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HRM
Wage & Salary Administration
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Wage & Salary Administration-
Introduction
As money is the prime need for human beings to
meet their basic needs, everyone tries to earn as
much money as possible
A clerk earning less than a driver may have a
vague grievance, but when he earns less than
another clerk of comparable qualifications and
experience he will show his unhappiness more
bitterly. This shows that people have the
tendency to compare themselves with others
who are in a similar profession and/or with
similar qualifications

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Wage & Salary Administration-
Introduction
The main objective of wage and salary
administration is to have a scientific, rational,
and balanced wage & salary structure
In salary administration, the employer should not
feel that the employees are paid more than they
deserve and the employees should not feel that
they are underpaid. Unless there is a scientific
approach /method we cannot solve this conflict
Here wage and salary administration includes
allowances, leave facilities, housing, travel, etc
and non-cost rewards such as recognition,
privileges and symbols of status
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Wage & Salary Administration-
Introduction
In India the question of wages assumes
paramount importance because of acute
poverty, large scale unemployment and a
high population. No fixed norms and
means are followed in fixing wages and
salaries, so a lot of ad-hocism and
expediencies are found in fixing wages.
The compensation has to be viewed from
economic, psychological, legal and growth
points of view
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Meaning of Wage and Salary
Administration
Wage and Salary Administration is the group of
activities involved in the development,
implementation and maintenance of a pay
system
It can also be called the ongoing process of
managing a wage and salary structure
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Difference between Wage, Salary
and Compensation
Wage: Paid to blue-collar workers-paid daily,
weekly or monthly-paid for the jobs which can ,
to some extent, be measured in terms of
moneys worth
Salary: Paid to white collar workers-paid
monthly-paid to employees whose contribution
cannot be easily measured
Compensation: a comparative term- includes
wage and all other allowances and benefits like
allowances, leave facilities, housing, travel and
non-cost such as recognition, privileges and
symbols of status
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Factors influencing Wages and
Salary
Wage policy of the company- The
company may have a policy to fix the
wages externally competitive and
internally compatible, i.e. they pay
according to the competition and maintain
equity among various employees in the
company. Sometimes the company may
have a wage policy that it should be above
the industry average or below it or
comparable to it
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Factors influencing Wages and
Salary
Prevailing wages in the region
Financial position of the company
Trade Unions pressure on the
Management
Government policy on wages and salaries
Relative worth of job done
Demand and supply of labour
Economic conditions of the nation

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Time-Rate and Piece-Rate Wages
Employees prefer time-rate while employers
prefer piece-rate
Both have their own merits. In time-rate, quality
can be maintained, but the expected level of
production may not be delivered by the
employees. In piece-rate, the quality may be
compromised but the workers may get extra
income that will motivate them
If an employees production exceeds the
standard production, he should be given
incentives for the extra production
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Time-Rate and Piece-Rate Wages
When production is not amenable to measure
the time taken to complete the job can be
considered to fix the wage on time-rate basis.
E.g. A person who takes only 60% of the
standard time to complete a job can be paid
incentive for the 40% time saved, since he
spends that 40% time for doing another job
Whether piece-rate or time-rate, the
management should provide all facilities and
keep the working conditions conducive for better
production, otherwise the system will be a failure
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Time-Rate and Piece-Rate Wages
Taylors Differential Piece-wage system
If the actual output exceeds or equals the
standard output then the employee will be
paid higher rate (as incentive). If the actual
output is less than the standard output, then
the employee will be paid lower rate (as
disincentive)
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Taylors Differential Piece-wage
system
e.g. Std output for an employee- 10 units
Higher wage rate - Rs 3per unit
Lower wage rate - Rs 2.5per unit
When an employees actual output is 10
units, his wage will be 10*Rs3=Rs 30.
When it is only 8 units, the wage will be
8*Rs2.5=Rs 20.

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Halsey Premium Plan
A bonus is paid for the time saved apart from a minimum
base rate for each unit produced
Standard time- 20 hrs
Hourly rate per unit- Re 1(base rate)
Incentive per hour- Re 0.5
In case the worker has taken only 14 hours, then his wage
will be 14*1+6*0.5=17 Rs
Totally Rs 17 will be paid. Hence 6 hours savings gets
incentive of 50% of base rate
In case he takes more than the standard hours, then there
is no bonus, only the base rate will be paid.

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Minimum Wages, Living Wages
and Fair Wages
Minimum wages- It must provide not only for the bare
sustenance of life but for the preservation of the
efficiency of the workers by providing some measures of
education, medical care, etc.
Criteria: It must be calculated for a family of 4 units
(numbers)
It must be able to provide 2700 calories per adult per day
It should be sufficient for 18 yards of cloth per unit per
annum
There should be a provision for reasonable house rent,
light, fuel and miscellaneous items
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Minimum Wages, Living Wages
and Fair Wages
Living wages- It is not only for the bare
essentials for the worker and his family,
but also for comfort, protection against ill-
health, decency, social needs and
insurance for old age
Fair wages- It is in-between minimum
wages and living wages, but below the
living wage
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Legal framework on wages
The Government has enacted various
laws to regulate and govern the wages.
They are:
1. The payment of Wages Act 1936
2. The payment of Bonus Act 1965
3. The Equal Remuneration Act
4. The Minimum Wages Act
5. The Companies Act 1956
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Dearness Allowance
The main objective of DA as a component
of wage is to neutralize the increase in
price. In certain cases the DA is more than
the basic pay or double the basic pay. The
DA is computed according to changes in
consumer price index and sometimes the
DA is linked to pay slabs also, i.e., as the
basic pay goes up, the rate of DA will
come down
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Arguments against DA
1. It has nothing to do with the amount of work
performed, i.e., DA is increased without proportionate
increase in production
2. Price rise leads to increase in DA, and DA increase in
turn, leads to price increase. Ultimately it leads to
spiralling inflation
3. Most of the industrially developed countries dont have
the DA system. They have the Gross Wage System.
Price rise is taken care of by increasing the gross
wage. So psychologically the employees feel that the
wage has been increased, so the production also
should be increased. But in Indian conditions, the
employees feel that the DA increase is only to
neutralize the price rise. So, they dont increase the
productivity and demand for more and more wages.
People are trying to get more wage through DA
increase rather than Basic wages increase in order to
avoid increase in production
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Development of a Pay System
Review Job description
Conduct Job
evaluation
Gather Wage Survey
information
Pay Structure
Administer individual
Pay adjustments
Monitor and Update
The Pay System
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Development of a Pay System
Before developing a pay system the organization must
develop policies as general guidelines to govern the pay
system. Uniform policies are needed for co-ordination,
consistency and fairness in compensating employees
Job Analysis is used in developing a pay system through
the activities of job evaluation and wage/salary surveys
Job Evaluation is to ensure internal equity whereas wage
survey is to ensure that the pay is externally competitive
Using the Job Evaluation details, the pay structure
(Grades) and minimum and maximum wage ranges are
determined. Then individual jobs must be placed in the
appropriate pay grades and employees pay adjusted
based on length of service and performance. Finally the
pay system must be monitored and updated as needed
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Conclusion
Any Pay System should create a feeling of equity in the
minds of the employees. Otherwise it will demoralize and
demotivate the employees. But in Indian conditions it is
very difficult to practice. For e.g. we can see wage
disparity among employees of Indian banks. In certain
cases, the disparity can be justified and in certain cases
it cannot be justified. Another feature of Indian Pay
System is that the Govt subsidies to PSUs and SSIs,
Compulsory bonus, etc. make the salary and wage
system unscientific.
The present trends in the wage pattern are that the gap
between the officers pay and workers pay is narrowing
down, and the difference between organized sector and
unorganized sector, women and men, casual and regular
workers pay is on the rise. The public policy is to reduce
the disparity, but it cannot be done overnight. The
modern trend in wage in organized sectors is linking it
with productivity. Nowadays the productivity-linked
bonus and incentives are quite common in the
companies including public sector undertakings