Compensation administration involves classifying jobs, setting salary ranges, and determining pay increases. Companies develop salary structures with multiple levels corresponding to job skills, responsibilities, and decision-making requirements. Salary increases such as merit increases reward performance and promotional increases accompany expanded duties. Developing sound compensation policies considers equal pay, incentive pay, and balancing employee needs with costs. However, determining fair pay and satisfying both management and employee interests in wages can cause problems. An effective policy clearly defines pay guidelines and flexibly responds to economic changes while ensuring fairness.

1. Compensation Policy and Administration
Module 10
MPA 212 Human Resource Development and
Management

2. Introduction
Compensation administration is the most sensitive
among all functions of the HR department. The pay and
benefits you, as an employee, receive are a yardstick of
how adequately the company is willing to meet your
needs.
Another name of compensation administration is salary
administration.

5. Different companies have different policies
regarding their salary administration.
 Normally all jobs in the
organization are classified
into various pay classes; that
is to say, a pay class for each
job.
 A minimum and maximum
salary for each class has been
fixed and established in
accordance with the Job
Classification.
 All salary increases are in
accordance with the
graduated steps in the pay
class and within the salary
range for the pay class
occupied by the employee.

6. General Policies in Compensation Administration
 Are contingent to innovative ingenuity of the HR
executives and the availability of funds of the company.

7. Salary Structure
Level 1 – Jobs that
are highly manual,
which involve little
skills and more of
physical exertion.
Jobs classified are:
typing, filling and
other clerical
works,
messengerial,
collecting,
janitorial and
driving.

8. Salary Structure
Level 2 – Jobs that
involve skill but require
a little planning and
organizing. Jobs
classified are: stock
and inventory
maintenance,
encoding, secretarial,
purchasing.

9. Salary Structure
Level 3 – Jobs that involve
talking to clients,
coordinating, collecting
data, little decision-
making and a great deal
or report writing. Job
classified are:
telemarketing, research
assistant, executive
secretary.

10. Salary Increases
Models of general policies
in salary administration:
1.Merit Increase- higher
wage rate paid to employee
on the basis of an agreed
upon criteria such as
efficiency and performance.
Also called merit bonus.

11. Promotional Increase-
moving an employee into a
job with a
significant increase in
duties and responsibilities
resulting in a grade, job
title and salary change.

12. Principles considered in salary
administration
1. Equal pay for equal
work.
2. A fair day’s pay for a
fair day’s work.
3. Incentive pay for
extra effort.

13. Problems in salary administration
 The difficulty in determining what
is an adequate and fair pay for a
particular job.
 The utmost desire of the
employees to earn more money
and simultaneously of
management to operate and
greater profit.
 Employees are not satisfied with
what they receive and they
continuously agitate for higher
salaries and benefits in order to
improve their living standard.

14. Problems in salary administration
 Employer’s perennial concern to keep
the operating costs as low as possible
so that they could offer their products
or services within the reach of
consumers.
 Employers were right to keep the
operating costs as low as possible.
Employees were right to demand for
an increase in wage due to the price
hike of the basic commodities.
 The lack of sound pay policy.
 The absence of written policy and clear
guide in determining the wage levels.

15. 1. When the pay policy is
clearly spelled out.
2. When the policy is
uniformly and
consistently
implemented.
3. When it is flexible
enough to meet
economic contingencies.
4. When the wage policy
has in-built safeguards.
5. The policy has to be
properly disseminated
and made known to all.
Sounds
compensation policy
is imperative

16. REFERENCES:
https://www.slideshare.net/AnubhaRastogi/comp
ensation-administration-wage-policy
https://www.slideshare.net/gidebrando/hrmgt-6-
compensation-policies-principles-and-problems-
in-compensation-administration