Wages and Salary Adm

8/8/2019 Wages and Salary Adm

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WAGES AND SALARY

ADMINISTRATION


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Objectives of wage and salary administration

To acquire qualified and competent personnel

To retain the present employee

To secure internal and external equity

To ensure desired behavior Labor costs

Follow up of wage act

Pay according to ability

Helping in preparing pay-rolls

Feasibility of wage


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Principles of wages and salary

administration Wages and salary plans should be sufficiently flexible.

Job evaluation must be done scientifically.

W & S administration should always be consistent with

overall organizational plans and programs. W & S administration plans and programmes should be

in conformity with the social and economic objectives ofthe country like attainment of equality in incomedistribution etc.

It should be responsive to the changing local andnational conditions.


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The elements of wage and salary system

Wage and salary system should have relationshipwith the performance, satisfaction, and attainment ofgoals of an individual. The following element of wage and salary system are worth

mentioning:-

Identifying the available salary opportunities, theircosts, estimating the worth of its members of thesesalary opportunities and communicating them toemployee.

Relating salary to needs and goals Developing quality, quanitinty, and time standard

relating to work and goals


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Determining the efforts necessary to achieve standards.

Measuring the actual performance . Comparing the performance with the salary received.

Measuring the job satisfaction gained by the employees.

Evaluating the unsatisfied wants and unreached goals ofthe employee

Finding out the dissatisfaction arising from unsatisfiedneeds and unattained goals.

Adjusting the salary levels according with the view toenabling the employees to reach unreached goals and

fulfill the unfilled needs.


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WAGE/SALARYDIFFERENTIALS

Industries employ various kinds of personnel oftheir activities such as workers, supervisors,professional, technical, managerial, and clericalworkers.

Wages differ in different employments oroccupations, industries and localities and alsobetween persons employed in the same industryor between persons in the same employment or

grade. Wages are given as per the nature of job and

activities etc.


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Wage differentials among workers working inthe same unit, among different units,occupation, region, are common features oflabor market in various countries.

Wage differentials on the basis of occupation,unit and areas can be justified on the basis ofequal pay for equal work among workers.


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Interpersonal wage differentials are mainly due tovariation in personal characteristics like sex, age,skill, knowledge etc, of workers who work in thesame unit and are in the same or similaroccupations.

Inter-firm or inter-unit wage differentials reflectrelative wage levels of workers in different units inthe same or similar occupation. Thesedifferentials are mostly because of varyingabilities of the firms to pay wages.


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Wage differential performs important economicfunctions like labor productivity, attracting thepeople to different jobs.

Wage differentials reflects in variations in

productivity, efficiency of management,maximum utilization of human force etc.

Attracting efficient workers, maximization ofemployee commitment, development of skills,

knowledge, utilization of human resource,maximization of productivity can be fulfilledthrough wage differentials.


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Industrial and Occupational Differentials

Industrial and occupational differentials exist because ofrequirement of different skill set and imbalance in

demand and supply of personnel having such skills.

Wages and salaries are usually fixed on the basis of

skills required to perform a job. Highly specialized jobs requiring higher level of skills are

linked with higher pay too.

Coupled with this, shortage of supply of such personnel

also induces the payment of higher pay.


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Presently, in India, various occupations based on the salary structure indescending order may be arranged as follows:

Consultancy Financial services

Investment banking

Information technology

Fast-moving consumer goods

Advertising Pharmaceuticals

Chemicals

Consumer durables

Electronics

Electrical Automobiles

Other engineering


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Regional Differentials

Apart from industrial and occupational differentials, theremay be differences in wages and salaries region-wise alsowithin the same industry and occupation group.

Such differences are visible in different countries of the world

as well as different regions within a country. Such differencesexist because of the differences in cost of living pace ofindustrial development and lack of adequate mobility ofpersonnel from one region to another.

For example, wages and salaries are higher in metropolitancities as compared to other cities; higher in cities ascompared to rural areas.


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Organizational Differentials

Different organizations falling in the same industry groupand at the same location offer different wages andsalaries to individuals having similar background.

The main reasons for organizational differentials are

organizations policy to recruit specific types of personneland their capacity to pay.

For example, most of the multinational organizationsoperating in India offer much higher salaries to theiremployees as compared to their counterparts of Indian

origin. Similarly, larger organizations offer much highersalaries as compared to smaller organizations.


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Personal Differentials

Different persons having similar qualifications areoffered different salaries in the same

organizations.

This happens because they have acquireddifferent skills in spite of the fact that they may

have similar educational background.

This happens more so when skill-based pay

system is adopted as against job based pay.


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Wage Structure

Wages are defined broadly as any economic

compensation paid by the employer to his

workmen under some contract for the

services rendered by them.

Wages are paid to workers which include

basic wages and other allowances which arelinked with the wages like dearness

allowances, etc.


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WAGE POLICY ININDIA


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Introduction:

Each theory tries to explain how wages are determined. In the Indian context, soon after the independence,

Government of India set up a Committee on FairWages in 1948 which has defined various concepts ofwages which govern the wage structure in the country

specially in those sectors which can be termed asunderpaid and where workers do not have bargainingpower through unions.

These concepts are:

Minimum wage, Living wage, and

Fair wage.


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Minimum Wage

A minimum wage is one which has to be paid by anemployer to his workers irrespective of his ability to pay.

According to the above committee,

"Minimum wage is the wage which must provide not

only for the bare sustenance of life, but for the

preservation of the efficiency of the workers.

For this purpose, minimum wage must provide some

measure of education, medical requirements and

amenities


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LivingWage

"A living wage is one which should enable theearner to provide for himself and his family not

only the bare essentials of food, clothing and

shelter but a measure of frugal comfort includingeducation for his children, protection against ill-

health, requirements of essential social needs

and a measure of insurance against the more

important misfortunes including old age. "


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Fair Wage

"Fair wage is the wage which is above theminimum wage but below the living wage. The

lower limit of the fair wage is obviously the

minimum wage: the upper limit is to be set by the

capacity of the industry to pay. Thus, fair wage depends on different variables

affecting wage determination. Such factors are

labour productivity prevailing wage rates, the

level of national income and its distribution andthe capacity of industry to pay.

At present, the concept of fair wages is followed

by the most business organizations.


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Wage theories

Subsistence theory by Ricardo,

Wage fund theory by Adam Smith,

Surplus value theory by Karl Marx, Residual claimant theory by FrancisWalker,

Marginal productivity theory by Philip and JohnClark,

Bargaining theory by John Davidson. and

Behavioral theory by James March and HerbertSimon.

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