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Wages & salary administration

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  • 1. Compensation /RemunerationDefined as the return received by employees for their contribution to theorganisationComponents Wages & SalaryWages represents hourly rates of pay/ rate of units producedSalary represents monthly rate of payBoth are subject to annual increments based on - Nature of Job,Merit/Performance, Seniority etc IncentivesReferred as payments by resultsMonetary payments in addition to wages & SalaryClassificationIndividual Incentive SchemeGroup Incentive Scheme
  • 2. Compensation /Remuneration Cont.. Fringe BenefitsInclude employee benefits such as:Provident fundGratuityInsuranceAccident ReliefFacilities for Canteen Uniform, Recreation PerquisitesApplicable to Executives which include Company Car, ClubMembership, Paid Holidays, Stock-Option Scheme, Furnished House Etc Non Monetary BenefitsInclude Job Responsibilities which are challenging, Merit Recognition,Growth Prospects
  • 3. Wage & Salary AdministrationDefined as the establishment and implementation of sound policies andpractices of employee compensationCovering Areas Job Evaluation Surveys of Wage and Salaries Analysis of Organisational Problems Development and Maintenance of Wage Structure Establishing rules for administering wages Wage payments incentives Profit Sharing Control of Compensation Costs
  • 4. Wage & Salary Administration - Objectives Attracts qualified employees by ensuring adequate payments for all jobs Reduces the likelihood of friction and grievances over wage inequities Enhances employees morale and motivation Helps the employers to systematically plan and control the labour costs Minimize chances of favoritism
  • 5. Wage Theories Reinforcement and Expectancy TheoryStates that Behaviour which has a rewarding experience likely to be repeatedie; Remuneration / Monetary reward followed by high employee performanceis likely to be repeated Equity TheoryProposed by Adam SmithStates that an employee who sees inequity in rewards seeks to restore equityEmphasises equity in pay structure of employee remuneration`
  • 6. Wage Theories Cont.. Agency TheoryAccording to this theory, Employers and employee who are two importantstakeholders of a business unit posses divergent interests and goals• Employees expect high remuneration (Agency costs) while employers seeks tominimise it• This theory proposes an idea that employers should choose a better scheme thatshould take care of the interests of both parties; by framing remunerationstructure either as merit pay or outcome oriented
  • 7. Wage Theories Cont.. Marginal Productivity TheoryProposed by Philips Henry Wicksteed and John Bates ClarkStates that Wages depends upon the demand for and supply of labour Residual Claimant TheoryProposed by Francis. A.WalkerStates that wages represent the value created by labour in the production process
  • 8. Wage Theories Cont.. Surplus Value TheoryProposed by Karl MarxStates that labour is considered as an article of commerce which can be purchasedon payment of priceThe Price of any product is determined by the time spent by labour on it