Seied Beniamin HosseiniBA.,LLB.,PG Student in MBA ,BIMS ,University of Mysore

Wages , Salary , Administration Perks and fringe Benefits in the Area of HRM - With special reference to India

The role of HR in the Payment of salariesOne of the most important function of HRM is the payment of proper salaries and wages to all employees. the employee s receive from the employer it is reason for them to being in the job. The pay provides them with strong incentive to do their jobs well and the rate of pay indicates their status in the company.

Empl

oyee

s G

rade

s

Skilled employees These are workers who have received specialized training to do their jobs. They have developed and horned a special skill and it may or may not need licensed or certified by the state.

Unskilled employees These are workers who received no special training and have few special skills.

Professionals Arguably the elite of the employees grades, these are those workers who need an advance degree to do their jobs.

Theories of WagesThe wage theories deal with the payment of labour employed in competitive enterprise. Wage represents the payment of one factor of production that is manpower.

Just wage Theory(St. Thomas Aquinas)

Classic Wage Theory(John R

Hicks )

Bargaining Theory (John Davidson)

Wage Fund Theory (John Stuart Mill)

Marginal Productivity

(John Bates Clark and Philip

Henry Wicksteed)

Purchasing Power Theory

(Gustav Cassel)

Labour Theory of Value

(Karl Marx )

The standard of Living Theory of Wage

•It is based upon the fundamental concept that labour is a commodity and we have to pay the price according to supply and demand. The greater the supply, the lower the price. And the greater the demand the higher the price.

Classic Wage Theory

• wage is described as a wage which permits the recipient worker to live in a manner in keeping with his position to society. This doctrine is related to social organization based on the status of the individual in the social organization.

• Minimum wage law –The just wage theory of St. Thomas Aquinas is the basis in the implementation of this law. While it could not be consistent with the minimum requirements of decent living in the social organization, it responds to the basic requirements for subsistence living.

The just wage theory (St. Thomas Aquinas)

• this theory holds the idea that the working capital of the nation provides a fund from which wages can be paid. The fund is to be divided by all the workers proportionately. This theory is based on the Malthusian theory of population and the law or diminishing marginal returns.

The Wage fund theory (John Stuart Mill)

• it proposes that labour is a commodity like anything that could be bought at a price by the user.

Bargaining theory (John Davidson)

• it offers the best explanation of the wages in modern industry. The supply labour in any given economy on the whole depends upon the total number of individuals who want to work and are available for work.

The marginal productivity theory (John Bates Clark and Philip Henry Wicksteed)

•Karl Marx propounds this theory of labour. This gives credence to the value of labour. It

emphasizes that labour is the source of all products and that without this important

component, there could be no goods for human consumption. Every good that is produced

could be track back to the participation of the worker and therefore, labour must get greater

share of the profit. This is the philosophy of some organized labour groups who are more

active in the greater share of the profits of company operations. These labour unions have

the notion that profits are the surpluses of the other factors of production, and are pocketed

by capitalist businessman making them amass wealth.

PPurchasing Power Theory (Gustav Cassel)Urchasing Power Theory (Gustav Cassel)

• a recent development in the labour market is the said theory means that the wages should be based on the cost of living. The cost of living is dependent upon the economic needs of the family for basic necessities of life for food, clothing and shelter.

The standard of living Theory of wage

It affects the workers’ earning and standard of living.

It eases the recruitment and maintenance of an effective labour force

It develops employee morale and increases work efficiency

It represents cost and competitive advantage in the industry

It helps in preparing budgetary allocations and ease computation of salary adjustments and as an aid in short term and long range plans

It eliminates pay distortions and inequities in employee compensation

It establishes an equitable salary range for various jobs

What is the result of using theses theories ?

.

By

the

amou

nt o

f w

ork

prod

uced

Number of

units produced

Rate per unit in Pesos

Wages earned per day or per

week

earning depends on how much work the employee completes or on a related factor, such as the quality of work. This method of paying wages is called an incentive wage plan. The most common incentive plan is called piecework. Piecework salaries are determined by the number of piece value that is called piece rate

By the time worked

Rate per

hour in

Pesos

Hours

Actually

Worked

Total Wage earned

wages are computed in terms of unit of time, it is common to pay workers by the day and the term day-work was adopted

Payment on the basis of timed worked is more

satisfactory under the following

conditions

Employees have little or no control over how much work they produce.

There is no clear cut relationship between the effort made to produce the work and the amount of work produced.

Work delays occur often and are beyond the employee’s control.

Quality of work is very important

Units of work produced cannot be distinguished and cannot be measured

Methods of Wage Payment

The main purpose of a formal wage and salary management plan is to have a systematic method of payment to ensure that employees receive a fair wage and salary for the work they perform.

Payment by Piecework is satisfactory under the following conditions

When a unit of completed work can be

measured easily

When there is a clear relationship between a workers’ effort and the

result of his effort

When the quality of work is less important than quantity, or when quality standards are

uniform and measurable

When the flow of work is regular, breakdowns are few, and jobs follow a standard procedure

with interruptions

Employee fringe benefits or perks include various types of non-wage compensation provided to employees in addition to their normal wages or salaries. In instances where an employee exchanges (cash) wages for some other form of benefit is generally referred to as a salary packaging or 'salary exchange' arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree.Examples of these benefits include: housing (employer-provided or employer-paid), group insurance (health , dental ,life etc.), disability income protection, retirement benefits ,day care ,tuition reimbursement, sick leave vacation (paid and non-paid), social security, profit sharing , employer student loan contributions ,and other specialized benefits.The purpose of employee benefits is to increase the economic security of staff members, and in doing so, improve worker retention across the organization. As such, it is one component of reward management .

The fringe benefits tax (FBT) was the tax applied to most, although not all,  Fringe benefits  in India. A new tax was imposed on employers by India's Finance Act 2005 was introduced for the financial year commencing April 1, 2005.The fringe benefit tax was temporarily suspended in the 2009 Union of India   by Finance Minister pranab Mukherjee.The following items were covered: Employer's expenses on entertainment, travel,

employee welfare and accommodation. The definition of fringe benefits that have become taxable has been significantly extended. The law provides an exact list of taxable items.

Employer's provision of employee transportation to work or a cash  allowances  for this purpose.

Employer's contributions to an approved retirement plan   Employee stock option plans (ESOPs) have also been brought under fringe benefits tax from the fiscal year 2007–08.

The term perks is refer to those benefits of a more discretionary nature. Often, perks are given to employees who are doing notably well and/or have seniority. Common perks are take- home vehicle, hotel stays, free refreshments, leisure activities on work time (golf , etc.),stationery ,allowances for lunch , and—when multiple choices exist—first choice of such things as job assignments and vacation scheduling. They may also be given first chance at job promotions when vacancies exist.