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Concept:: Unit - Iv Wage and Salary Administration
Concept:: Unit - Iv Wage and Salary Administration
Concept:: Unit - Iv Wage and Salary Administration
Meaning:
Wages may be defined as the price paid for the use of labour. According to Dale Yoder
and Heneman "Wages are the compensation of wage earner, the numerous employees who use
the tools and equipments of their employers to produce goods and services that are sold by their
employers." In other words, wages are the payments made to the employees as compensation for
the services rendered by them to an enterprise. Wages include salaries also. Wages is the central
point for all labour problems. It is not only the concern of the organisation but is equally
important for the workers because it is the question of their bread and butter.
Type of wages:
Living Wage:- Living wage is that which workers can maintain the health and decency, a
measure of comfort and some insurance against the more important misfortune of lie.
Living wages has been defined differently by different people in different countries. The
best definition is given by Justice Higgins which reads "Living wage is a wage sufficient
to ensure the workman food, shelter, clothing, frugal comfort, provision for evil days etc.
as regard for the skill of an artisan, if he is one".
Money Wages: Money wages or nominal wages are wages that are paid to a person
regardless of the inflation rate in the market. Many companies use this method to pay
their employers. Money wages include the whole salary package of the employee such as
basic salary plus any additional benefits that are provided by the company or institution.
Money wages do not take into consideration the purchasing power and the employee
receives the amount that is promised to him when he/she is hired. Raise in money wages
are also solely dependent on the employee rather than economic conditions of the country
or the purchasing power of a basic employee.
Real Wages: Real wages are wages that provided taken into consideration the inflation
amount. Real wages are wages that determine the purchasing power of the individual or
how much goods the salary can buy. Real wages can also be defined as the amount of
goods and services that can be bought from the individual’s wages after taking inflation
into account. Some dictionaries also define it as providing goods and service to the
individual in form of remuneration.
“Real wages is the wages in terms of the goods and services that can be bought with
them.” This shows that real wages show the purchasing power of the person. Real wages
indirectly affect the money wages, since as real wages rise, they may force employee to
demand a higher money wage. Money wages may or may not affect real wage, but higher
money wages can increase the cost of living which could indirectly affect the real wage.
This depends on the situation of the country.
WAGE STRUCTURE
Wage structure is generally the levels or hierarchy of job and pay ranges. It is
the interrelationship of the levels of pay for different types of employees. Wage and salary
structures provide wage rates for specific jobs and determine the relationships between these
rates by combining the wage level, specific market pay rates and the job structure.
Wage structures result from pricing job structures. Job structures, in turn, result from the
application of formal or informal job evaluation to an organization's jobs. In order to price a job
structure, it is necessary to use dollar amounts from either current pay rates or the market data
collected from wage surveys. A wage structure, then, is a combination of the job structure, the
labor market, and the organization's decisions regarding the wage level. The pricing of job
structures is subject to the influences discussed in Chapter 9 on wage structure determinants plus
some technical ones.
Pricing a Job Structure: The job structure presents the compensation decision maker
with a hierarchy of the jobs in the organization. Ordinarily, this hierarchy has been
developed by the use of job evaluation and represents the organization's relative rating of
its jobs. A dollar value now needs to be placed on this hierarchy. This dollar value is
available in the current wage rates paid for the jobs and/or in the wage survey data
representing the labor market.
The Vertical Dimension: The vertical axis of the scatter diagram is simply a set of dollar
figures from low to high. This amount may come from either (1) the current pay rate or
range for the job within the organization or (2) more commonly the value placed upon the
job through wage surveys.
1. Lag the market. In this strategy, the organization updates the wage survey data
to the current date and then installs the new wage structure. If a change in the
labor market of 5 percent is assumed for the next year, then the only time the
organization will be competitive with the market is at the beginning of the year.
By the end of the year any decisions based upon the wage structure will be 5
percent behind the market.
2. Lead-lag. Here the organization takes account of the 5 percent estimated change
in the market but wishes to be on average with the market. It does this by starting
the year at 2.5 percent above the market rate. Provided the increase is steady over
the year, this strategy will place the organization ahead of the market the first half
of the year and behind it the second half. At the end of the year the organization
will be paying 2.5 percent under the market.
3. Lead the market. In this strategy the organization wishes to pay above the
market rate and does so by starting the year at 10 percent above the wage survey
data. By the end of the year the organization will be paying the market rate.
The Horizontal Dimension: The horizontal axis is the internal ranking of all the
organization's jobs. The pricing process may work with either individual jobs or pay
grades. In fact, if the organization is to employ rate ranges with differential pay rates for
individuals on the same job, it may save time by making decisions on the pay-policy line,
pay grades, and rate ranges at the same time.
1. Market Rates. The organization may assume that it wishes to pay strictly market
rates for its jobs and may therefore place dollar values on both axes, making a
totally consistent structure. Clearly this alternative assumes that there is a market
rate for all of the organization's jobs and that this rate is satisfactory. This process,
called Market Pricing, was discussed in chapter 11 and will be further discussed
further at the end of this chapter.
2. Job Evaluation Rates. Still the most common alternative for the horizontal axis
is the set of ratings developed through job evaluation. Depending upon the
method of job evaluation used, these ratings may consist of a ranking of jobs from
low to high, a series of classification levels, or a range of points.
3. Negotiated Rates. Where there is a union, the hierarchy of jobs may be a
negotiated ranking based upon custom or the relative power of a group of unions.
Developing the pay-policy line: Once the horizontal and vertical dimensions of the
scatter diagram have been settled upon, all the jobs or the key jobs can be plotted as a
point by their values on both axes.
1. Low-high line. This is a straight line connecting the highest and the lowest of the
plotted points (these are often called anchor points). The rates of all intervening
jobs are made to fall on the line. The low-high line appears especially useful in
union bargaining of the wage structure because of its flexibility.
2. Freehand line. After the points have been plotted the trend of the data can often
be easily visualized. In this case it is possible to draw a freehand line that best
describes the plotted points. In drawing such a line, it is useful to follow the
principle that vertical deviations from the line are minimized if the line follows
the obvious slope of the data.
3. Least-squares line. The least-squares line follows the principles specified for the
freehand line but is determined mathematically. It may be fitted by calculating the
equation for the line and plotting the line obtained from the solution.
At this point in the discussion the wage structure consists of a horizontal dimension and a
vertical dimension with a pay-policy line derived from the plotting of jobs. Theoretically, this
wage structure as pictured in figure 12-1 could be used to establish wage rates for jobs as every
job in the organization could be plotted on the pay-policy line to determine its pay rate.
Pay Grades: A pay grade is defined as a group of jobs that have been determined by job
evaluation or other measure on the horizontal dimension to be approximately equal in
difficulty or importance. If a point plan is employed in job evaluation, a pay grade
consists of jobs falling within a range of points; if factor comparison is used, a range of
evaluated rates; if ranking is used, a number of ranks.
Cluster Approach: The simplest approach is to make a scatter diagram of the
organization's jobs, as is done in establishing the pay-policy line. When this is done it can
often be observed that the jobs tend to cluster rather than scattering evenly. This effect
can be taken advantage of by encasing the clusters horizontally and vertically, as
illustrated in figure 12-6. This provides all three dimensions, but none of them is arrived
at consistently, nor are they likely to be symmetrical.
Division Approach: Another relatively simple approach is to use the horizontal
dimension of the wage structure, usually the job evaluation points, to determine the
number of pay grades. This is done most easily by determining a set number of points for
each pay grade and, starting with the least number of points, marking off the lines
between adjacent grades.
WAGE AND SALARY POLICY
Overview
The Company attempts to pay competitive wages and salaries with those businesses in our
community and industry. Wages and salaries are classified by position based on experience,
responsibility, and physical and mental demands. Management reviews salary ranges once per
year and makes any adjustment deemed necessary. Ask your manager, accounting or supervisor
if you would like to know the ranges for your position.
Overtime Pay
All overtime must be authorized and directed by a supervisor. Non-exempt employees are paid
time and on half for authorized hours in excess of 12 hours in one day and 40 hours in one week.
The maximum amount of overtime, which may be scheduled for any employee in any 24-hour
period, is eight (8) hours. The maximum overtime that may be scheduled for any employee in
any work week (Sunday through Saturday) is twenty (20) hours.
Work required of a non-exempt employee on a Holiday is calculated at the actual number of
hours worked, paid at the overtime rate.
Payday
Payroll weeks begin on Sunday and end on Saturday. Employees are paid weekly on following
Friday. If you turn time cards in late, you will be delayed in receiving your paycheck.
Pay Advances
Pay advances are not generally given.
Payroll Deductions
Payroll deductions are made from each paycheck to comply with federal and state laws and
certain benefits. Deductions will be made for:
Federal and State Income Tax
FICA (Social Security)
Garnishments and Wage Assignments required by law or court order
Other items designated by the employee
At the beginning of each year you will be supplied with a W-2 which summarizes your income
and deductions for the previous year.
Wage or Salary Increases
Your rate of compensation will typically be reviewed periodically. Pay increases, if any, will be
base on your performance and attitude, not your length of service.
Eastern Region West Bengal, Odisha, Bihar, Jharkhand and Andaman & Nicobar Islands.
North Eastern Region Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Sikkim,
Nagaland and Tripura.
Southern Region Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Pondicherry and
Lakshadwadeep.
Northern Region Punjab, Rajasthan, Himachal Pradesh, Jammu & Kashmir, Haryana, Uttar
Pradesh, Uttarakhand, Delhi and Chandigarh.
Western Region Maharashtra, Gujarat, Goa, Madhya Pradesh, Chhattisgarh, Dadra &
Nagar Haveli and Daman & Diu.
(iii) Cost of living: Another important factor affecting the wage is the cost of living adjustments
of wages. This approach tends to vary money wage depending upon the variations in the cost of
living index following rise or fall in the general price level and consumer price index. It is an
essential ingredient of long term labour contracts unless provision is made to reopen the wage
clause periodically.
(iv)Government legislation: The laws passed and the labour policies formed by the Government
have an important influence on wages and salaries paid by the employees. Wages and salaries
can’t be fixed below the level prescribed by the government. The laws on minimum wages,
hours of work, equal pay for equal work, payment of dearness and other allowances, payment of
bonus, etc. have been enacted and enforced to bring about a measure of fairness in compensating
the working class.
(v) Ability to pay: Labour unions have often demanded an increase in wages on the basis that
the firm is prosperous and able to pay. However, the fundamental determinants of the wage rate
for the individual firm emanate for supply and demand. If the firm is marginal and cannot afford
to pay competitive rates, its employees will generally leave it for better paying jobs. However,
this adjustment is neither immediate nor perfect because of problems of labour immobility and
lack of perfect knowledge of alternatives. If the firm is highly successful, there is little need to
pay for more than the competitive rates to obtain personnel.
(vi) Supply and demand: As stated earlier, the wage is a price for the services rendered by a
worker or employee. The firm desires these services, and it must pay a price that will bring forth
the supply, which is controlled by the individual worker or by a group of workers acting together
through their unions. The practical result of the operation of this law of supply and demand is the
creation of “going- wage rate”.
(vii) Productivity: Increasingly there is a trend towards gearing wage increases to productivity
increases. Productivity is the key factor in the operations of a company. High wages and low
costs are possible only when productivity increases appreciably. The above factors exercise a
kind of general influence on wage rates. In addition, there are several factors which do affect the
individual difference in wage rates.
WAGE DIFFERENTIALS
WAGE DIFFERENTIALS
Meaning: the difference in wages between workers with different skills in the same industry or
between those with comparable skills in different industries or localities. Wage differential refers
to differences in wage rates due to the location of company, hours of work, working conditions,
type of product manufactured, or other factors. It may be the difference in wages between
workers with different skills working in the same industry or workers with similar skills working
in different industries or regions.
The wage paid to workers varies greatly. These wage differentials are mostly the result of
differences in worker ability and the workers' effort in performing the job. There are also wage
differentials across occupations, because of differences in the demand and supply of laborers for
particular job or occupation. These differences arise primarily because of differences in the
amount of education or training required and in the desirability of the job itself.
Wage differential:
The committee on fair wages recommended that wage differentials should be established
on the basis of certain considerations:
• The degree of skill
• The strain of work
• The experience involved
• The training required
• The responsibility undertaken
• The mental and physical requirement
• The disagreeableness of the task
• Hazards
• Fatigue involved
JOB EVALUATION
Concept of job evaluation:
In simple words, job evaluation is the rating of jobs in an organization. This is the process
of establishing the value or worth of jobs in a job hierarchy. It attempts to compare the relative
intrinsic value or worth of jobs within an organization. Thus, job evaluation is a comparative
process.
The objectives of job evaluation, to put in a more orderly manner are to:
1. Provide a standard procedure for determining the relative worth of each job in a plant.
2. Determine equitable wage differentials between different jobs in the organisation.
3. Eliminate wage inequalities.
4. Ensure that like wages are paid to all qualified employees for like work.
5. Form a basis for fixing incentives and different bonus plans.
6. Serve as a useful reference for setting individual grievances regarding wage rates.
7. Provide information for work organization, employees’ selection, placement, training and
numerous other similar problems.
8. Provide a benchmark for making career planning for the employees in the organization.
2. Planning Stage: In this stage, the evaluation programme is drawn up and the job holders to be
affected are informed. Due arrangements are made for setting up joint working parties and the
sample of jobs to be evaluated is selected.
3. Analysis Stage: This is the stage when required information about the sample of jobs is
collected. This information serves as a basis for the internal and external evaluation of jobs.
4. Internal Evaluation Stage: Next to analysis stage is internal evaluation stage. In the internal
evaluation stage, the sample of bench-mark jobs are ranked by means of the chosen evaluation
scheme as drawn up at the planning stage. Jobs are then graded on the basis of data pending the
collection of market rate data. Relative worth of jobs is ascertained by comparing grades
between the jobs.
5. External Evaluation Stage: In this stage, information is collected on market rates at that time.
6. Design Stage: Having ascertained grades for jobs, salary structure is designed in this stage.
7. Grading Stage: This is the stage in which different jobs are slotted into the salary structure as
designed in the preceding stage 6.
8. Developing and Maintaining Stage: This is the final stage in a job evaluation programme. In
this stage, procedures for maintaining the salary structure are developed with a view to
accommodate inflationary pressures in the salary levels, grading new jobs into the structure and
regarding the existing jobs in the light of changes in their responsibilities and market rates.
INCENTIVE PAYMENT
Purpose
To improve company performance by motivating those in management roles to increase
focus and effort on overall company goals and objectives.
Process
Conduct a review of the company’s vision, goals and incentive plan history.
Confirm overall company objectives.
For each manager, assess which objectives they can realistically contribute to and how,
within the context of their day to day responsibilities.
Set individual objectives and the corresponding incentive.
Consolidate objectives and determine the impact on the overall company objectives.
Once approved, establish a quarterly review process that will track progress, remove
potential roadblocks, and address any new factors that could impact the attainment of
objectives.
Assist in the completion of the year end reports, distribution of the incentive, and post
review of the program.
WELFARE MANAGEMENT
Meaning:
Employee welfare implies the setting up to minimum desirable standards and the provisions of
facilities like health, food, clothing, housing, medical assistance, education, insurance, job
security, recreation, etc. such facilities enable the worker and his family to lead a good work life,
family life & social life. Employee welfare measures are an effort towards revolving the
industrial worker of his worries and making them happy.
Definitions:
The labour Investigation Committee preferred to include under ‘Labour Welfare’:
“Anything done for the intellectual, physical, moral and economic betterment of the workers,
employers, by government or by other agencies over and about what is laid down by law or what
is normally expected of the contractual benefits for which workers may have bargained.”
According to the committee and labour welfare services should be
“Such services, facilities, and amenities as adequate canteen, rest and recreation facilities,
sanitary and medical facilities, arrangements for travel to and from place of work, and for the
accommodation of workers employ data distance from they homes; and such other services,
amities and facilities, including social security measures, as contribute to the conditions under
which workers are employed
Objectives Of Employee Welfare:
To avoid the frustration of workers and thereby increase their overall efficiency and
productivity.
To improve the health and working environment of the individual
To release the employees from personal and family worries
To provide better amenities to the workers and thereby afford him a wider concept of life
To increase the standard of living
To reduce absenteeism and labor turnover in organization
Basic Features Of Employee Welfare:
On the basis of the various definitions, the basic charters tics of labour welfare work may be
noted thus:
It is the work, which is usually undertaken with in the premises or in the vicinity of the
undertakings for the benefits employees and the members of their families.
The work generally includes those items of welfare which are over and above what is
provided by statutory provisions are required by the custom of the industry or the
employees expect as a results of a contract of services from the employers.
The purpose of providing welfare amenities is to bring about the development of the
whole personality of the worker-his social, psychological, economic, moral, and cultural
and intellectual development to make him a good worker, a good citizen and a good
member of the family.
These facilities may be provided voluntarily by progressive and enlightened
entrepreneurs at their own accord out of their realization of social responsibility towards
labour statutory provisions may compel them to make these facilities available: or these
may be under taken by the government or trade unions, if they have the necessary funds
for the purpose.
Labour welfare is a very broad term, covering social securities and such other activities
as medical aid, crèches, canteens, recreations, housing, adult education, arrangements for
the transports of labour to and from the work place.
The incentive mechanism is formed, it will be intrinsic role in the organizational system
itself, so that the organization functions in a certain state, and further affect the survival and
development of organizations. Incentive mechanism of organization have two properties,
namely, encourage and attenuated, that is to say, incentive mechanism has contributed to the role
and attenuated effects on tissue. One of the facilitation of incentive mechanism is a set of
incentive mechanism for employees in accordance with the organization's desired behavior have
repeatedly strengthened, the increasing role of, such incentives under, organization development,
growing.
The role of attenuated incentives, the motivating factors which must be eradicated,
replaced by an effective motivator. Incentive mechanism in the organization is obviously, it not
only can fully mobilize the enthusiasm and creativity of employees, improve the organizational
performance, but also conducive to the creation of a tissue culture, the formation of the whole
enterprise respect knowledge, respect talent atmosphere and efforts to forge ahead, the
atmosphere. Just imagine, if the work of the staff motivation has been very good incentive, the
level of work it is possible to play to the highest. Conversely, if the employee is not due to the
lack of motivation, enthusiasm and he would not have to work hard, will "one day at a time",
muddle along, but have, not only can’t play a normal level of business, but also become the
tissue in the unstable factor, disturb the normal order of organization, influence others work
performance