Theories of Wages & Legislations

Contents

Introduction Maslows Hierarchy of needs Hertzberg two factor theory of motivation Just Wage Theory Subsistence Theory Wage fund Theory Standard of Living theory Residual claimant theory Marginal productive theory Bargaining theory & Behavioral theories Expectancy theories Equities theory

Maslows Need Hierarchy Theory

Maslow's need hierarchy divides human needs into five levels Each level represents a group of needs-not one need for each level Maslows expresses the view that Man is a Wanting Animal and also that Wants are unlimited He also suggests that people can travel down as well as up the hierarchy Loss of existing satisfaction of needs for example, can re-activate that level and increase its relative importance

Hierarchy of Needs

Critical Evaluation of Maslows Theory

This theory has been highly appreciated as has it helps the managers think about motivating their employees. It accounts for interpersonal variations in human behavior Need hierarchy model is dynamic as it presents motivation as a constantly changing force. Here human behavior makes a total departure from earlier approaches

Herzberg Two Factor Theory

The first basic part of this model is a formally stated theory of work behavior The second aspect of Herzberg's work has focused upon the behavioral consequences of jobenrichment and job-realization programmes This model is variously termed as the two-factor theory, the dual factor theory, and the motivationhygiene theory. This model has been highly accepted by the managers concerned with the problem of human behavior at work

Continued..

Herzberg used critical incident method in his survey for obtaining data for analysis The respondents were asked two questions:

When did you feel particularly good about your job and When did you feel exceptionally bad about your job

The responses obtained revealed factors that the they were two extremes, which is related to job satisfaction or which is related to job-dissatisfaction

Hygiene factors and Motivators

Company Policy & Administration Hygiene Factors

Security

Status

Achievement Recognition Work itself Responsibility Growth Advancement

Working Conditions

Motivators Salary

Evaluation of the theory

Intrinsic factors are variously known as motivators, satisfiers or job-content factors. Extrinsic factors also known as dissatisfiers, hygiene factors, maintenance factors or job-context factors. To achieve motivation, managers should cope with both satisfiers and dissatisfiers, that improve hygiene factors. The major pitfall of this theory is that contrasting views of satisfaction and dissatisfaction

Just Wage Theory

This was the first theory on wages advocated during medieval period The essence of this theory is that the worker should be paid on the level of maintaining himself and his family

Subsistence Theory

According to Ricardo the laborers are paid to enable them to subsist and perpetuate the race without increase or diminution

Wage Fund Theory

According to J.S.Mill, the wages are determined of the relationship between the amount of fund allocated for the purpose of wage payment and number of workers in a country Wage = Amount of fund allocated for wage payments Number of workers

Standard of Living Theory

Karl Marx pointed out that the Wage of labor is determined by a traditional standard of living, which, in turn, is determined by the mode of production of the country concerned

Residual Claimant Theory

According to Walker, the wages are determined on the basis of the amount left after the payment of rent, profits and interest to land, entrepreneur and capital respectively out of the productive value. Amount of wages = Production Value (Rent+ Profits+ Interest)

Marginal Productive theory

According to the J.B.Clark, the wages are determined on the basis of marginal contributions of the worker to the production The employer stops employing further workers where the contributions of the most recently employed worker are equal to his wages.

Bargaining Theories and Behavioral Theories

According to this theory the wages and other terms of employment are determined on the basis of the relative bargaining strength of the two parties, the employer and the employees. Webbs stated that, the higgling of the market which under a system of free competition and individual bargaining determines the conditions of employment.

Expectancy theories

According to behavioral scientists, wages are determined on the basis of several factors:

Size Nature Prestige of the organization Strength of the union Social norms Traditions Customs Prestige of certain jobs Level of job satisfaction Morale Level of performance

Equities Theory

This theory emphasis on equity in pay structure of employee remuneration. Equity theory states that an employee who perceives inequity in his or her rewards seeks to restore equity. The remuneration system needs to meet three types of equity:

Internal External Individual

Dimensions of Equity

Internal Equity

Motivation

External Equity

Perceptions of Fairness

Commitment

Individual Equity

Performance

WAGE LEGISLATION

Contents of the Chapter

Introduction Wage survey Wage Legislations Payment of wages Act Minimum Wages Act Payment of Bonus Act

Introduction

We have various labor laws at the central and the state levels. Some of the central laws which have a bearing on employee remuneration are:

The Payment of Wages Act, 1936. The Minimum Wages Act, 1948. The Payment of Bonus Act, 1976. Payment of Gratuity act, 1972.

Contd..

In addition to legal enactments, there are wage boards, tribunals, and fair wage committees which aim at providing a decent standard of living to workers. India is the only democratic country in the world which has attempted wage regulation on the large regulation on so large scale through state sponsored agencies. With regard to managerial remuneration, the Companies Act 1956 puts a cap on salary and

Wage Survey

Survey is an investigation of current position. Salary Survey is one of the techniques useful in salary administration. The purpose of this salary is to collect competitive salary data regarding various jobs in the labor market and provide the same for salary administration.

An salary survey enables an organization to find out what other organizations pay for specific jobs and the basis for payment of the existing salary level.
Most of the organizations are forced to pay the wage equivalent to the going rate or the market rate.

Factors Affecting Wage/Salary Levels

Remuneration in the Comparable Industries. Firms Ability to pay Cost of Living Productivity Union Pressure and Strategies Government Legislations

Government Legislations

Government legislations influence wage determination.

The important legislations which affect wage fixation are:

The Payment of Wages Act. The Minimum Wages Act. The Payment of Bonus Act. Payment of Gratuity Act.

WORKMENS COMPENSATION ACT, 1923 (As Amended Upto Act 46 of 200)

The workmens compensation Act is a welfare legislation and its object is that the compensation for injuries or death sustained by the workmen be paid to him or his family members without any delay. The Act provides cheaper and quicker disposal of disputes relating to compensation through special tribunals than possible under civil law.

The Payment of Wages Act, 1936.

The important provisions of this Act are:

Ensure proper payment of wages Avoiding all malpractices like non-payment Underpayment Delayed and irregular payment Payment in kind and undermeasurement of work

The Act covers all employees drawing the wage up to Rs 1000 per month.

Contd..

The Act stipulates that the organization with less than hundred workers should pay by seventh and the organization with more than 100 employees should pay by the tenth of next month. The Act also stipulates time for payment of dues to the discharged employees.

The Minimum Wages Act, 1948

The Act seeks to protect the workers from underpayment of wages for their efforts.

It presents the guidelines for the fixation of minimum wages which is just sufficient to meet the basic needs of workers and to keep a mans body and soul together.
Statutory minimum wage is determined according to the procedure prescribed by the relevant provisions of the Act.

Contd..

The Act provides for fixing of:

Minimum wage in certain employments Minimum time rate Minimum piece rate Guaranteed time rate Overtime rate Basic pay and D.A

The Act also provides for revision of minimum wage at fixed intervals

The Payment of Bonus Act, 1965.

The Government Enacted the Payment of Bonus Act in September, 1965. The important provisions of the Act are:

60% of the surplus should be allocated for the payment of Bonus. Salary for the purpose of bonus means Pay + DA. Minimum Bonus payable is 4% of the salary or Rs 40, whichever is higher. If an employee is below 15 Years of age, the bonus payable is 4% of the salary or Rs 25 whichever is higher If the available surplus is more than 20% of the bonus, it can be set on upto a maximum period of 4 Years

Contd..

The Government amended the Act again in 1977. The important provisions of this amended are:

The Industrial undertaking covered by the Act to pay the Minimum bonus of 8.33%, irrespective of profit or loss from the year 1976. Investment Allowance should be taken as prior charge.

Banking Companies and Industrial Reconstruction Bank of India are covered by this Act.

OTHER MAJOR REGULATIONS

maternity Industrial Employment Act 1946 Factories Act 1948 Employees state insurance Act, 1948 Employees provident fund & miscellaneous provision Act 1952 Payment of bonus Act 1965 Payment of gratuity Act, 1972 Equal Remuneration Act 1975

Motor transport workers Act 1961 Plantations labour Act 1951 Sales promotion employees Act, 1976 Trade unions Act , 1926 ( Amended by Acts upto of 2001)