Wage and Salary Administration

ByNishant Singh(8360)

Ameya Joshi(8156)

News in the views….Corporate Affairs Minister Salman Khurshid,

who yesterday favoured trimming pay packets of India Inc CEOs,earnestly advised them to lead a simple life saying.

Mukesh Ambani, Asia’s richest man, took a 66 percent pay cut to “set a personal example of moderation” after India’s government called for austerity in salaries of executives.

Unhappy with pay hike, IIT-M faculty begin strike today

Concept of Wage and Salary Administration

Concept of Wage and Salary AdministrationRefers to the establishment &

implementation of sound policies and practices of employee compensation

Includes areas as Job Evaluation, Surveys of Wages & Salaries, Establishing rules for administering wages, Profit Sharing, Wage changes & adjustments, Supplementary payments, Control of compensation costs

PurposeTo establish & maintain an equitable wage &

salary structure and an equitable labour-cost structure.

Other objectives include:To recruit persons for a firmTo control payroll costsTo satisfy people, to reduce the incidence of

quitting grievances, & fractions over pay, &To motivate people to perform better

Important DefinitionsCompensation: Money received in the performance of work ,

plus the many kinds of benefits and services that organisations provide their employees.

Wages (or PAY) The remuneration paid, for the service of

labour in production, periodically to an employee

Difference between Wages and Salary Wages: Hourly/daily rate, blue collar workers Salary: weekly/Monthly rates, white Collar

workers

The Wage determination Process

The Wage Determination ProcessDiagram1)The Process of Job Analysis2)Wage Surveys3)Relevant Organisational Problems4)Preparation of Wage Structure5)Wage Administration Rules: (advancement

will be based on Merit or length of service? Frequency of pay increases? Information to be given to employees? Employee appraisal, fixing of wages)

The Wage Line/ Wage CurveThe wage lineThe 6th Pay commission Report

Factors Influencing Wage & Salary Structure & AdministrationThe Organization's ability to paySupply & demand of labourThe prevailing market rateThe cost of livingLiving wageProductivityTrade Union’s Bargaining powerJob requirements

Continued….Managerial attitudesPsychological & Sociological factorsLevels of Skills available in the market

Administration of Wages & Salaries

The administration should be controlled by the Personnel manager or a Committee composed of high ranking executives.

Major functions of such a Committee are:1.Approval and/or recommendation to

management on job evaluation methods & findings

2.Review & recommendation of basic wage & salary structure

3.Help in formulation of wage policies from time to time

4.Co-ordination & review of relative departmental rates to ensure conformity, and

5. Review of Budget estimates for wage & salary adjustments & increases

The Committee should be supported by information from other, technical staff.

Principles of Wage & Salary AdministrationDifferences in pay should be based upon

variations in JOB REQUIREMENTSWages should be in line with that prevailing in

the labour marketEqual pay for equal workThere should be recognition of individual

differences in ability and contributionThere should be established structure for

redressal of wage complaintsWages should ensure a reasonable standard of

living for the worker and his familyThe wage structure should be flexibleWAGE COMMITTEE should be appointed for

revision of wages

Theory of WagesSubsistence TheoryThe Surplus Value Theory of WagesResidual Claimant TheoryMarginal Productivity TheoryThe Bargaining Theory of WagesBehavioural Theories: The Employee’s

Acceptance of a Wage Level,The Internal Wage Structure,Wage & Salaries & Motivators

Minimum, Fair & Living Wage

Minimum, Fair & Living WageStatutory Minimum WageBare or Basic Minimum WageA Minimum WageLiving WageFair WageThe Need-Based Minimum Wage

Types of WagesTime RatePiece RateBalance or Debt Method

Wage Differentials

Why the salaries offered in Bangalore and Pune are different in spite of the same job profile?

Occupational DifferentialsInter-firm DifferentialsInter-area or Regional DifferentialsInter-Industry DifferentialsPersonal Wage Differentials

Wage Differentials inIndiaIn the unorganized labour market, personal

differences tend to existThe tendency appears to be towards the

elimination of wage differentialsWage differentials by sex are quite commonThere has been a tendency towards the

elimination of inter-firm differentials

Executive Remuneration

EXECUTIVE RENUMERATIONUNIQUE FEATURES OF EXECUTIVE

RENUMERATION1)Cannot be compared towage schemes of

other employees2)Cannot form unions3)Secrecy4)Not based on individual performance but on

organizational performance5)Subject to statutory ceilings

Components of executive remuneration: 1)Salary: determined through evaluation and

serves as the basis for other benefits2) Bonus: Related to performance, at a certain

percentage of profits3) Incentives4) Perquisites: medical care, free well

furnished accommodation, conveyance, servants, company recreational area; mostly to make up for the taxation

Some generalizations related to executive compensation:

Satisfaction with pay is a function of comparison with another’s pay

A manager’s satisfaction with his current income and its motivational effect appear to be directly related to Anticipated pay raises

The choice of merit, as opposed to seniority, as the basis for determining salary rates tends to increase with education and position

The actual determinants of pay differentials seem to be job level supervisory experience and professional experience

Managerial incentive compensation has tended to become flexible

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