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Introduction
Wage: A fixed regular payment made especiallyto a manual or unskilled employees. It can be
paid daily, weekly or monthly.
Salary: Fixed payment made to employees fortheir services. It is paid on a regular basis, i.e.
on a monthly basis.
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Compensation
It is the total amount of monetary and non-monetary pay and benefits provided to anemployee by an employer in return for his work
performed. Monetary benefits may include wage, allowances,
leave facilities, housing, travel allowances etc.
Non-monetary benefits include recognition,privileges and symbols of status.
It is the vital part of HRM as it helps in attractingand retaining the employees.
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Compensation
Direct Indirect
Bonuses
Gain sharing
Security Plans Pensions
Employee Services Educational assistance Recreational programs
Commissions
Wages / Salaries
Insurance Plans Medical Dental Life
Time Not WorkedVacations Breaks Holidays
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Wage and Salary Administration is the group ofactivities involved in the development,
implementation and maintenance of a paysystem
It can also be called the ongoing process ofmanaging a wage and salary structure.
It is also called compensation management.
Wage And Salary Administration
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Wage And Salary Administration
It is the process of managing a companyscompensation (base compensation as well assupplementary) programme.
Base compensation, here, refers to monetarypayments paid to employees in the form ofwages and salaries. It is a fixed, non-incentivekind of payment calculated on the basis of
time spent by an employee on the job.
Supplementary compensation signifiesincentive payments based on the actual
performance of an employee.
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To establish a fair and equitable remuneration.
To attract competent personnel.
To retain present employees.
To control labour cost.
To improve motivation and morale of employees.
To project a good image of the company.
Objectives
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Components Of Compensation
There are four types of compensation:
Basic pay
Allowances
Incentives
Fringe benefits
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Primary part of pay package.
It includes wages and salary.
They are generally paid in cash and at times in
cheques.
Example- blue collar workers basic wage isbased on work done (piece wage system)
and white collar workers basic salary is timebound.
Basic Pay
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Allowances
An allowance is an amount of money set aside for adesignated purpose.
Some types of allowances are: Dearness allowance: it is given to protect the real
income against inflation. House Rent Allowances(HRA)-provision of house
rent to employees.
City Compensatory Allowance(CCA)-paid toemployees in metro or big cities. Transport Allowance/Conveyance Allowance(TA)-
A fixed sum paid to cover the travelling charges.
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Incentives
It is any factor financial or non-financial thatenables or motivates a particular course ofaction.
Financial incentives are in the form of money. It not only satisfies the primary needs but also
security and social needs.
Non- Financial incentives are non-monetary innature. It includes promotions, recognition, etc.
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Fringe Benefits
Fringe Benefits are a supplement to a regular wages orsalaries.
These are paid to employees to stimulate their interest in
the work.
They add to the workers standard of living and welfare.
Fringe benefits commonly include health insurance, lifeinsurance, education reimbursement, employee
discounts, personal use of a company ownedvehicle and other similar benefits.
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Methods of wagepayment
Time wage
system
Piece wage
system
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It is simple and easy to understand.
Gives workers a sense of economic security and self confidence as worker is assuredof fixed and regular income.
Helps to keep good relations with union as union prefers this wage system as it doesnot differentiate between efficient and inefficient workers.
In case of service organizations where work done is intangible and output cannot bemeasured accurately there time wage system is of great advantage.
It gives chance to the new people entering the organization to learn their workeffectively and also gives them time to learn the best method to do the work as thewages are not based on amount of work.
Advantages
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Disadvantages
This method make workers inefficient as they stick to aparticular method of doing the work.
It provides no distinction between efficient and inefficientworkers so gradually competent workers lose their zeal ofworking and turn inefficient.
There is no basis for finding the merit of different employeesand promotions are made on seniority. This leads todecoration in morale of efficient and young employees.
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Piece Wage System
Remuneration is based on amount of work donei.e. quantity of output generated by the workers.
One unit of output is considered as one piece ofwork and specific wage is paid per piece.
Greater the number of pieces produced byworker, higher is the remuneration.
Thus a workman is paid in direct proportion tohis output. It is called payments by results.
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Advantages
There is a direct relationship between the efforts and therewards. Hence, workers who work hard and produce more getmore wages.
Ambitious and efficient workers are provided ample opportunity
to utilize their talent and increase their earning and therebyimprove their standard of living and morale.
Management can distinguish between efficient and inefficientworkers for the purpose of promotion.
Increase in productivity results in higher output and lower costof production per unit.
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Disadvantages
It is very difficult to fix wages in case of non-measurableoutputs.
The earnings of workers are not stable and they may suffer in
case of temporary delays or difficulties. They may feel insecureand dissatisfied.
Employees may not stress on quality , so rigid quality controlbecomes necessary.
System creates disparity between efficient and inefficientworkers so it is not favoured by trade unions as it affects thework environment.
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Process Of Wage Determination
Wage determination process consist of the followingsteps:
Job analysis: The contents and requirements ofjob are analyzed. The data collected through jobanalysis is used to prepare job description and jobspecification.
On basis of these statement standards of jobperformance are laid down.
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Process Of Wage Determination
Job evaluation: The relative value of every jobis determined through job evaluation.
The relative job value is then converted into
money value so as to fix basic wage for the job.
Wage survey: Wage or salary surveys areconducted to find out wage/salary levelsprevailing in the region or industry for similar
jobs.
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Process Of Wage Determination
Developing wage structure : On basis of foregoing stepsan equitable wage structure is prepared. Whiledetermining such a structure several points need to beconsidered.
Legislations relating to wages. Payments equal to, more or less that prevailing wage
rates.
Number and width of pay grade.
Job to be placed in each pay grade. Provisions for merit increase.
Differentials between pay plans.
Dealing with wages/salaries that are not of line with the
structure.
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Process Of Wage Determination
Wage administration rules : rules are required todetermine the degree to which advance will be based onlength of service rather than merits, the frequency withwhich pay increments will be awarded ,the frequencywith which pay based on length of service.
The rules that will govern promotion from one pay gradeto another.
Once rules are made they should be communicated tothe employees.
Employee appraisal: In order to reward merit andperformance, it is necessary to evaluate the performanceof individual employees.
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Process Of Wage Determination
Broad banding: is consolidation of many previouslydiscrete job tiles, ranks and pay grades into much widercategories known as bands or ranges.
These are given in organizations which have a flatstructure, fast paced, non bureaucratic kind of culture.
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Wage Policy In India
A wage policy offers certain guidelines fordetermining a wage structure.
The term wage structure refers to various pay
scales showing rages of pay within each grade.
Three important elements of wage policy in Indianeed to be elaborated. They are:
Minimum Wages
Fair Wages
Living Wages
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Wage sufficient to sustain and preserve the efficiencyof the worker and offer basic amenities of life byproviding some measures of education, medicalcare, etc.
Criteria: It must be calculated for a family of 4members.
It must be able to provide 2700 calories per adult perday.
Cloth requirements should be 18 yards per unit perannum.
Light, fuel, house rent and other miscellaneousexpenditure should constitute 20% of the totalminimum wage.
Minimum Wages
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This is the highest amount of wages proposed by
the government, offering basic amenities of lifeand satisfying the social needs of worker likeeducation for children,protection against ill-healthetc.
Living Wages
It is above the minimum wage but below the livingwage. It is fixed, taking into account certain factorssuch as the productivity of labor, prevailing wagerates, level of national income and its distribution,
the employers capacity to pay etc.
Fair Wages
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The Government has enacted various laws toregulate and govern the wages.
They are:1. The payment of Wages Act 1936
2. The Equal Remuneration Act 1976
3. The Minimum Wages Act 1948
4. Pay Commissions
Legal framework on Wages
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The payment of wages act 1936
The main objective of this act is to ensureregular and prompt payment of wages and toprevent unauthorized deductions and arbitraryfines from wages.
It also regulates the rate of payment for overtimework.
The Act is applicable to persons employed infactories/industrial establishments.
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The minimum wages act 1948
It was enacted to safeguard the interests ofworkers, mostly in the unorganised sector byproviding for the fixation of minimum wages incertain specified employments.
It also provides regulation of overtime rate, fixwages by hour, day, month etc.
The Act also requires the appropriate government
(both Central and State) to fix minimum rates ofwages in respect of employments specified in theschedule and also review and revise the same atintervals not exceeding five years.
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The equal remuneration act 1976
The main objective of this act is to preventdiscrimination in remuneration on basis ofgender.
Under the act, it is the duty of the employer topay equal remuneration to men and womenworkers for the same work or work of a similarnature.
No discrimination is to be made against womenin recruitment and in conditions of service unlessprovided for under any law.
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Pay Commissions
A Pay Commission is a panel ofmembers of the Union Cabinet of India forreview and revision of the salaries of
government employees. It was set up by the Central Government in
the year 1965 and as an administrativecommittee to determine the salaries ofcentral government employees. Six paycommissions have been set up till date.
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References
Human Resource Management C.B GuptaHuman Resource Management L.M PrasadHuman Resource Management DeCenzo and Robbins
www.google.comwww.wikipedia.com
http://www.google.com/http://www.wikipedia.com/http://www.wikipedia.com/http://www.google.com/ -
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Any Questions