WAGES AND SALARY ADMINISTRATION

Wage may be defined as payment fo use of labor. According to Benham” Wages means the amount paid to the laborer for his services to the employer.Although the term wages is often used to include salaries, some experts differentiate between the two. The word’ wage’ means compensation paid on an hourly basis and salaries is used to mean compensation of executives, supervisors, sales men and other employees paid on a basis other than an hourly rate.

NATURE AND PURPOSEThe basic purpose of wage and salary administration is to establish and maintain an equitable wage and salary structure. The wage and salary administration is concerned with financial aspects of needs, motivation and rewards. Managers, therefore , analyse and interpret the needs of their employees so that rewards can be decided to satisfy those needs. The reward may be money or promotion , recognition, acceptance etc

OBJECTIVESA sound wage and salary administration tries to achieve these objectivesFOR EMPLOYEES

1. employees are paid according to requirements of the job.ie highly skilled jobs are paid more compensation than low skilled jobs. This eliminates inequalities.

2. the chances of favouritism (while fixing wage rates) are greatly eliminated3. job sequences and lines of promotion are established wherever applicable.4. employees morale and motivation are increased because a wage program can be explained

and is base on facts.

TO EMPLOYERS1. They can systematically plan and control labour costs2. in dealing with trade union, they can explain the basis of their wage program because it is

based upon a systematic analysis of job and wage facts3. a wage and salary administration reduces the likelihood of friction and grievances on job

inequalities.4. it enhances an employee’s morale and motivation because adequate and fairly

administered wages are basic to his wants and needs.5. it attracts qualified employees by ensuring adequate payment for all the jobs.

according to Beach, wage and salary administration have four major purposes1. to recruit persons for a firm2. to control payroll costs3. to satisfy people, to reduce the incidence of quitting grievances, and fractions over pay4. to motivate people to perform better

TYPES OF WAGES1. NOMINAL WAGES

It is the amount paid to the worker in cash for the efforts of the worker towards production and no other benefits are given to the worker. This is called money wage.

2. REAL WAGESIt represents the amount of necessaries, comforts, luxuries and cash payment a worker gets in return for his efforts. Some organizations provide their employers certain essential commodities, housing with free electric and water charges, uniforms and other such facilities in addition to the money in cash. If these amounts are considered for wages, it becomes the real wage

3. LIVING WAGEWhen the wage rates are such that they are going to fullfil some of the requirements of a family like food, cloths, education and insurance against misfortune along with other basic necessities, they are referred to as living wage

4. FAIR WAGEIt is a wage which is to be considered as a fair amount of return for the efforts of the employees and should be able to cover the other necessities of food, cloths and shelter for his family. The rate for the fair wage lies between real wage and minimum wage,

5. MINIMUM WAGEMinimum wage may be defined as the wage, which not only provides for basic subsistence but something more than this. It should be able to keep the employees motivated and it should provide for some measure of education, medical facilities and other essential requirements. It should also consider the cost of living.Main objectives of minimum wages are

To protect the sections of working population whose wages are very low To prevent exploitation of the workers To improve the general standard of life Satisfactory compensation towards efforts expended by the worker

FACTORS INFLUENCING WAGE SYSTEMThe various factors that determine the wage and salary administration are

1 the organization’s ability to pay2 supply and demand of labor3 the prevailing market rate4 living wage5 productivity6 trade union’s bargaining power7 job requirement8 managerial attitude9 psychological and social factors(psychologically, persons perceive the level of wages as a

measure of success in life, people may feel secure. Sociologically and ethically workers should feel that they are not exploited and that no distinction is made on the basis of caste, color, sex or religion)

10 skill level available in the market

TYPE OF WAGESTime rate and Piece rateTime rate – under this system workers are paid according to work done during a certain period of time without considering the production in fixing wage. The worker is paid at the settled rate as soon as the time contracted is spent.Advantages

the workman is not in a hurry and that they will pay attention to the quality of work. As all workmen employed for doing a particular kind work receive the same wages, ill-will

and jealousy among them are avoided. Due to slow and steady pace of the worker, there is no rough handling of machinery The worker gets steady wages so that he can plan the budget.

Demerits It does not take into account the fact that men are of different abilities and that if al persons

are paid the same wages, better Workmen will have no incentive to work harder and better. They will therefore be drawn

down to the level of the least efficient workmen.

Piece Rate- under the system, workers are paid according to the amount of work done or the number of units completed the rate of each unit being settled in advance, irrespective of the time to complete a job. Advantages

The worker gets a direct stimulus to increase his production Supervision is not heavy since the workers do not waste time as they know that their wages

are dependent upon the amount of work. The workman will concentrate to avoid breakdown of machinery to get more production

and this will reduce plant maintenance carges. The total unit cost of production comes down with larger output .

Disadvantages As the workers wish to perform their work at high speed, they generally consume more

power, over work the machine, and do not try to avoid wastage of materials. This results in high cost of production and lower profit.

There is greater chance of deterioration in the quality of work due special drive to increase the production