WAGE AND SALARY ADMINISTRATION

INTRODUCTION
Wage and Salary administration has an important bearing on workers,
organizations, government and society. The mechanics of wage determination
based on the element of adhocism has been the source of legitimate concern and
anxiety to the workers. This mechanism, apart from being adhocistic in nature is
also based on the principle of irrationality and other unscientific factors. Wage
differential also exist on the basis of sex, region and other such artificial
considerations. It is an administrative procedure of establishing and supervising
wage levels and operations in an organization. In most organizations, wage and
salary administration is performed in the personnel department, although larger
organizations often have a payroll or wage and salary administration department.

WAGE AND SALARY ADMINISTRATION

Definition

Wage and Salary Administration is the group of activities involved in the

development, implementation and maintenance of a pay system. It can also be
called the ongoing process of managing a wage and salary structure.

Meaning

• The main objective of wage and salary administration is to have a scientific,

rational, and balanced wage & salary structure.
• In salary administration, the employer should not feel that the employees are
paid more than they deserve and the employees should not feel that they are
underpaid.
• Unless there is a scientific approach /method we cannot solve this conflict.
• Here wage and salary administration includes allowances, leave facilities,
housing, travel, etc and non-cost rewards such as recognition, privileges and
symbols of status.
 In India the question of wages assumes paramount importance because of
acute poverty, large scale unemployment and a high population. No fixed norms
and means are followed in fixing wages and salaries, so a lot of adhocism and
expediencies are found in fixing wages. The compensation has to be viewed from
economic, psychological, legal and growth points of view.

Difference between Wage, Salary and Compensation

Wage

Paid to blue-collar workers-paid daily, weekly or monthly-paid for the jobs

this can, to some extent, be measured in terms of money’s worth.

Salary

Paid to white collar workers-paid monthly-paid to employees whose

contribution cannot be easily measured.

Compensation

A comparative term- includes wage and all other allowances and benefits
like allowances, leave facilities, housing, travel and non-cost such as recognition,
privileges and symbols of status.

Principles Governing Compensation Administration

• Maintaining Equity.
• Maintaining Competitiveness.
• Matching Employee Expectations.
• Reinforcing positive employee behavior.
• Eliminating any discrepancies.
• Devising a system that is most efficient.
• Optimization of management and employee interests.
• Maintaining good IR and harmony.
Factors influencing Wages and Salary
• Wage policy of the company - The company may have a policy to fix the
wages externally competitive and internally compatible, i.e. they pay
according to the competition and maintain equity among various employees
in the company. Sometimes the company may have a wage policy that it
should be above the industry average or below it or comparable to it.

• Prevailing wages in the region.

• Financial position of the company.

• Trade Unions’ pressure on the Management.

• Government policy on wages and salaries.

• Relative worth of job done.

• Demand and supply of labour.

• Economic conditions of the nation.

Concepts of Different Wages

Minimum Wages

• It is amount of remuneration, which is just sufficient to enable an average

worker to fulfill all his obligations.
• It is applicable to workers across the country and is governed by the
Minimum Wages Act 1948.
• The law states that an employer who cannot pay the minimum wage has no
right to engage labour and no Justification to run a firm.
• The current minimum wage in India is Rs. 66 per day to all the workers in
scheduled employment.
• It is revised every 5 yrs.

Fair Wages
• Workers performing work of equal skills, difficulty or unpleasantness should
receive equal or fair wages.
 • The basis of fair wage is the minimum wage, within the capacity of the
organization to pay.
• Fair wage should be related to the productivity of the labour.
• It should match the prevailing rates of wages in the same or neighboring
localities.
• It should reflect the level of national income and its distribution.

Living Wages

Living wages should enable the male earner to provide for himself and his
family, not only the bare essentials of food, clothing and shelter, but also a measure
of frugal comfort including:

• Education for the children

• Protection against ill-health
• Requirements of essential social needs
• A Measure of insurance against the more important misfortunes including
old age.

Time-Rate and Piece-Rate Wages

• Employees prefer time-rate while employers prefer piece-rate.

• Both have their own merits. In time-rate, quality can be maintained, but the
expected level of production may not be delivered by the employees. In
piece-rate, the quality may be compromised but the workers may get extra
income that will motivate them.
• If an employee’s production exceeds the standard production, he should be
given incentives for the extra production.
• When production is not amenable to measure the time taken to complete the
job can be considered to fix the wage on time-rate basis. E.g. A person who
takes only 60% of the standard time to complete a job can be paid incentive
for the 40% time saved, since he spends that 40% time for doing another job.
• Whether piece-rate or time-rate, the management should provide all facilities
and keep the working conditions conducive for better production, otherwise
the system will be a failure.