Generally, compensation payable to an employee includes the following threecomponents:
Basic compensation for the job (wage/salary)
Incentive compensation for the employee on job
Supplementary compensation paid to employees (fringe benefit and employeeservices)
IMPORTANCE OF WAGE PAYMENT :
1. To worker :
Wage payment is important to all categories of workers. Wage is a matter of life and death to workers/employees. Their life, welfare and even social status dependon wage payment. It is only source of income to large majority of workers. They andtheir unions always demand higher wages and other monetary benefits.Majority of labourproblems and disputes are directly related to wagepayment. The efficiency of workers and their interest and involvement in the workdepend on wage payment. Even their attitude towards employer depends on wagepayment. In brief, wage payment is a matter of greatest importance to workers. Wageproblem is the most pressing and persistent problem before the entire labour force.
2. To employer :
Wage payment is equally important to employers as their profit depend on thetotal wage bill. An employer in general is interested in paying low wages and therebycontrols the cost of production. However,low wages are not necessarily economical. Infact they may prove to be too costly to the employer in the long run. E.g. In garmentmanufacturing company if tailors are not paid properly then it is difficult for the companyto retain them. An employer has a moral and social responsibility to pay fair wages tohis worker as they are equal partners in the production process. He should give fair wages which will benefit to both the parties. Employees will offer full co-operation to themanagement when they are paid attractive wages. On the other hand, strikes anddisputes are likely to develop when workers are paid low wages or when they aredissatisfied and angry due to low wage rates. It is possible to earn more profit by payingattractive wages to workers. E.g. Reliance, Citi Bank, Motorola are earned huge profitsbecause of their higher pay packages.