This document discusses compensation and rewards in organizations. It states that organizations expect performance from employees and employees expect rewards for achieving organizational objectives. It defines different types of compensation like wages, salaries, bonuses, and fringe benefits. It discusses the need for a sound compensation policy and lists various objectives and principles of wage and salary administration. It also covers factors affecting compensation levels and different compensation-related terms.

1. COMPENSATIONCOMPENSATION
 ORGNS EXPECT PERFORMANCEORGNS EXPECT PERFORMANCE
 EMPLOYEES EXPECT REWARDSEMPLOYEES EXPECT REWARDS
 EMPLOYEES WHO PERFORM TOEMPLOYEES WHO PERFORM TO
ACHIVE ORGNL OBJECTIVES AREACHIVE ORGNL OBJECTIVES ARE
REWARDED/COMPENSATEDREWARDED/COMPENSATED
 REWARDS-REWARDS-
1.1. INTRINSIC AND EXTRINSICINTRINSIC AND EXTRINSIC
2.2. EXTRINSIC-FINANCIAL AND NONEXTRINSIC-FINANCIAL AND NON
FINANCIALFINANCIAL
3.3. PERFORMANCE BASED VsPERFORMANCE BASED Vs
MEMBERSHIP BASEDMEMBERSHIP BASED

2. ROLE OF REWARDSROLE OF REWARDS
 MOST IMP. FACTOR OF HRMMOST IMP. FACTOR OF HRM
 A SUB-SYSTEM OF HRDA SUB-SYSTEM OF HRD
 MONEY PROVIDDES MORE THANMONEY PROVIDDES MORE THAN
MEANS OF SATISFYING HUMANMEANS OF SATISFYING HUMAN
NEEDSNEEDS
 FINANCIAL ADPECTS STILL VERYFINANCIAL ADPECTS STILL VERY
SIGNIFICANTSIGNIFICANT
 PAY IS AN IMP. MOTIVATORPAY IS AN IMP. MOTIVATOR
 HENCE FORMULATION AND ADMN. OFHENCE FORMULATION AND ADMN. OF
A SOUND REMUNERTION POLICY/A SOUND REMUNERTION POLICY/
COMPENSATION POLICY/REWARDCOMPENSATION POLICY/REWARD
SYSTEM IS AMJOR CHALLENG AND ANSYSTEM IS AMJOR CHALLENG AND AN
IMP. HRM TASKIMP. HRM TASK

3. DEFINITIONSDEFINITIONS
 WAGE- AS PER ILO “ REMUNERATIONWAGE- AS PER ILO “ REMUNERATION
PAID BY THE EMPLOYER FOR THEPAID BY THE EMPLOYER FOR THE
SERVICES OF HOURLY, DAILY,SERVICES OF HOURLY, DAILY,
WEEKLY, AND FORTNIGHTLYWEEKLY, AND FORTNIGHTLY
EMPLOYEESEMPLOYEES
 SALARY-REMUNERATION PAID TOSALARY-REMUNERATION PAID TO
CLERICAL AND MANAGRERIAL STAFF.CLERICAL AND MANAGRERIAL STAFF.
 EARNINGS-TOTAL AMOUNT OFEARNINGS-TOTAL AMOUNT OF
REMUNERATION RECEIVED BY ANREMUNERATION RECEIVED BY AN
EMPLOYEE DURING A GIVEN PERIODEMPLOYEE DURING A GIVEN PERIOD
 BONUS- A SHARE IN THE PROFITSBONUS- A SHARE IN THE PROFITS

4. DEFINITIONSDEFINITIONS
 NOMINAL WAGE-MONEY WAGENOMINAL WAGE-MONEY WAGE
 REAL WAGE-REPRESENTS PURCHASINGREAL WAGE-REPRESENTS PURCHASING
POWER OF THE WAGES.POWER OF THE WAGES.
 MINIMUM WAGE-AN AMT WHICH MEETS THEMINIMUM WAGE-AN AMT WHICH MEETS THE
NORMAL NEEDS OF AN AVERAGE EMPLOYEENORMAL NEEDS OF AN AVERAGE EMPLOYEE
IN A CIVILISED SOCIETY.IN A CIVILISED SOCIETY.
 STATUTORY MINIMUM WAGE-WAGE FIXEDSTATUTORY MINIMUM WAGE-WAGE FIXED
IN ACCORDANCE WITH THE MINIMUMIN ACCORDANCE WITH THE MINIMUM
WAGES ACT 1948WAGES ACT 1948
 TAKE HOME SALARY-THE AMOUNT THAT ISTAKE HOME SALARY-THE AMOUNT THAT IS
ACTUALLY AVAILABLE TO THE EMPLOYEACTUALLY AVAILABLE TO THE EMPLOYE
AFTER THE DEDUCTIONS-I.TAX, P.TAX, PF,AFTER THE DEDUCTIONS-I.TAX, P.TAX, PF,
ESI, LIC, ETCESI, LIC, ETC

5. NEED FOR SOUND WAGE ANDNEED FOR SOUND WAGE AND
SALARY ADMINISTRATION-1SALARY ADMINISTRATION-1
 WAGE/SALARY AN IMP. MOTIVATORWAGE/SALARY AN IMP. MOTIVATOR
 PAY INFLUENCES EMPLOYEESPAY INFLUENCES EMPLOYEES
PERFORMANCE, SATISFACTIONPERFORMANCE, SATISFACTION
 INTERNAL INEQUALITIES CREATSINTERNAL INEQUALITIES CREATS
SERIOUS PROBLEMSSERIOUS PROBLEMS
 EMPLOYEES COMPARE THEIR PAYEMPLOYEES COMPARE THEIR PAY
WITH THEIR COLLEAGUES AND ALSOWITH THEIR COLLEAGUES AND ALSO
COMPARE WITH THE EXISTINGCOMPARE WITH THE EXISTING
MARKET TRENDS AND THE INDUSTRYMARKET TRENDS AND THE INDUSTRY
STANDARDSSTANDARDS
 EMPLOYEES REACT TO ONLY GROSSEMPLOYEES REACT TO ONLY GROSS
EXTERNAL INEQUITIESEXTERNAL INEQUITIES

6. NEED FOR SOUND WAGE ANDNEED FOR SOUND WAGE AND
SALARY ADMINISTRATION-2SALARY ADMINISTRATION-2
 EMPLOYEES EXPECTATIONSEMPLOYEES EXPECTATIONS
INFLUENCED BY LEVELS OFINFLUENCED BY LEVELS OF
ASPIRATIONS AND PAY HISTORYASPIRATIONS AND PAY HISTORY
 EMPLOYEES EXPECT THE PAY TOEMPLOYEES EXPECT THE PAY TO
MATCH THEIR SKILL, KNOWLEDGE,MATCH THEIR SKILL, KNOWLEDGE,
ACHIVEMENT, PERFORMANCE, JOBACHIVEMENT, PERFORMANCE, JOB
RISK LEVELS, HAZARDOUS WORKRISK LEVELS, HAZARDOUS WORK
CONDITIONS, PERFORMANCECONDITIONS, PERFORMANCE
DESPITE SERIOUS RESOURCEDESPITE SERIOUS RESOURCE
CONSTRAINTS,CONSTRAINTS,
 ATTRITION LEVLES ARE HIGHATTRITION LEVLES ARE HIGH
IMMEDIATELY AFTER A GENERAL PAYIMMEDIATELY AFTER A GENERAL PAY
REVISIONREVISION

7. OBJECTIVES OF W A S A-1OBJECTIVES OF W A S A-1
 ATTRACT COMPETENT PERSONSATTRACT COMPETENT PERSONS
 RETAIN SKILLED EMPLOYEESRETAIN SKILLED EMPLOYEES
 INTERNAL AND EXTERNAL EQUITYINTERNAL AND EXTERNAL EQUITY
 MINIMUM. ADMN COSTMINIMUM. ADMN COST
 PAYMENT BY RESULTS/CONTENT OFPAYMENT BY RESULTS/CONTENT OF
JOBS/MERIT/EFFORTSJOBS/MERIT/EFFORTS
 REWARD PERFORMANCEREWARD PERFORMANCE
 BUY EMPLOYEE LOYALTYBUY EMPLOYEE LOYALTY

8. OBJECTIVES OF W A S A-2OBJECTIVES OF W A S A-2
 RECOGNISE FAST TRACKERSRECOGNISE FAST TRACKERS
 ADDRESS HIGH PERFORMERSADDRESS HIGH PERFORMERS
 FACILITATE PAYROLL OPERATIONSFACILITATE PAYROLL OPERATIONS
 PROMOTE ORGNL FEASIBILITYPROMOTE ORGNL FEASIBILITY
 COMPLY WITH LEGAL REGULATIONSCOMPLY WITH LEGAL REGULATIONS
 NO GENDER DISCRIMINATIONNO GENDER DISCRIMINATION
 FURTHER THE OVERALLFURTHER THE OVERALL
ADMINISTATIVE EFFICIENCYADMINISTATIVE EFFICIENCY

9. SYSTEMS TO ACHIEVE THESYSTEMS TO ACHIEVE THE
W A S A OBJECTIVESW A S A OBJECTIVES
 PROPER JOB DESIGNPROPER JOB DESIGN
 JOB EVALUATIONSJOB EVALUATIONS
 PERFORMANCE FACILITATIONPERFORMANCE FACILITATION
 WAGE & SALARY RANGESWAGE & SALARY RANGES
 FLEXIBLE COMPENSATIONFLEXIBLE COMPENSATION
SYSTEMSSYSTEMS

10. PRINCIPLES OF W A S A-1PRINCIPLES OF W A S A-1
 SIMPLE TO UNDERSTANDSIMPLE TO UNDERSTAND
 EASY TO IMPLEMENTEASY TO IMPLEMENT
 FLEXIBLEFLEXIBLE
 BASED ON SCIENTIFIC JOBBASED ON SCIENTIFIC JOB
EVALUATIONEVALUATION
 CONSISTENT WITH OVERALLCONSISTENT WITH OVERALL
ORGANISTIONAL PROGRAMMESORGANISTIONAL PROGRAMMES

11. PRINCIPLES OF W A S A-2PRINCIPLES OF W A S A-2
 TOTAL LEGAL COMPLIANCETOTAL LEGAL COMPLIANCE
 SHOULD BE RESPONSIVE TOSHOULD BE RESPONSIVE TO
CHANGES-NATIONAL AND GLOBALCHANGES-NATIONAL AND GLOBAL
 IN LINE WITH SOCIAL ANDIN LINE WITH SOCIAL AND
ECONOMIC OBJECTIVES OF THEECONOMIC OBJECTIVES OF THE
NATIONNATION
 SHOULD FACILITATE OTHER HRSHOULD FACILITATE OTHER HR
PROCESSESPROCESSES
 SHOULD BE A PART OF OVERALL HRSHOULD BE A PART OF OVERALL HR
STRATEGYSTRATEGY

12. FACTORS AFFECTING WAGESFACTORS AFFECTING WAGES
AND SALARY LEVELSAND SALARY LEVELS
 DOES NOT EXIST IN ISOLATIONDOES NOT EXIST IN ISOLATION
 INFLUENCED BY LARGE NUMBERINFLUENCED BY LARGE NUMBER
OF FACTORSOF FACTORS
 EXTERNALEXTERNAL
 INTERNALINTERNAL

13. FACTORS AFFECTING WAGESFACTORS AFFECTING WAGES
AND SALARY LEVELS-1AND SALARY LEVELS-1
 INDUSTRY CUM REGIONINDUSTRY CUM REGION
PATTERNPATTERN
 ORGANISTION’S ABILITY TO PAYORGANISTION’S ABILITY TO PAY
 COST OF LIVINGCOST OF LIVING
 DEMAND AND SUPPLY OFDEMAND AND SUPPLY OF
LABOUR (SKA)LABOUR (SKA)
 LEGAL FACTORSLEGAL FACTORS

14. FACTORS AFFECTING WAGESFACTORS AFFECTING WAGES
AND SALARY LEVELS-2AND SALARY LEVELS-2
 PERFORMANCEPERFORMANCE
 PRODUCTIVITYPRODUCTIVITY
 SUSTAINABILITYSUSTAINABILITY
 UNION’S CB STRENGTH ANDUNION’S CB STRENGTH AND
PRESSURESPRESSURES
 JOB EVALUATIONJOB EVALUATION

15. WAGES AND SALARY SURVEYWAGES AND SALARY SURVEY
 ASSIGNMENTASSIGNMENT

16. WAGE FIXATIONWAGE FIXATION
INSTITUTIONS IN INDIAINSTITUTIONS IN INDIA
 MIN. WAGES ACT-1948MIN. WAGES ACT-1948
 MIN. WAGES BOARD/MIN. WAGES BOARD/
NOTIFICATIONNOTIFICATION
 COLLECTIVE BARGAININGCOLLECTIVE BARGAINING
 WAGE BOARDS-CEMENT, PAPER,WAGE BOARDS-CEMENT, PAPER,
SUGAR, ETCSUGAR, ETC
 PAY COMISSIONPAY COMISSION
 JUDICIARYJUDICIARY

17. INCENTIVESINCENTIVES
 SIMPLE CONTRACT SIMPLE WORKSIMPLE CONTRACT SIMPLE WORK
 EXTRAORDINARY PERFORMANCEEXTRAORDINARY PERFORMANCE
HAPPENS IN THE PRESENCE OF ANHAPPENS IN THE PRESENCE OF AN
INCENTIVE SCHEMEINCENTIVE SCHEME
 INCENTIVE IS AN ADDITIONALINCENTIVE IS AN ADDITIONAL
PAYMENT FOR EXTRA OR HIGHERPAYMENT FOR EXTRA OR HIGHER
PERFORMANCEPERFORMANCE
 NEED TO ACHIVE FULL CAPACITYNEED TO ACHIVE FULL CAPACITY
 NEED FOR PRODUCTIVITYNEED FOR PRODUCTIVITY
 PRINCIPLE OF OUTPUTPRINCIPLE OF OUTPUT ABOVE BEPABOVE BEP

18. Principles of an effectivePrinciples of an effective
incentive schemeincentive scheme
 Simple to understandSimple to understand
 Easy to implement/AdministerEasy to implement/Administer
 Based on job contentsBased on job contents
 A OR B OR C OR A+B+CA OR B OR C OR A+B+C
 Identify the current issuesIdentify the current issues
 Identify the areas offeringIdentify the areas offering
potentialpotential


19. BONUSBONUS
 ADHOC PAYMENTADHOC PAYMENT
 EX-GRATIA PAYMENTEX-GRATIA PAYMENT
 CLAIMED AS DA DURING THE WORLDCLAIMED AS DA DURING THE WORLD
WAR IIWAR II
 IT HAS TAKEN DIFF SHAPES IN THEIT HAS TAKEN DIFF SHAPES IN THE
COURSE OF LABOUR HISTORYCOURSE OF LABOUR HISTORY
 DEFERRED WAGES- BRIDGING THEDEFERRED WAGES- BRIDGING THE
GAP BETWEEN ACTUAL & NEED BASEDGAP BETWEEN ACTUAL & NEED BASED
WAGESWAGES
 SHARE OF THE WORKER IN CO’SSHARE OF THE WORKER IN CO’S
PROSPERITYPROSPERITY
 SHARE IN THE SURPLUS/PROFITSHARE IN THE SURPLUS/PROFIT
 GOVERNED BY THE PAYMENT OFGOVERNED BY THE PAYMENT OF
BONBUS ACT 1965BONBUS ACT 1965

20. BONUS-A LEGAL RIGHTBONUS-A LEGAL RIGHT
 LOTS OF ISSUES REG. BONUSLOTS OF ISSUES REG. BONUS
 GOVT. APPOINTED BONUS COMMISSIONGOVT. APPOINTED BONUS COMMISSION
IN 1961IN 1961
 IMPORTANT RECOMMENDATIONSIMPORTANT RECOMMENDATIONS
1.1. BONUS RIGHT OF THE WORKMANBONUS RIGHT OF THE WORKMAN
2.2. SHOULD BE PAID FROM THE AVAILABLESHOULD BE PAID FROM THE AVAILABLE
SURPLUSSURPLUS
3.3. MIN AND MAX BONUSMIN AND MAX BONUS
4.4. INFANCY PESRIOD PROTECTIONINFANCY PESRIOD PROTECTION
5.5. SET OFF AND SET ON PROVISIONSSET OFF AND SET ON PROVISIONS
6.6. EMPLOYEES UNDER THE FACTORIES ACTEMPLOYEES UNDER THE FACTORIES ACT
1948 ARE ELIGIBLE TO RECEIVE THE1948 ARE ELIGIBLE TO RECEIVE THE
BONUSBONUS

21. PAYMENT OF BONNUS ACTPAYMENT OF BONNUS ACT
 REF. TO ADDITIONAL PPT-PAYMENTREF. TO ADDITIONAL PPT-PAYMENT
OF BONUS ACT 1965OF BONUS ACT 1965

22. FRINGE BENEFITSFRINGE BENEFITS
 EXTRA BENEFITS IN ADDTITON TOEXTRA BENEFITS IN ADDTITON TO
THE COMPENSATIONTHE COMPENSATION
 ILO-”WAGES ARE OFTEN AUGMENTEDILO-”WAGES ARE OFTEN AUGMENTED
BY SPECIL CASH BENEFITS, BY THEBY SPECIL CASH BENEFITS, BY THE
PROVISION OF MEDICAL AND OTHERPROVISION OF MEDICAL AND OTHER
SERVICES OR BY PMTS IN KIND THATSERVICES OR BY PMTS IN KIND THAT
FORMS PART OF WAGE FORFORMS PART OF WAGE FOR
EXPENDITURE ON THE GOODS &EXPENDITURE ON THE GOODS &
SERVICESSERVICES
 FB ARE MONETARY AND NONFB ARE MONETARY AND NON
MONETARY BENEFITS CONNECTEDMONETARY BENEFITS CONNECTED
WITH EMPLOYMENTWITH EMPLOYMENT

23. FRINGE BENEFITSFRINGE BENEFITS
 HOUSING-CO.OWNED, LEASEDHOUSING-CO.OWNED, LEASED
 MEDICAL-INSURANCE, REIMBURSEDMEDICAL-INSURANCE, REIMBURSED
 CANTEEN-SUBSIDISED,CANTEEN-SUBSIDISED,
 EDUCATIONP-SCHOOL, SUBSIDYEDUCATIONP-SCHOOL, SUBSIDY
 CONVEYANCE-VEHICLE, ALLOWANCECONVEYANCE-VEHICLE, ALLOWANCE
 RECREATION FACILITIESRECREATION FACILITIES
 COOPERATIVE CREDITCOOPERATIVE CREDIT

24. F. B.-EXCECUTIVESF. B.-EXCECUTIVES
 CAR-NORMAL, PREMIUM. HIGHCAR-NORMAL, PREMIUM. HIGH
ENDEND
 A/C HOUSEA/C HOUSE
 PHONES-LAND LINE AND ORPHONES-LAND LINE AND OR
MOBILEMOBILE
 LAPTOPLAPTOP
 CREDIT CARDSCREDIT CARDS
 CLUB MEMBERSHIP-COCLUB MEMBERSHIP-CO
OWNED/OUTSIDEOWNED/OUTSIDE

25. F. B.-EXCECUTIVESF. B.-EXCECUTIVES
 LTA/HOLIDAY HOMESLTA/HOLIDAY HOMES
 FESTIVAL GIFTSFESTIVAL GIFTS
 HEALTH CARE-INSURANCEHEALTH CARE-INSURANCE
 ESOPESOP
 SUPER ANNUATAIONSUPER ANNUATAION
 MISCELLANEOUSMISCELLANEOUS

26. ESOPESOP