Introduction

Wage: A fixed regular payment made especially to a manual or unskilled employees. It can be paid daily, weekly or monthly. Salary: Fixed payment made to employees for their services. It is paid on a regular basis, i.e. on a monthly basis.

Compensation

It is the total amount of monetary and nonmonetary pay and benefits provided to an employee 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 attracting and retaining the employees.

Compensation
Direct Wages / Salaries Commissions Bonuses Gain sharing Indirect Time Not Worked
Vacations Breaks Holidays

Insurance Plans
Medical Dental Life

Security Plans
Pensions

Employee Services

Educational assistance Recreational programs

Wage And Salary Administration

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. It is also called compensation management.

Wage And Salary Administration

It is the process of managing a companys compensation (base compensation as well as supplementary) programme. Base compensation, here, refers to monetary payments paid to employees in the form of wages and salaries. It is a fixed, non-incentive kind of payment calculated on the basis of time spent by an employee on the job. Supplementary compensation signifies incentive payments based on the actual performance of an employee.

Objectives
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.

Components Of Compensation
There are four types of compensation:

Basic pay Allowances Incentives Fringe benefits

Basic Pay

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 is based on work done (piece wage system) and white collar workers basic salary is time bound.

Allowances
An allowance is an amount of money set aside for a designated 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 to employees in metro or big cities. Transport Allowance/Conveyance Allowance(TA)A fixed sum paid to cover the travelling charges.

Incentives

It is any factor financial or non-financial that enables or motivates a particular course of action. 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 in nature. It includes promotions, recognition, etc.

Fringe Benefits

Fringe Benefits are a supplement to a regular wages or salaries. 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, life insurance, education reimbursement, employee discounts, personal use of a company owned vehicle and other similar benefits.

Methods of wage payment

Time wage system

Piece wage system

Time Wage System

Wages are paid on the basis of time spent on the job irrespective of amount of work done. Unit of time may be a day, a week or a month.
It is suitable for offices where outputs are nonmeasurable.

Advantages
It is simple and easy to understand.

Gives workers a sense of economic security and self confidence as worker is assured of fixed and regular income. Helps to keep good relations with union as union prefers this wage system as it does not differentiate between efficient and inefficient workers. In case of service organizations where work done is intangible and output cannot be measured accurately there time wage system is of great advantage. It gives chance to the new people entering the organization to learn their work effectively and also gives them time to learn the best method to do the work as the wages are not based on amount of work.

Disadvantages

This method make workers inefficient as they stick to a particular method of doing the work.

It provides no distinction between efficient and inefficient workers so gradually competent workers lose their zeal of working and turn inefficient.
There is no basis for finding the merit of different employees and promotions are made on seniority. This leads to decoration in morale of efficient and young employees.

Piece Wage System

Remuneration is based on amount of work done i.e. quantity of output generated by the workers. One unit of output is considered as one piece of work and specific wage is paid per piece. Greater the number of pieces produced by worker, higher is the remuneration. Thus a workman is paid in direct proportion to his output. It is called payments by results.

Advantages
There is a direct relationship between the efforts and the rewards. Hence, workers who work hard and produce more get more wages. Ambitious and efficient workers are provided ample opportunity to utilize their talent and increase their earning and thereby improve their standard of living and morale.

Management can distinguish between efficient and inefficient workers for the purpose of promotion. Increase in productivity results in higher output and lower cost of production per unit.

Disadvantages
It is very difficult to fix wages in case of non-measurable outputs. The earnings of workers are not stable and they may suffer in case of temporary delays or difficulties. They may feel insecure and dissatisfied.

Employees may not stress on quality , so rigid quality control becomes necessary.
System creates disparity between efficient and inefficient workers so it is not favoured by trade unions as it affects the work environment.

Process Of Wage Determination

Wage determination process consist of the following steps:

Job analysis: The contents and requirements of job are analyzed. The data collected through job analysis is used to prepare job description and job specification. On basis of these statement standards of job performance are laid down.

Process Of Wage Determination

Job evaluation: The relative value of every job is 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 are conducted to find out wage/salary levels prevailing in the region or industry for similar jobs.

Process Of Wage Determination

Developing wage structure : On basis of foregoing steps an equitable wage structure is prepared. While determining such a structure several points need to be considered. 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.

Process Of Wage Determination

Wage administration rules : rules are required to determine the degree to which advance will be based on length of service rather than merits, the frequency with which pay increments will be awarded ,the frequency with which pay based on length of service. The rules that will govern promotion from one pay grade to another. Once rules are made they should be communicated to the employees. Employee appraisal: In order to reward merit and performance, it is necessary to evaluate the performance of individual employees.

Process Of Wage Determination

Broad banding: is consolidation of many previously discrete job tiles, ranks and pay grades into much wider categories known as bands or ranges. These are given in organizations which have a flat structure, fast paced, non bureaucratic kind of culture.

Wage Policy In India

A wage policy offers certain guidelines for determining 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 India need to be elaborated. They are:
Minimum Wages Fair Wages Living Wages

Minimum Wages

Wage sufficient to sustain and preserve the efficiency of the worker and offer basic amenities of life by providing some measures of education, medical care, etc. Criteria: It must be calculated for a family of 4 members. It must be able to provide 2700 calories per adult per day. Cloth requirements should be 18 yards per unit per annum. Light, fuel, house rent and other miscellaneous expenditure should constitute 20% of the total minimum wage.

Fair Wages

It is above the minimum wage but below the living wage. It is fixed, taking into account certain factors such as the productivity of labor, prevailing wage rates, level of national income and its distribution, the employers capacity to pay etc.

Living Wages

This is the highest amount of wages proposed by the government, offering basic amenities of life and satisfying the social needs of worker like education for children,protection against ill-health etc.

Legal framework on Wages

1. 2. 3. 4.

The Government has enacted various laws to regulate and govern the wages. They are: The payment of Wages Act 1936 The Equal Remuneration Act 1976 The Minimum Wages Act 1948 Pay Commissions

The payment of wages act 1936

The main objective of this act is to ensure regular and prompt payment of wages and to prevent unauthorized deductions and arbitrary fines from wages. It also regulates the rate of payment for overtime work. The Act is applicable to persons employed in factories/industrial establishments.

The minimum wages act 1948

It was enacted to safeguard the interests of workers, mostly in the unorganised sector by providing for the fixation of minimum wages in certain specified employments. It also provides regulation of overtime rate, fix wages by hour, day, month etc. The Act also requires the appropriate government (both Central and State) to fix minimum rates of wages in respect of employments specified in the schedule and also review and revise the same at intervals not exceeding five years.

The equal remuneration act 1976

The main objective of this act is to prevent discrimination in remuneration on basis of gender. Under the act, it is the duty of the employer to pay equal remuneration to men and women workers for the same work or work of a similar nature. No discrimination is to be made against women in recruitment and in conditions of service unless provided for under any law.

Pay Commissions

A Pay Commission is a panel of members of the Union Cabinet of India for review and revision of the salaries of government employees. It was set up by the Central Government in the year 1965 and as an administrative committee to determine the salaries of central government employees. Six pay commissions have been set up till date.

References
Human Resource Management Human Resource Management Human Resource Management C.B Gupta L.M Prasad DeCenzo and Robbins

www.google.com www.wikipedia.com

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