mod 4 - job_compensation
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Compensation Planning
Definition: Compensation is what employees receive in
exchange for their contribution to the organization. It is
comprehensive term which includes pay,incentives and benefits
offered by the employer
Objectives
± Internal Equity: It ensures that more difficult jobs are paid
more
± External Equity: It ensures that jobs are fairly compensated
to similar jobs in the labor market ± Individual Equity: It ensures equal pay for equal work i.e.
each individual¶s pay is fair in comparison to others doing
same/similar jobs
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BASIC WAGES
Basic wage is based on recommendations by Fair
Wage Committee(1948)and 15th Indian Labor
Conference(1957), awards by wage tribunals, wage
boards, pay commission and job evaluations.Criteria
be considered for basic wage:
± Skill needs of the job
± Experience needed
± Difficulty of work;mental as well as physical
± Training needed
± Responsibilities involved
± Hazardous nature of the job
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Remunerations,if paid,not amounting to wages under anyof theActs:
1. Bonus or other payments under a profit-sharing schemewhich do not form a part of contract of employment.
2. Value of any house accommodation, supply of light,water, medical attendance, traveling allowances, or
payment in lieu thereof or any other concession.3. Any sum paid to defray special expenses entailed by the
nature of the employment of a workman.
4. Any contribution to pension, provident fund, or ascheme of social security and social insurance benefits.
5. Any other amenity or service excluded from thecomputation of wages by general or special order of an
appropriate govt. authority.
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WAGE BOAR D
Wage board: Important institutions set up bygovernment of India for fixation and revision of wages.Each board consists of one neutral Chairman,twoindependent members and two or three representativesof workers and management each.Considers following
Job evaluation, wages rates for similar jobs incomparable industry, Employee¶s productivity, firm¶sability to pay, various wage legislations, Governmentobjectives, Place if industry, need for incentives
Wage board fix revise various components of wageslike basic pay,DA,Incentive earnings, overtime HR A
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Equity & Pay R ates
1. Find the worth of each job through job
evaluation.
2. Conduct a salary survey to find what other employers are paying for comparable jobs.
3. Group similar jobs into pay grades.
4. Price each pay grade by using wage curves.
5. Fine tune pay rates.
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Formal & Informal Surveys
The published survey sources in India include:
Reports published by the Ministry of Labour.
Pay commission reports.
Reports of Wage Boards appointed by Govt.
Reports of employees and employers¶ organization.
Trade journals of specific industry groups etc.
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SURVEYS METHODS
Key job matching
Key class matching
Occupational method
Job evaluation method
Broad classification method
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Dearness Allowance
Definition It is allowance paid to employees to enable
them to face the increasing dearness of essential
commodities.It serves as a cushion, sort of insurance
against increase in price levels of commodities.DA is
linked to:
All India Consumer Price Index(AICPI): The labor
bureau,Shimla,Computes AICPI(Base1960=100
points) from time to time
Time Factor: In this case DA is linked to rise in All
India Consumer Price Index in a related period ,instead
of linking it to fortnightly or monthly fluctuations
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PAY COMMISSIONS
Wages and allowances of Central and stategovernments employees are determined through
pay commissions appointed by appropriategovernments.So for Central government hasappointed five such commissions. The disputesarising out of pay commissions awards and their implementation are decided by Commissions of inquiry, adjudication machinery and jointconsultative machinery
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Objectives of Wage and SalaryAdministration
1. To establish a fair and equitable remuneration offering similar pay for similar work.
2. To attract qualified and competent personnel.
3. To retain the present employees by keeping wage levels in tune
with competing units.
4. To control labour and administrative costs in line with the ability
of the organisation to pay.
5. To improve motivation and morale of employees and to improve
union-management relations.
6. To project good image of company & to comply with legal
needs relating to wages & salaries.
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Some common allowances in the organisedSection in India are:
Attendance Books Car
Credit Card Education Medical
City Compensatory ESIS Night Shift
Club Membership Family Overtime
Computer Insurance Paternity
Deputation Lease Travel Pension
Driver Lunch PF
Relocation Servant Tiffin
Transport Telephone Uniform
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The elements of Wage and SalaryAdministration
1.Identifying the available salary opportunities, their costs, estimating the worth of its members, of their
salary opportunities and communicating them to
employees.
2.Relating salary to needs and goals.
3.Developing quality, quantity and time standards
related to work and goals.
4.Determining the effort necessary to achieve
standards.
5.Measuring the actual performance.
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Elements of Wage and SalaryAdministration contd.
6.Comparing the performance with the salaryreceived.
7.Measuring the job satisfaction of the employees.
8.Evaluating the unsatisfied wants and unrealised
goals of the employees.
9.Finding out the dissatisfaction arising from
unfulfilled needs and unattained goals.
10.Adjusting the salary levels accordingly with a
view to enabling the employees to reach unreached
goals and fulfill the unfulfilled needs.
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Wage Policy in India
Minimum Wage Fair Wage
Living Wage
MinimumW
ageThe 15th Indian Labour Conference (1957) formally
quantified the term µminimum wage¶ thus:
In calculating the minimum wage, the standard
working class family should be taken to comprisethree consumption units for one earner, the earningsof women, children and adolescents beingdisregarded;
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MinimumWage (contd.)
Minimum food requirements be calculated on basis of setintake of calories as recommended by Dr Aykroyd for an average
Indian adult of moderate activity;
Clothing requirements be estimated on the basis of per
capita consumption of 18 yards per annum which would give for
the average worker¶s family of four a total of 72 yards;
In respect of housing, the rent corresponding to the minimum
area provided for under Govt. Industrial Housing Scheme
should be taken into consideration in fixing the minimum wage;
Fuel,lighting and other miscellaneous items of expenditure should constitute 20% of the total minimum
wage.
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FairWage
Fair Wage should be determined taking the following
factors into account:
The productivity of labour;
The prevailing rates of wages in same or similar
occupations in same region or neighboring regions;
The level of national income and its distributions;
The place of industry in the economy of the country;
The employer¶s capacity to pay.
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LivingWage
According to the Committee on Fair Wages, the living
wage is the highest among the three. It must provide (i)
basic amnesties of life, (ii) efficiency of worker and (iii)
satisfy social needs of workers such as medical,
education, retirement, etc. µLiving Wage¶ is a dynamic
concept, which grows in line with the growth of the
national economy.
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STATE R EGULATION OFWAGESACTS
Minimum WagesAct, 1948
The Payment of WagesAct, 1936
Adjudication of Wage Disputes
Wage Boards
Pay Commissions
The Payment of BonusAct, 1965
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Bonus Calculation in India
1. Bonus is calculated on salary of Rs 2,500 /month.
2. Bonus is to be paid at a minimum of 8.33% of thesalary of an employee.
3. Bonus be paid within 8 months from the close of accounting year.
4. Available surplus exceeds the amount of minimum bonus payable to an employee, employer pays a higher bonus subject to a minimum of 20% of salary or wage.
5. Bonus is paid out of available surplus of anaccounting year after deducting the sums referred to in
Sec.6. If there is no surplus, even then bonus has to be paidtreating it as µdeferred wage¶.
6. To claim bonus, the employee must have worked for 30days in that year.
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Some common allowances in the organisedSection in India are:
Attendance Books Car
Credit Card Education Medical
City Compensatory ESIS Night Shift
Club Membership Family Overtime
Computer Insurance Paternity
Deputation Lease Travel Pension
Driver Lunch PF Servant Tiffin
Transport Telephone Uniform
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Objectives of Wage and SalaryAdministration
To establish a fair and equitable remunerationoffering similar pay for similar work.
To attract qualified and competent personnel.
To retain the present employees by keeping wage
levels in tune with competing units. To control labour and administrative costs in line
with the ability of the organisation to pay.
To improve motivation and morale of employees
and to improve union-management relations. To project a good image of the company and to
comply with legal needs relating to wages andsalaries.
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Factors influencing compensation levels
Job needs
A bility to pay
Cost of living
Prevailing wage rates
Unions
Productivity
State regulation
Demand and supply of labour
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R EASONS FORWAGE DIFFER ENTIALSThe following are the reasons for Wage Differentials:
Wage Differentials R easons
Interpersonaldifferentials
Differentials in sex, skills, age,knowledge, experience
Inter-occupationaldifferentials
Varying requirements of skill,knowledge, demand-supply situation
Inter-areadifferentials
Cost of living, ability of employers¶to pay, demand and supply situation,extent of unionisation
Inter-firmdifferentials
A bility to employer to pay,employees¶ bargaining power, degreeof unionisation, skill needs, etc.