WAGE DETERMINATION

A K BASU

FACTORS IN DETERMINATION
EMPLOYER EMPLOYEE CONTRACT WAGES FIXED ON WORTH OF THE JOB BASED ON THE SKILL REQUIRED PHILOSOPHY OF MANAGEMENT CAPACITY TO PAY REGION CUM INDUSTRY BENCHMARKS

FACTORS [CONTD]
COLLECTIVE BARGAINING WAGE BOARDS STATUTORY IMPOSITIONS TRIBUNAL/COURT AWARDS

CONTRACT OF EMPLOYMENT
APPLICABLE IN ITS PURE FORM TO - NEW INDUSTRIES - NO UNION SITUATIONS - MANAGERIAL/SUPERVISORY REMUNERATION OTHER THAN THIS, ALL CONTRACTS ARE INFLUENCED BY EXTERNAL FACTORS

JOB WORTH
IS DETERMINED BY JOB EVALUATION ALSO BY THE COMPARABLE INDUSTRY BENCHMARK CAPACITY TO PAY COMPARISON WITH THE COMPETITION AND MARKET GOING RATE PHILOSOPHY OF MANAGEMENT WHETHER TO BE THE HIGHEST,MEDIAN OR LOWER PAYMASTERS

COLLECTIVE BARGAINING
THE UNION PUSH - IN THE UNIT - IN INDUSTRYWISE AGREEMENT THE UNITS/INDUSTRYS CAPACITY TO PAY AND COMPETITIVE POSITION IS A MAJOR DETERMINANT UNION ALSO DERIVES STRENGTH FROM CAPITAL INVESTMENTS

GOVERNMENT INTERVENTIONS
STATUTORY DIRECTIONS - MINIMUM WAGES - BONUS - SETTING UP WAGE BOARDS/PAY COMMISSIONS - REFERENCE TO TRIBUNALS/ LABOUR COURT

WAGE ELEMENTS
BASIC WAGES DEARNESS ALLOWANCE OTHER ALLOWANCES RETIRALS ANNUALISED PAYMENTS PERQUISITES AND BENEFITS

BASIC WAGES
IT IS THE PRICE TO BE PAID FOR GETTING A PARTICULAR JOB DONE DEPENDS ON THE SKILL,TRAINING AND EXPERIENCE REQUIRED FOR THE JOB IT IGNORES THE DIFFERENCES ATTRIBUTABLE TO INDIVIDUALS

BASIC WAGES [CONTD]

BASIC WAGES DOESNOT FLUCTUATE LIKE DA OR BONUS/VARIABLE PAY IT PROGRESSES GRADUALLY OVER A TIME PERIOD THEREFORE, IT MAY HAVE A LAID DOWN TIME SCALE OF PAY IT IS PAIDHOURLY,DAILY,FORTNIGHTLY OR MONTHLY

BASIC WAGES [CONTD]

FORM A SMALLER PART OF TOTAL WAGES FOR BOTH UNIONISED AND MANAGERIAL PERSONNEL FOR UNIONISED, DA IS THE LARGEST COMPONENT FOR MANAGEMENT, PERQUISITES AND VARIABLE PAY ARE LARGER

BASIC WAGES [CONTD]

FOR UNIONISED, IT COULD INCREASE BY - AD HOC INCREASE WHEN THE WHOLE SET OF BASIC WAGES MOVE UP BY AGREED AMOUNT - BY CHANGING THE INCREMENT AFTER A GIVEN PERIOD OF YEARS - BY MERGING A PART OF DA

DEARNESS ALLOWANCE
IT IS A SPECIAL ALLOWANCE PAID BY EMPLOYERS TO PROTECT THE REAL WAGE OF EMPLOYEES BY COMPENSATING FOR INFLATION NO LAW GOVERNS THIS PAYMENT, EXCEPT WHERE IT IS PART OF MINIMUM WAGE NOTIFICATION

WHY BURDEN ON EMPLOYERS

INFLATION IS BEYOND THE CONTROL OF EMPLOYERS THEN WHY SHOULD EMPLOYERS COMPENSATE FOR IT? EMPLOYERS HAD ENTERED INTO CONTRACT TO PAY A WAGE TO THEIR WORKERS AS PER CONTRACT THEY MUST PROTECT WHAT THAT WAGE CAN SUBSEQUENTLY BUY

BACKGROUND
DA STARTED WHEN PRICES OF FOODGRAINS INCREASED SIGNIFICANTLY DURING THE 1ST WORLD WAR DEAR FOOD ALLOWANCE WAS GRANTED TO INDUSTRIAL WORKERS FROM 1915 DISCONTINUED IN 1923-24 WHEN PRICES FELL

BACKGROUND [CONTD]
INDEXING FOR PRICES STARTED IN 1933-34, BUT IN SPORADIC MANNER CONSUMER PRICE INDEX WAS FIXED IN1939 MAINLY FOR TEXTILE BOMBAY MILLOWNERS PAID DA BASED ON CHANGES IN THIS INDEX ON PERSUASION OF PROVINCIAL GOVT

BACKGROUND [CONTD]
GOVT. OF INDIA SET UP RAU COMMITTEE OF ENQUIRY IN 1940 BASED ON ITS RECOMMENDATIONS, COMPILATION AND MAINTENANCE OF CPI TAKEN OVER BY CENTRAL GOVT DIRECTORATE OF COST OF LIVING SET UP IN SHIMLA IN 1941 NOW KNOWN AS LABOUR BUREAU

BACKGROUND [CONTD]
BUREAU CONDUCTED FAMILY LIVING SURVEYS IN 1958-59 IN 50 IMPORTANT CENTRES FOR ORGA NISED WORKMEN UNDER GUIDANCE OF TECHNICAL ADVISORY COMMTEE RESULT WAS THE INTRODUCTION OF ALL-INDIA SERIES 1960 = 100 STILL WIDELY IN USE

CONSUMER PRICE INDEX

CONSUMER PRICE INDEX HAS BEEN MODIFIED BASED ON CHANGES IN THE RELATIVE WEIGHT OF THE BASKET OF CONSUMABLES INDICES WERE THE FOLLOWING: 1939 THE FIRST PARTIAL INDEX FOR TEXTILE 1949 1960 MOST COMMONLY IN USE 1982 CONVERSION TO 1960 IS TO MULTIPLY BY 4.74 2001 THE LATEST. CONVERSION WITH 1982 IS TO MULTIPLY BY 4.63

CPI [CONTD]
SERIES ARRIVED AT THROUGH FAMILY INCOME & EXPENDITURE SURVEY CONDUCTED IN IMPORTANT INDUSTRIAL CENTRES OVER A YEAR BASKET HAS 6 BROAD GROUPS AND SUBGROUPS WITHIN EACH GROUP GROUPS ARE : FOOD ; PAN,SUPARI,TOBACCO & INTOXICANTS; FUEL & LIGHT; HOUSING; CLOTHING,BEDDING & FOOTWEAR; MISCELLANEOUS

CPI [CONTD]
WELL LAID OUT PROCEDURE FOR COLLECTION OF PRICES BY PRICE COLLECTORS UNDER DIRECTORATE OF ECONOMICS & STATISTICS , OR LABOUR DEPARTMENT OF STATE GOVERNMENTS PERIODIC DATA SENT TO LABOUR BUREAU

TYPES OF DEARNESS ALLOWANCE

PAID AS A PERCENTAGE OF BASIC WAGES/SALARIES CENTRAL GOVERNMENT DA FORMULA BASED ON 4TH PAY COMMISSION RECOMMENDATIONS PAID TWICE A YEAR BASED ON 1ST JANUARY AND 1ST JULY FIGURES

DA

TH 4

PAY COMMISSION

FORMULA BASED ON 1960 AICPI NOS. BASE IS 608 CALCULATION: 12 MONTHLY AVG 608/ DIVIDE BY 608 * 100 = % INCREASE IN PRICES NEUTRALISATION BASED ON SALARY SLABS IN 4TH PAY COMMISSION HIGHER NEUTRALISATION AT LOWER SLABS CONCEPT OF EQUITY

DA 4TH PAY COMMISSION [CONTD]

BASIC SALARY UPTO RS 3,500/- PM = 100% NEUTRALISATION BASIC SALARY BETWEEN RS 3501/AND RS 6000/- = 75% NEUTRALISATION FOR BASIC FROM RS 6001/- AND ABOVE = 65% NEUTRALISATION

DA

TH 6

PAY COMMISSION

PERCENTAGE INCREASE 1/7/06 - 2% OF BASIC SALARY 1/1/07 - 6% 1/7/07 - 9% 1/1/08 - 12% 1/7/08 - 16% SAME INCREASE AT ALL LEVELS

DA FOR PENSIONERS
PRIOR TO 1972, NO DA ON PENSIONS FROM 1/4/72,FLAT RATE OF DA TO ALL PENSIONERS FROM 1/10/84, DA IS PAID AS % OF BASIC PENSION PENSION IS THE ORIGINAL PENSION WITHOUT COMMUTATION

VARIABLE DA IN PRIVATE SECTOR

BASED ON ACCEPTABLE MEASUREMENT OF INFLATION AND RATE OF NEUTRALISATION MEASUREMENT IS DONE BY LABOUR BUREAU, SHIMLA RATE OF NEUTRALISATION IS FIXED THROUGH COLLECTIVE BARGAINING/COURT JUDGEMENTS

VARIABLE DA [CONTD]
VARIOUS COMMITTEES FROM TIME TO TIME HAVE RECOMMENDED THAT FULL NEUTRALISATION SHOULD BE GIVEN ONLY AT LOWEST LEVEL OF BASIC WAGES, AND THEREAFTER NEUTRALISATION SHOULD PROGRESSIVELY DECLINE THIS CAME FROM THE CONCEPT OF EQUITY

VARIABLE DA [CONTD]
CURRENTLY,SIMPLEST FORMULA IS: - SELECT AN INDEX -AGREE ON A RATE OF NEUTRALISATION -FIX THE PERIODICITY OF NEU TRALISING -WHETHER ALL WILL GET THE SAME DA INCREASE/DECREASE

QUANTUM OF DA
SINCE IT COMPENSATES FOR INFLATION,WITH CONTINUOUS INFLATION,DA FORMS DISPROPORTIONATELY LARGER PART OF WAGES DEEMED BASIC WAGES , HENCE USED FOR CALCULATION OF RETIRALS,ETC SOMETIMES A PART OF DA MERGED WITH BASIC WAGES CEILING ON DA ?

CALCULATIONS OF DA CASE I
BASE YEAR 1960 = 100 RATE OF NEUTRALISATION = RS 1.80/PT DA NEUTRALISATION BASED ON QUARTERLY AVERAGE POINTS JUL SEPT AVERAGE POINTS WAS 2134 OCT = 2268, NOV = 2289, DEC = 2222 WHAT INCR/DECREASE IN DA IS PAYABLE IN JANUARY 2010 ?

CASE II
BASE YEAR 1960 = 100 RATE OF NEUTRALISATION = RS 1.80 PER PT UPTO 1658 PTS. THEN RS 2.00 PER PT UPTO 2500 PTS, AND THEREAFTER @ RS 2.20 PER PT JULY-SEPT AVERAGE WAS 2689 PTS OCT =2712, NOV = 2723, DEC= 2700 WHAT TOTAL DA IS PAYABLE IN JANUARY 2010?

CASE III
1960 BASE HAS BEEN AGREED AS PER LONG TERM SETTLEMENT RATE OF NEUTRALISATION IS RS 2.00 PER PT HOWEVER, GOVT IS ONLY NOTIFY ING 2001 INDEX OCT = 146, NOV = 153, DEC = 149 WHAT IS TOTAL DA PAYABLE IN JANUARY 2010 ?

BASIC SALARY FOR MANAGEMENT

FOR MANAGERIAL/SUPERVISORY STAFF, BASIC WAGE IS FIXED : - SEEING WHAT MARKET PAYS FOR SIMILAR JOB WITH SIMILAR EXPERIENCE - INTERNAL PARITY - FOR MID LEVEL ENTRIES, DONOT PAY LESS THAN WHAT HE GETS AS BASIC IN PREVIOUS JOB

MANAGEMENT TRAINEES STIPEND

WHILE FIXING STIPEND, CONSIDER - WHAT WILL BE THE STARTING LEVEL IN - HAND SALARY ON CONFIRMATION - EXCLUDE VARIABLE PAY AND VALUE OF PERQUISITES AND BENEFITS FROM IN HAND SALARY - STIPEND SHOULD NORMALLY BE 50% TO 60% OF ABOVE