Wage and salary


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  • Dear Friends,Today let us examine the essential factors governing wage and salary administration in an organization.
  • Wage and salary administration is a systematic way to make proper compensation to the employees that includes money and other valuables in return to the services of the employee. It takes into consideration various opposing forces and maintains a balance to provide adequate monetary value for the services. It seeks to give right and just wages so that both the employer and the employee get justice.
  • What are wages and salaries ? Wages are the value paid to the blue collar employees like daily contract workers, manual workers, utility service providers like home call plumbers, fitters etc. Their work does not involve much mental strain. It needs more of manual and physical energy. Wages are usually paid daily or weekly or at the end of contract period. The value of such work can be measured in monetary value i.e. we can quote a monetary figure for these services.
  • Now let us examine what salary is. Salary is the monetary value paid to white collar employees. Now who are white collar employees? Clerks, executives and management staff come under this category. Their services are paid for on a monthly or bi-monthly basis. We can measure such services with a monetary value. They use more mental activity than blue collar services.
  • The concept compensation includes wages, service benefits, yearly paid leave, company housing or house rent, company paid transport and special facilities provided tp important managerial staff.
  • Wages are classified according to their buying power. Minimum wages are those which are just sufficient to provide for the average needs of the employee. When wages are mentioned in money then they are called nominal wages. When wages are counted in their buying power in reference to some period then they are real wages. They are adjusted according to the rise and fall in the cost of living. Statutory wages are the ones that are fixed by some government legislation. Fair wages are those that provide compensation equal to value of skill needed for the work. Living wages are those that provide not only the basic needs for the employee and family but add a measure of comfotable living.
  • Why is salary administration given an important place in management? It is because it makes sure that right and fair wages are paid to all employees. Good payment practices attract better and efficient people towards the organization and also keeps the present employees loyal. It matches work value with payment so that employees are satisfied. This boosts motivation and morale and thereby increases production. It also buils up a good image for the company as a liberally paying company.
  • Wages and salary administration is governed by some established principles. When planning the remuneration interests of both the parties are to be kept in mind. If employees benefit more then it will be a burden on the employer. If the employer tries to save too much, the employees will suffer. Remuneration administration has to do justice to both. The wage plan must be flexible so the it can be adjusted to the ever changing conditions. Differences in wages between various categories should have logical explanation. There should be proper reason for the differences. The wage rules should make things easy for the administration. The wage policy must be according to the set rules of the company. Lastly and most importantly the wages should be at par with prevailing market rates.
  • Wages and salaries are influenced by some external and internal factors. Let us examine the external factors. The demand for the service may be more and supply may be less. In such a case we have to pay more. In cases where the demand is less and the supply is more, we can pay less. Market conditions and cost of living definitely have a great influence on salary that is to be paid. Trade unions may negotiate and bargain for eirtain conditions which may have to be met with. The government, from time to time may lay down certain rules according to which payment has to be made. Psychological and social factors and changes in technology will bring in wage changes.
  • Let us examine the internal factors. A job needs specific requirements to fulfill. When these conditions are fulfilled, the remuneration agreed upon, is given. Secondly the management may have some policies according to which a salary structure is built. The employees will get paid according to that. Sometimes a company may have lavish or limited resourses. The employee may get paid on the basis of those resources.
  • How do decide how much to pay to particular employees. The process of job evaluation seeks to do this. After considering job responsibilities, risks, effort involved, job productivity and viability the monetary worth of that job is fixed and the management gets a recommendation on which it decide pay structure.
  • So far we have gone through a brief tour of Wages and Salary Administration. We examined what wages and salary mean, the influencing factors that determine the salary structure and the job evaluation that fixes the monetary value of a service or a job. Thank you.
  • Wage and salary

    2. 2. It is a systematic way to provide monetary and other values to the employees for the services provided It is the administration of compensation It aims to provide and maintain a right wage structure
    3. 3. WAGES Wages are paid to the blue collar employees like daily manual workers Are paid daily or weekly For work the value of which can be measured in money
    4. 4. SALARY It is paid to white collar Employees like clerks, Executives and mangers Paid monthly Monetary value cannot be measured easily
    5. 5. COMPENSATION Compensation includes wages, benefits, leave facility, travel, house rent, privileges of rank and non monetary awards and recognition
    6. 6. TYPES OF WAGES minimum Wage Nominal Wage Real Wage Statutory wage Fair Wage Living Wage
    7. 7. OBJECTIVES OF SALARY ADMINISTRATION •Ensure fair and right payment • Attract efficient and good employees • Retain present employees • Balance payment and the work • increase morale and motivation • Project good image of the company
    8. 8. Principles of wages administration Interest of the employer and employees to be considered Wage plan is to flexible to care of changes in society Differences in wages should be logical Should simplify administration Should align with company policy Should be according to prevailing market rates
    9. 9. FACTORS INFLUENCING WAGES/ SALERIES External Factors: Demand and Supply Cost of living Trade Union influence Government Legislation Psychological and social factors Technology changes
    10. 10. INTERNAL FACTORS INFLUENCING WAGES / SALARY Job requirements Management strategy Ability to pay
    11. 11. JOB EVALUATION Job Evaluation is a process of fixing the monetary value for a job on the basis of comparison with similar jobs