This document discusses factors that affect wage and salary administration such as theoretical considerations, public policy and legal frameworks, company objectives, and labor market pressures. It defines key concepts like minimum wage, living wage, and fair wage. Minimum wage should provide for basic needs plus some amenities, while a living wage allows for a decent standard of living. Legal frameworks governing wages include acts around payment of wages, minimum wages, bonus payments, and equal remuneration.

1. Wage & Salary Administration
Salary-
Pay, income, earnings, money, remuneration
(monthly basis)
Wage- Take-home pay, net pay
(hourly/daily/weekly basis)

2. Pay & Benefits
• Constitute an important element in HRM.
• Few considerations affecting Policies & Programmes concerning
Pay & Benefits are: Theoretical, Public Policy and Legal
Framework, Company objectives, Labour market
situation, Pressures from Unions and Competition, etc.
• Systematic approach to finalising the Pay & Benefits is Job
Evaluation and Pay Surveys.
• Certain part of the components of the Pay structure bear no relation
to performance. Therefore organisations are finding the need to
develop various incentive schemes and payment-by-results
systems.

3. Factors affecting wage and Salary administration
• Theoretical Considerations
• Public Policy and Legal Framework
• Company Objectives
• Labour market situation
• Pressures from Unions
• Competition

4. Theoretical Considerations
Many economists have formulated theories which assert the following:
1. The natural price for labour is the subsistence-level wage. Higher
wages will, over the time, increase labour supply and bring down
wage levels. The reverse also could happen. For, If wages fall
below subsistence level, people will die of disease and
malnutrition which will lead to diminition in the supply of labour
(David Ricardo’s “Subsistence Theory of Wages”)
2. There is a pre determined fund (surplus income) which decides
the wages. It pays to increase the fund through collective efforts
than to ask for a higher share in the existing fund through
legislation or otherwise (Adam Smith’s “Wage Fund Theory”)
3. That workers will never receive full compensation and that wages
constitute an inadequate payment for the surplus value created by
the workers for employer (Karl Marx “ Surplus Theory of Wages”).

5. Theoretical Considerations
Not the theories of Wages:
1. State has to manipulate the allocation of
income to wage-earners to restore full
employment (J M Keynes General Theory of
Employment, Interest and Money).
2. Cheap Labour would be a basis for
comparative cost advantage in international
trade (Comparative Costs Theory)

6. Other Theories
• Frederic Herzerg’s Two-Factor-Theory of Motivation.
It suggests that rewards affect work behaviour in substantially different
ways depending upon whether they are intrinsic rewards
(motivators/satisfiers)
or extrinsic rewards (hygiene factors/dis-satisfiers)
The Process Theories seek to explain how the individual work
behaviour is started, energized, directed, sustained and stopped.
The motivating power of rewards does not reside in the rewards
themselves, but in a process which meets the perceptions and
expectations of the employees as well as the needs of the
Organisation. An employee will perform at a given level if he
believes that a series of conditions exist and organization would do
well to ensure that these conditions are met.

7. Public Policy and Legal Framework
• Today most modern societies are moving
towards becoming a Welfare State.
• Today State actively intervenes, directs
and sets conditions which govern, among
other things, the wage and salary
administration policies.
• The
Constitution, Employers, Unions, Legislatu
res and Courts actively influence Public
Policy.

8. Public Policy concerning
Wages/Salaries
• Industrial Truce Resolution (1947)
• Industrial Policy Resolution (1948)
• The Constitution
• Planning Documents
• Ministerial Speeches

9. • Key Considerations:
a)
b)
c)
d)
Page no.172- Personal Management and
Human Resources (C S Venkata Ratnam, B K
Srivastava) 2006.

10. Wage Concepts:
The committee on Fair Wages (1948) and The 15th session of The
Indian Labour Conference (1957) put forward certain Wage
Concepts:
The committee on Fair Wages (1948) defined-
1. Minimum Wage
2. Living Wage
3. Fair Wage
15th session of The Indian Labour Conference (1957) defined-
4. Need-based minimum Wage

11. Minimum Wage
• A minimum wage must provide not merely
for the bare sustenance of life but for the
preservation of the efficiency of the worker
by providing some measure of
education, medical requirements and
amenities.

12. Living Wage
• It represents a standard of living which is
provided not merely for a bare physical
sustenance but decency, protection
against ill-health, requirements of essential
social needs and some insurance against
the more important misfortunes including
old age.

13. Fair Wage
• While the lower limit of the fair wage obviously
be the minimum wage, the upper limit is
equally set by what may broadly be called the
capacity of industry to pay. Between these two
limits the actual wage would depend on
1. The Productivity of Labour
2. The prevailing rates of wages
3. The level of national income and distribution
4. The place of the industry in the economy of the
country.

14. Need-based minimum wage
• The minimum wage should be need-based and “should ensure the
minimum human needs of the industrial worker, irrespective of any
other consideration.”
• The basis for calculating Need-based minimum wage is as follows:
a) The standard working-class family taken to consist of 3 consumption
units for one earner; earnings of women, children and adolescents
should be disregarded.
b) Minimum food requirements-net intake of 2700 calories for an
average indian Adult.
c) Clothing requirements- 18 yards per annum (Average worker’s family
of 4 = 72 yards/annum).
d) Housing- minimum rent charged by govt.in any area for houses
provided under subsidized industrial housing scheme for low-income
group.
e) Fuel, Lighting & other miscellaneous items- 20% of total minimum
wage.

15. • The minimum wages Act, 1948 did not define
the minimum wage.
• Courts and employers go by the definition given
by the committee on fair wages while the trade
unions would like to consider the need-based
minimum wage concept.
• The Pay Commissions appointed by govt. did
not accept the need-based minimum wage
formula because of budgetary
implications, unemployment and low wage levels
in agriculture etc.

16. Legal Frame Work
The legal frame work for the payment of
wages/salaries is governed by mainly 4
legislations besides the guidelines for
managerial remuneration:
1. The payment of wages Act, 1948
2. The Minimum Wages Act, 1948
3. The Payment of Bonus Act, 1965
4. The Equal Remuneration Act, 1976