2. Why wage and salary administration
in an organization
Main objective is to have a scientific, rational and balanced
wage & salary structure
In salary administration, the employer should not feel
employees are getting more money than they deserve and
employees should not feel they getting lower money than
they deserve
Wage and salary administration includes allowances, leave
facilities, housing, travel, etc. and non-cost rewards such as
recognition, privileges and symbols of status
3. Objectives
To establish fair and equal compensation
To attract competent personnel
To retain the present employees
To control labor and administrative cost
To improve motivation and morale of employees
To project good image for the company
4. Principles of wage and salary
administration
It must be flexible
Job evaluation must be scientific
It must consistent with overall plan of the organization
It must be according to the social and economic objective
of the organization
It must change according to the local and national
conditions
It must simplify and speed up the administrative process
5. Difference between wage, salary
and compensation
Wage : Paid to blue-collar workers- paid daily, weekly or
monthly- paid for the jobs which can be measured in
terms of money’s worth to some extent
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 symbol of status
6. Types of compensation and wages
Compensation
Base compensation : Payment made to employees in
the form of wage and salaries, It is a fixed and non-
incentive payment based on the basis of time spent in
the job
Supplementary compensation : Incentive payment
based on the actual performance of employee
7. Wages
Minimum wage : Compulsory wage paid to employees
irrespective of the financial status of the organization. It
should be calculated based on the minimum food
requirements, cloth requirements, rent to live in a
particular area, standard of a working class family and
fuel, lighting and other needs
Fair wage : Wage above minimum and below living
wage. It is decided based on productivity of labor,
prevailing rates of wages, level of national income and
the capacity of employer to pay
Living wage : It provides basic needs of life. It should
meet medical, education and retirement needs and it is
paid according to the efficiency of worker
8. Factors influencing wage and
salary
Wage policy of the company
Job needs
Ability to pay
Cost of livings
Prevailing wage rates
Unions
State regulations
Demand and supply of labor
Economic conditions of the nation
9. Methods of wage payment
1. Time wage system : The workers id paid based on the
time spend on the work irrespective of the work done. It
may be based on hour, day, week or month worked. It is
the oldest method of wage payment
It is issued in following kind of orgns
Quality is more important than quantity
Measurement of work is not easy
Work requires high degree of skill and dexterity
When efficiency of work can be measured only by close
supervision
10. Merits
It is simple to understand and easy to operate
Workers are assured of guaranteed minimum wage
irrespective of output
Suitable for beginners
It is advocate by trade unions
Demerits
It do not make any differentiation between efficient and
inefficient workers
It does not have provision for offering incentives to
efficient workers
Management should spend more on supervision
The system is unfair as wage and productivity are not
correlated
11. 2. Guaranteed time rates : The wage is paid according to the time rate
and its adjusted according to the cost of living.
3. Piece rate system : The workers are paid at a stipulated rate for per
unit of output. Payment is based on speed,
This method is applicable
Quality of work is not important
Work is of a repetitive nature
There is sufficient demand for output to guarantee continuous work
12. Merits
It provides encouragement for high productivity
The workers will adopt better and more efficient methods
Idle time will be reduced to minimum
The cost of supervision is less
Types of piece rate system
a) Straight piece rate system : Paid according to fixed amount per fixed
units produces irrespective of time taken
b) Piece rate with guaranteed time rate: Workers are paid minimum
on the basis of time rate plus paid for number of units produced
c) Differential piece rate system : The rate per piece is increased as the
output level gets increased. The increase in rates may be proportionate
to the increases in output
13. Legal frame work on wages
The payment of Wages Act 1936
The minimum wages Act 1948
The companies Act 1956
The payment of Bonus Act 1965
The equal remuneration Act 1976