wages and Salary Administration


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In this presentation, we will discuss definition and concept of Wages and Salary Administration in an organization. Objectives of determining wages and factors that affect the salary of employees is also discussed here in this presentation.
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wages and Salary Administration

  2. 2. CHAPTER 6 Definitions and Concepts Wage salary administration is essentially theapplication of a systematic approach to the problem ofensuring that employees are paid in a logical, equitableand fair manner and the terms used are Wage, Salary,Earnings, Nominal Wage, Real Wage, Take Homesalary, Minimum Wage, Statutory Minimum Wage, TheNeed-based Minimum Wage, The Living Wage, TheFair Wages, Incentive Wage, Wage Rate, StandardWage Rate Contd.
  3. 3. CHAPTER 6 Indian Labour Organization (ILO) defined the term wageas “the remuneration paid by the employer for theservices of hourly, daily, weekly and fortnightly employeesSalary is defined as the remuneration paid to the clericaland managerial personnel employed on monthly orannual basis Minimum Wage is the amount of remuneration whichcould meet the “normal needs of the average employeeregarded as a human being living in a civilised society”Statutory Minimum Wage is the amount of remunerationfixed according to the provisions of the Minimum WagesAct. 1948 Contd.
  4. 4. CHAPTER 6 The Need-based Minimum Wage is the amount ofremuneration fixed on the basis of norms accepted at the15th session of the Indian Labour Conference held at NewDelhi in July 1957 The Conference recommended that minimum wagesshould ensure the minimum human needs of industrialworkers, minimum food requirements should be calculatedon the basis of a set in activity, clothing requirementsshould be estimated on the basis of per capita consumptionof 18 yards per annum which would give for the averageworker’s family of four a total of 72 yards amongst otherrecommendations
  5. 5. CHAPTER 6NEED FOR SOUND SALARY ADMINISTRATIONMost of the employees’ satisfaction and workperformance are based on payInternal inequalities in pay are more serious to certainemployeesEmployees act only to gross external inequitiesEmployee comparisons of pay are uninfluenced by levelsof aspirations and pay historyEmployees compare their pay with that of others
  6. 6. CHAPTER 6OBJECTIVE OF WAGE AND SALARY ADMINISTRATION To Acquire Qualified Competent PersonnelTo Retain the Present EmployeesTo Secure Internal and External EquityTo Ensure Desired BehaviourTo Keep Labour and Administrative costs in line with the ability of the organization to payTo Facilitate Pay RollTo Simplify Collective Bargaining procedures andnegotiationsTo Promote Organization feasibility
  7. 7. CHAPTER 6 FACTORS AFFECTING WAGE/SALARY LEVELSRemuneration in Comparable IndustriesFirm’s ability to payRelating to price indexProductivityCost of livingUnion pressure and strategiesGovernment legislations
  8. 8. CHAPTER 6WAGE BOARDS AND PAY COMMISSIONS Wage policies are formulated by the followinginstitutions in India: Collective Bargaining and Adjudication Wage Boards Pay Commissions
  9. 9. CHAPTER 6 WAGE INCENTIVES To increase a worker’s earnings withoutdragging the firm into a higher wage ratestructure regardless of productivityTo use wage incentives as a useful tool forsecuring a better utilization of manpower
  10. 10. CHAPTER 6OBJECTIVES OF WAGE INCENTIVE SCHEMES To improve the profit of a firm through a reduction in the unit costs of labour and materials or both To avoid or minimise additional capital investment for the expansion of production capacity Contd.
  11. 11. CHAPTER 6OBJECTIVES OF WAGE INCENTIVE SCHEMES To increase a worker’s earnings without dragging the firm into a higher wage rate structure regardless of productivity To use wage incentives as a useful tool for securing a better utilization of manpower, better production scheduling and performance control, and a more effective personnel policy
  12. 12. CHAPTER 6 MERITS OF WAGE INCENTIVE SCHEMES They are accepted as sound technique for theachievement of greater production The need for supervision is reduced for theemployees. The experience gained in India and elsewhereindicates that wage incentives have resulted ingains in productivity “In a majority cases, the existence of paymentby results was related to increased output, higherearnings and lower costs”
  13. 13. CHAPTER 6DEMERITS OF WAGE INCENTIVE SCHEMES The experience with the working of incentives inthe highly industrialized countries of the West isnot quite happy They have a dubious value for increase inoutput A sound and effective administration of incentiveschemes would depend upon an understandingof the problems of human relations as well asthose of engineering.
  14. 14. CHAPTER 6NEED FOR WAGE INCENTIVES IN INDIAThe efficiency of the Indian worker is very low, andneeds to be raised and in this regard wage incentivescan play an important roleThe average Indian worker is financially very poor andfinancial incentives are likely to tempt him to workbetter It can help in promoting the use of electronic devices,can help in affecting the prices that the communitywould be benefited and in the national interest, it isfelt that wage incentive schemes should be applied toall economic activities
  15. 15. CHAPTER 6SOME IMPORTANT WAGE INCENTIVE PLANSHalsey premium PlanHalsey weir Premium PlanRowan Premium PlanThe 100% Premium PlanThe Bedeaux Point PlanTaylor’s differential Piece Rate PlanAccelerating premium systemsEmerson efficiency planMerric’s multiple piece rate planThe Gnatt Task and Bonus Plan
  16. 16. CHAPTER 6 PROFIT SHARINGProfit sharing is regarded as a stepping stone toindustrial democracy. It usually involves the determination of anorganization’s profits at the end of the financialyear and distribution of a percentage of theprofits to workers qualified to share in theearnings Contd.
  17. 17. CHAPTER 6 PROFIT SHARING The main features of Profit sharing scheme The proportion of the profits to be distributed among the employees is determined in advance The employees should have some minimum qualifications as per company’s conditionsThree types of profit sharing plans are in use:Current, Deferred and Combination Contd.
  18. 18. CHAPTER 6 PROFIT SHARING Profit sharing may be on different formsIndustry basisLocality BasisUnit BasisDepartment BasisIndividual basis
  19. 19. CHAPTER 6 SCANION PLAN This plan was developed in 1937 by JosephScanion to involve the workers in makingsuggestions for reducing the cost of operationand improving working methods and sharing thegains of increased productivity The plan has two basic features- financialincentives and a network of departmental andplant screeing committees Contd.
  20. 20. CHAPTER 6 SCANION PLAN Financial incentives aimed at cutting cost andthere by increasing efficiency are installed Network of plant screening committees are setup to evaluate employees
  21. 21. CHAPTER 6 BONUS Starting as an ad-hoc and ex-gratia payment,bonus was claimed as dearness allowanceduring the World War II Under the payment of Bonus Act, 1965, itsecured the character of a legal right The dictionary meaning of “bonus” is anextra payment to the workers beyond thenormal wage. Contd.
  22. 22. CHAPTER 6 BONUS The Payment of Bonus Act was amended in 1985according to which: employees whose salary is upto RS 2,500 are eligiblefor bonus. Salary for the purpose of bonus means Pay+DA Employees drawing upto Rs. 1600 are eligible forbonus 60% of the surplus should be allocated for thepayment of bonus
  23. 23. CHAPTER 6 MANAGERIAL COMPENSATION There is a feeling among the trade union circlesthat executives get a very high salary includingperks Section 198 of the Companies Act. 1956 saysthat the total managerial remuneration payableby a public limited company to its Directors,Secretaries and Treasurers and Managers in afinancial year shall not exceed 11% of the netprofits of the company contd.
  24. 24. CHAPTER 6 The Government issued guidelines from time totime and some liberalizationsOverall ceiling is increased to Rs. 62,700 inMumbai apart from increased in allowances forcooking gas, electricity, gas etc. and pensionbenefits and medical expenses The economic liberalizations announced in 1991allowed the deregulations on managerialcompensation
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