The term compensation as a substitute word for wages and
salaries, is of recent origin. Wages is now considered as a
cost factor. Therefore, strategic management of wages and
salaries is very important for organizations. Employee
compensation is a better term than employee benefits or
wages or salaries. What the employee provides the
employer is a labor service, usually known as work.
Pay or compensation represents an exchange between the
employee and the organization. Each gives something in
return for something else.
Compensation should be fair, irrespective of economic
consideration. Many scholars believe that compensation is
the outcome of productivity.
DEFINATION OF WAGES:
Under Sec. 2(m) wages includes ‘Wages for leave period,
holiday pay, overtime pay, bonus, attendance bonus etc.
Any award of settlement and production bonus if paid,
constitutes wages. But under Payment of Wages Act, 1948
‘Retrenchment compensation , payment in lieu of notice
and gratuity payable on discharge constitute wages.
THE PAYMENT OF WAGES ACT
It extends to the whole of India .
The Central Government is responsible for enforcement of
the Act in railways, mines, oilfields and air transport
services, while the State Governments are responsible for
it all other establishments ( factories and other
(1) Every person responsible for the payment of wages under
section 3 shall fix periods (in this Act referred to a wage period)
in respect of which such wages shall be payable.
(2) No wage-period shall exceed one month.
Time for payment of wages
(a) any railway, factory or [industrial or other establishment] upon
or in which less than one thousand persons are employed, shall be
paid before the expiry of the seventh day.
(b) any other railway, factory or [industrial or other establishment]
shall be paid before the expiry of the tenth day, after the last day
of the wage-period in respect of which the wages are payable
MINIMUM WAGES ACT, 1948:
A Minimum Wages Bill was introduced in the Central
Assembly on 11.4.46 to provide for fixation of minimum
wages in certain employments. It was passed in 1946 and
came into force with effect from 15.3.48.
The minimum amount of compensation an employee must
receive for performing labour . Minimum wages are
typically established by contract or legislation by the
government. As such, it is illegal to pay an employee less
than the minimum wage.
Minimum wage in a country is fixed by the government in
consultation with business organizations and trade unions.
National Floor Level Minimum Wage was fixed at Rs.35/-
per day in 1996.
National Floor Level Minimum wage to Rs.40/- per day in
1998. Further to Rs.45/- w.e.f. 01.12.1999 and Rs. 50/- per
day w.e.f. 01.09.2002.
National Floor Level Minimum Wage was revised
upwards to Rs.66/- per day with effect from 1.02.2004.
Central Government further revised the National Floor
Level Minimum Wages from Rs.66/- to Rs.80/- per day
with effect from 01.09.2007.
The minimum wage attempts to protect employees from
exploitation, allowing them to afford the basic necessities
of life. The minimum wage rate fluctuates between
countries, and sometimes between states .
JUST WAGES OR LIVING WAGES
Living wages has been defined differently by different
people in different countries. The best definition is given
by Justice Higgins which reads "Living wage is a wage
sufficient to ensure the workman food, shelter, clothing,
frugal comfort, provision for evil days etc. as regard for
the skill of an artisan, if he is one".
According to Fair Wages Committee Report: "The living
wage should enable the male earner to provide himself
and his family not merely the basic essentials of food,
clothing and shelter but a measure of frugal comfort
including education for the children, protection against ill-
health, requirement of essential social needs and measures
of insurance against old age."
Higher than market wage paid to encourage higher output and to
raise worker morale, and to
discourage absenteeism and inventory shrinkage.
The argument is that paying workers a higher wage may lead to
increased productivity from the worker. If a worker gets a
relatively higher wage, he may feel more loyal and devoted to the
With a higher wage, he may also fear being made unemployed
and so will work harder to make sure he keeps his job. Therefore,
although the firm pays more, they get more productivity from
Generally Fair wages refer to : ‘Company practices that lead to
sustainable wage developments’.
Fair wages refer to: ‘Wage levels and wage-fixing mechanisms
that provide a living wage floor for workers,
while complying with national wage
regulations (such as the minimum wage,
payment of wages, overtime payments,
provision of paid holidays and social
insurance payments), ensure proper wage
adjustments and lead to balanced wage
developments in the company
DIMENSION OF FAIR WAGES
1. Payment Of Wages A wage which is regularly and formally paid
in full to the workers.
2. Living Wages A wage that ensures minimum acceptable
3. Minimum Wages A wage which respects the minimum wage
4. Prevailing Wages A wage which is comparable to wages in
similar enterprises in the same sector.
5. Payment Of Working Hours A wage that does not generate excessive
working hours and properly rewards normal
working hours and overtime.
6. Pay systems A wage that leads to a balanced wage structure between the
basic wage and additional bonuses and benefits.
7. Real wages A wage that progresses at least in proportion to price increases.
8. Wage share A wage that progresses proportionally along with enterprise
sales and profit growth and which does not lead to a fall in
the wage share in enterprise performance growth.
9. Wage costs A wage whose progression does not lead to a dramatic reduction
in wage costs within total production costs and as a percentage of
10. Work intensity, technology Wages A wage that progresses along with
changes in intensity at work, technological
contents and the evolving skills and tasks
of the labour force.