Process of wage determination

1. kk kecture series: Wage & salary
administration
WAGE DETERMINATION
Concept of Wage
Wage, Salary, & Compensation
Minimum, Living, & Fair wage
Minimum Wage: Statutory, Need Based

2. kk kecture series: Wage & salary
administration
Compensation =>>
Mistakenly used as the substitute concept for wage and salary
Compensation is essentially a different concept. It is related to
strategic management while wage & salary is focused on cost and
legal perspective.
Replacement of wage by compensation is rooted in the idea of
money as a motivating factor.
Consideration of compensation consists of two types of
components:
1. Intrinsic (psychological) and 2. Extrinsic (tangible)
Extrinsic: Monetary & non-monetary rewards
Intrinsic: Reflecting employees’ mental satisfaction & job
accomplishment

3. kk kecture series: Wage & salary
administration
Attribute Wage Compensation
Perspective Short term Long term
Origin Labour Cost Employee
Motivation
Purpose Maintenance & profit Development of
Organization
Components Few Exhaustive
Nature Tangible Tangible &
Intangible
Difference between wage & compensation

4. kk kecture series: Wage & salary
administration
TYPES OF WAGES:
Minimum Wage
Living Wage
Fair Wage

5. kk kecture series: Wage & salary
administration
Minimum Wage (Need Based)
The standard working-class family should be taken to consist
of three consumption units for the earners. The earnings of the
women, children, & adolescents should be disregarded.
Food: the minimum food requirements should be calculated
on the basis of the net intake of 2700 calories for an average
Indian adult of moderate activity.
Cloth: The clothing requirement is estimated at a per capita
consumption of 18 yards per annum, for an worker’s family of
four, total 72 yards.

6. kk kecture series: Wage & salary
administration
Minimum Wage (Need Based)
Housing: The minimum rent charged by the government in
any area for houses provided under the Subsidized Housing
Scheme for low income groups.
Miscellaneous: Fuel, lighting, and other miscellaneous items
of expenditure should constitute 20% of the total minimum
wage.

7. kk kecture series: Wage & salary
administration
Living Wage
Living wage is one, which should enable the earners to
provide for himself/herself and his/her family not only the
bare essentials of food, clothing, and shelter but a measure
of frugal comfort, including education of children,
protection against ill health, requirements of essential
social needs, and a measure of insurance against the more
important misfortunes, including old age.

8. kk kecture series: Wage & salary
administration
The determining factors of living wage:
i)National income, ii) industry’s capacity to pay, iii) demand
and supply of laboour, iv) bargaining power of the
workforce, and v) standard of living
The Goal: During the time of the determination of the
concept of living wage (Indian Labour Conference-
1957) it has been observed that the present level of
‘National Income’ of the country did not permit to pay
‘living wage’ at per with that of the advanced countries.
But living wage should be the ultimate goal.

9. kk kecture series: Wage & salary
administration
Stages to reach the goal:
Stage-I: Wage paid to the entire workforce of the country
(including unorganized sector) was to be established,
stabilized, and defined.
Stage-II: Fair wages to be established in the community-
cum-industry.
Working class was to be paid a living wage.

10. kk kecture series: Wage & salary
administration
Fair Wage
Fair wage is the wage between minimum wage and living wage
Fixed
Minimum
Wage
Living Wage

11. kk kecture series: Wage & salary
administration
Fair Wage
A fair wage as one equal to that received by
workers performing work of equal skill, difficulty,
or unpleasantness.
Between the two defined extremes, the actual
wage will depend on
i) The productivity of labour
ii) The level of national income and its distribution
iii) The place of the industry in the economy of the
country

12. kk kecture series: Wage & salary
administration
Determination of Wage
Determination of general pay
Determination of pay based on performance
Determination of bonus
Determination of incentives
Determination of commissions
Determination of service related pay
Determination of skill-based pay
Determination of competence related pay
Determination of career development pay
Determination of other job related allowances
Determination of DA
Determination of HRA, MA, & other benefits

13. kk kecture series: Wage & salary
administration
Steps Involved in Determination of wage
JOB
ANALYSIS
JOB
DESCRIPTION
WAGE
LEGISLATION
WAGE
STRUCTURE
RULES OF
ADMINISTRATION
WAGE
DETERMINATION
WAGE SURVEY &
ORGANIZATIONA
L ANALYSIS
ECONOMIC
CONDITION
PERFORMANCE
STANDARDS
JOB
EVALUATION
PAY DETERMINATION

14. kk kecture series: Wage & salary
administration
Factors Influencing Wage & Salary Structure of the Organization
I. The Organization’s ability to pay
II. Supply and demand of labour
III. Prevailing market rate
IV. Cost of living
V. Union’s bargaining power
VI. Managerial attitude
VII.Economic condition
VIII.State of business

15. kk kecture series: Wage & salary
administration
Factors affecting compensation plan
INTERNATIONAL LEVEL INFORMATION
Economic
Condition
NATIONAL LEVEL
Going rate
Demand & Supply
Nature of Business
Social Trends
Economic
Forces
Legislations
REGIONAL LEVEL
Union’s bargaining
power
Managerial Attitude
Capacity to pay
Nature of Business
Wage
Survey

16. kk kecture series: Wage & salary
administration
Components of Wage: Wage Structure:
1. Basic Wage
2. DA
3. Incentives
4. HRA
5. Statutory Annual Bonus
6. Miscellaneous Other Allowances
7. Medical
8. PF
9. Other Fringe Benefits

17. kk kecture series: Wage & salary
administration
Wage Legislations in India:
Payment of Wages Act- 1936
Minimum Wages Act- 1948
Payment of Bonus Act- 1965
Equal Remuneration Act- 1976

18. kk kecture series: Wage & salary
administration
Determination of Compensation
Determination of wage
Determination of other monetary benefits
Determination of fringe benefits
Determination of notional benefits
Determination of other hygiene factors
Determination of other non-monetary factors

19. kk kecture series: Wage & salary
administration
Wage Policy in India:
Chakraborty Committee- 1973
The Study Group on Wages, Income & Prices:
Bhoothalingam Panel- 1978
Public Sector Wage Policy: Arjun Sengupta Committee-
1984