Wages and Salaries Administration


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-Overtime Pay Computation

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Wages and Salaries Administration

  2. 2. WAGES AND SALARIES DEFINED• Wages – paid to blue-collar employees; paid daily, weekly ormonthly; paid to jobs which can be measured in terms ofmoney’s worth.• Salary – paid to white-collar employees; paid in monthly basis;paid to employees whose contribution cannot be measuredeasily.• Compensation – a comparative term; includes wages and allother allowances and benefits. (e.g. allowances, leavefacilities, housing, travel, and non-cost such asrecognition, privileges, and symbols of status)
  3. 3. WAGE AND SALARY ADMINISTRATION• A group of activities involved in thedevelopment, implementation, and maintenance of apay system.• An ongoing process of managing a wage and salarystructure.
  4. 4. WHY DO WE NEED TO STUDY WAGEAND SALARY ADMINISTRATION?• To have a scientific, rational, and balanced wage andsalary structure.• In a salary administration, the employer should not feel thatthe employees are paid more than they deserve and theemployees should not feel that they are underpaid.
  5. 5. • One of the most important functions of Human Resources is the payment ofthe proper salaries and the wages to all company employees. The pay thatthe employees receive from their employer is the very reason for their beingin the job.• The function of the payroll in a company is usually the wage and salaryadministration and it is carried out by the Human Resources Department.THE ROLE OF HUMAN RESOURCES INTHE PAYMENT OF SALARIES
  6. 6. 1. Classical Wage Theory• This theory is based upon the fundamental concept that labor is acommodity and we have to pay the price according to supply anddemand.2. The Just Wage Theory of St. Thomas Aquinas•A just wage is described as wage which permits the recipient workerto live in a manner in keeping with his position in the society.THEORIES OF WAGES
  7. 7. 3. The Wage Fund Theory•This theory is expounded by John Stuart Mill and his followers based onthe Malthusian theory of population and the law of diminishing returns.4. Bargaining Theory of John Davidson•This theory proposes that the labor is a commodity like anything thatcould be bought at a price by the userTHEORIES OF WAGES
  8. 8. 5. The Marginal Productivity Theory•This theory offers the best explanation of wages in modern industry6. The purchasing Power Theory•This theory tries to establish the relationship between wages and thelevel of economic activity.THEORIES OF WAGES
  9. 9. 7. Labor Theory of Value•It emphasizes that labor is the source of all the products and thatwithout this important component, there could be no goods for humanconsumption.8. The Standard of Living Theory of Wages•A recent development in the labor market is the theory of living wagesthat means that wages should be based on the cost of living.THEORIES OF WAGES
  10. 10. • Once the worth of a job has been established, using one of thejob ratings systems, the actual salary to be paid for each jobmust be determined.• A major factor in making the determination is the wage survey.• Since salaries paid by other companies have an effect onemployment, morale and turnover rate, close attention is paid tothe salary that is prevailing in the community and industry forspecific jobs.WAGE AND SALARY SURVEYS
  11. 11. WAGES AND SALARY SURVEYS• A survey of employers in the same industry and the samearea showing the wages and salaries they pay totheir employees.• Wage and salary surveys are useful because they show theprevailing compensation in a given city or otherplace, which may result in employers making upward ordownward adjustments.
  12. 12. WAGES AND SALARY SURVEYS• The actual salary to be paid for each job must bedetermined.• Wage survey is a major factor.• Informal surveys may be conducted through telephones orinformal interviews.• Formal surveys use questionnaires based on benchmarksjobs.• The Human Resource Department are preparing sets ofquestionnaires.
  13. 13. PROCEDURE IN CONDUCTINGWAGE AND SALARY SURVEYS1. Defining the Labor Market2. List of key Job Position3. Detailed Description of Jobs4. Collection of Salary Data5. Compilation of Salary Data6. Results of Survey
  14. 14. CONSIDERATIONS IN MAKINGDECISIONS• Whether the salaries will be above, below, or the samelevel.• Whether pay in a single rate for each job.• How many pay grades or salary ranges to use, and howwide each pay grade should be.• The range of the amount in terms of money value.
  15. 15. DATA TREND GRAPH• One tool that is often used to simplify the process in decisionmaking is the use of two-dimensional graphs.• Horizontal line, where the points for key jobs are plotted.• Vertical line, where the range of pay is plotted.
  16. 16. TECHNIQUES IN INDICATING THETREND OF THE DATA PLOTTED.1. Eye Inspection- This technique is the least scientific and reliable as this doesnot require scientific computations. It is more of a judgmentalanalysis.2. The Least Squares- This uses the statistical formula. It presents moreaccurately the relationships between the money value and thekey jobs.3. The Second Degree Curve- The trend Line will normally take the form of acurve, and may more accurately indicate the trend of the data.
  17. 17. THE DEVELOPMENT OF WAGE ANDSALARY STRUCTURE• Wage and Salary StructureThe hierarchy of jobs to where the pay rates are attached.The Advantages:1. Affects the workers’ and standard of living.2. Eases the recruitment and maintenance of an effective labor force.3. Develops employee morale and increases work efficiency.4. Represents cost and competitive advantage in the industry5. Helps in preparing budgetary allocations.6. Eliminates pay distortions and inequities in employee compensation.7. Establishes an equitable salary range for various jobs.
  18. 18. WAGE STRUCTURE DESIGN• The design of the wage and salary structure is theestablishment of job classes and rate ranges. All jobswithin a class are treated in the same way for purposesof economical administration.
  19. 19. GREEN CIRCLE RATE• When employees’ salaries fall below the minimum of thepay grade for the job.• The decision to bring salaries to the minimum of the gradeshould be based on the employees’ performance.
  20. 20. RED CIRCLE RATE• Situation whereby the employee with high seniority is either socompetent or has received so many increases that his salary isabove the maximum of the pay grade.• This can be handled in two-ways:1. Review the performance of the employee.2. If the performance review reveals the employee is not worthy tobe promoted and such salary increase was discreetly earnedsome obvious reasons, then the employee will not get the normalmerit increase.
  21. 21. METHODS OF WAGE PAYMENT• What is Wage Payment?• It is the way of giving financial compensation to theworkers for the time and effort invested by them inconverting materials into finished products.• The main purpose of a formal wage and salarymanagement plan is to have a systematic method ofpayment to ensure that employees receive a fair wageand salary for the work they perform.
  22. 22. TWO METHODS OF PAYING SALARIES• By the time worked• By the Amount of Work Produced
  23. 23. FIRST METHOD OF PAYING SALARIESBy the time worked- wages are computed in terms of unit of time.• Day-Work methods of pay - include weekly, biweekly, or on a monthly basis.- It is common to pay workers by the day and theterm day work was adopted.• Non-incentive Wage Plan – paying by the time worked.• No matter how hard an employee works during an hour, the pay will be computedby the hourly rate and no more.• Wages under this plan are computed by multiplying the number of hours worked bythe rate hour:• H x R = W• H- Hours actually worked• R- Rate per hour in pesos• W- Total Wages earned
  24. 24. FIRST METHOD OF PAYING SALARIES• Payment on the basis of time worked is more satisfactory under thefollowing conditions:1. Employees have little or no control over how much work theyproduce.2. There is no clear-cut relationship between the effort made toproduce the work and the amount of work produced.3. Work delays occur often and are beyond the employees’control.4. Quality of work is very important.5. Units of work produced cannot be distinguished and cannotbe measured.
  25. 25. SECOND METHOD OF PAYING SALARIESBy Amount of Work Produced• Incentive Wage Plan- a method of paying wages where earnings dependon how much work the employee completes or on a related factor, such asthe quality of work.• Piecework – most common incentive plan.- piecework salaries are determined by the number of piecesproduced or completed, and each piece is assigned a piecevalue that is called a piece rate.• The formula for computing salaries under piecework is as follows:• N x U = W• N- Number of units produced• U- Rate per unit in pesos• W- Wages earned per day or per week
  26. 26. SECOND METHOD OF PAYING SALARIESPayment by piecework is satisfactory under the following conditions:1. When a unit of completed work can be measured easily;2. When there is clear relationship between a workers’ effort andthe result of his effort;3. When the quality of work is less important than quantity, or whenquality standards are uniform and measurable.4. When the flow of work is regular, breakdowns are few, and jobsfollow a standard procedure, with few interruptions.
  27. 27. WAGE AND SALARY POLICIES• These policy guidelines that will help the organizationhave better relationships with employees and developa more comprehensive employee financial planningprogram.
  28. 28. CHARACTERISTICS OF THE WAGE ANDSALARY POLICY1. The wage and salary plan must be easily understood.2. Salaries in the wage plan should be easily computed.3. Salaries should be made relevant with effort.4. Incentive wage plans should provide payment for incentiveearnings to employees soon after they have been earned by effortsexerted to reach standards.5. The method of payment should be stable and unvarying.
  29. 29. MORAL RENEWAL IN THE WORKPLACE1.Know that leaders have limitations.2. Choose character3. Walk the talk4. Avoid compromising5. Use the same measures on yourself.6. Face the mirror.7. Show the mirror to your leaders.8. Don’t just admit mistakes; correct them.9. Have an improvement plan10. Rebuild and don’t slide back.
  30. 30. LABORS AND WAGES• In the past, the terms used to classify/describe the type ofvocations are:• Blue Collar: Manual Laborers• White Collar: Office workers• Pink Collar: jobs associated with women (e.g.nursing, secretarial, etc.)
  31. 31. LABOR AND WAGES• In the present time, work roles are classified into 3 categories:• Skilled Labor: workers who received specialized training to do theirjobs; developed & improved a special skill; may or may not needto be licensed or certified by the state. This may be blue/whitecollars workers.• Unskilled Labor: workers who received no special training; have fewspecific skills. These are blue collar workers.• Professionals: Perhaps the elite of the labor grades. Workers whoneed to do an advanced degree to do their jobs. These are whitecollar workers.• These are non-competing labor grades
  32. 32. THEORY OF WAGES AND SALARIES• Traditional Theory of Wage Determination:• the law of supply and demand dictates salary.• Theory of Negotiated Wages:• Employees who work in unions where the unions negotiatessalary on behalf of all workers fit into this theory.
  33. 33. OVERTIME PAY• All employees required to work beyond eight hours in one workday is entitledto overtime pay. The basis of overtime pay is found in Article 87 of the LaborCode.• Article 87. Overtime work. Work may be performed beyond 8 hours a dayprovided that the employee is paid for the overtime work an additionalcompensation equivalent to his regular wage plus at least 25% thereof. Workperformed beyond 8 hours on a holiday or rest day shall be paid an additionalcompensation equivalent to the rate for the first 8 hours on a holiday or rest dayplus at least 30% thereof.
  34. 34. OVERTIME PAY | OVERTIME WORK |WORKDAY• Overtime Pay is the additional compensation payable to employee forservices or work rendered beyond the normal eight hours of work.• OT Pay = OT rate x No. of hours in excess of the regular 8 hours of work• Overtime Work. Any work performed beyond the normal 8 hours of work inone workday is considered as overtime work.• Workday is the consecutive 24-hour period which commences from thetime the employee starts to work and ends at the same time the followingday.• To illustrate, if the employee regularly works from 8AM to 4PM, his regularworkday is the 24-hour period from 8AM to 8AM of the following day. Workdaysdo not necessarily corresponds to calendar days.
  35. 35. OVERTIME PAY RATES• Overtime pay rates depend upon the day the work isperformed, whether it is ordinary working day, specialday, holiday or rest day.
  36. 36. COMPUTATION FOR OVERTIME PAY• For ordinary working day:a. 25% of the hourly rate x the number of hoursb. 10% more on 125% (based on letter (a) above) if OT isrendered between 10pm-6am• For holiday, special day and rest day:a. 100% additional if work is done on 10 legal regular holidays(marked color red in the calendar) and 5 legal Muslimholidays (as declared by OMA)b. 30% more if work is done on special holidays and Sundays
  37. 37. ADDITIONAL INFORMATION• TYPES OF EMPLOYEE REWARDS• Service Awards• Employee of the Month• Attendance Awards• Safety Awards• Company Advancement
  38. 38. COLLECTIVE BARGAINING• A process of negotiating an agreement regarding theterms and conditions of employment through system ofshared responsibility and decision making betweenlabor and management.
  39. 39. WHY IS COLLECTIVE BARGAINING ANIMPORTANT ASPECT OF LABOR-MANAGEMENT RELATIONS?• Collective bargaining is important because it promotes therights and ideals of labor.• A means of improving workers’ standard of living through justcompensation and humane working conditions• It guarantees security of tenure and employees promotion onthe basis of seniority• It defines the right and responsibilities of labor andmanagement• It affords participation to labor in running an enterprisethrough shared decision making, control, management, andownership of the means of production.• It includes machinery for settling grievance or labor-disputeson employment-related issues.
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  41. 41. CONCLUSION• Compensation is a hot potato for the Human ResourceDepartment. The motivation level of the employees to greatextent lies in monetary rewards.• Hot Potato - A problem that is so controversial or sensitive thatthose handling it risk unpleasant consequences.• The major challenge that managers face today is retention ofmanpower and its major cause is that they are paid better inother organizations.