WAGES AND SALARY INTRODUCTION: In the narrower sense, wages are the price paid for the services

of labor the process of production and only include the perfor!ance wages"# The ter! wages" has been defined by the pay!ent of Wages Act 1936 as re!uneration in ter!s of !oney which would be payable on the basis of contract of e!ploy!ent but which does not include the following: a$ %ouse acco!!odation, supply of light, water etc# b$ Contribution by the e!ployer to any pension fund or provident fund# c$ Travelling allowances or value of any travelling concession# d$ No &ratuity will be paid# In India, statistics reveal that wages have been one of the !ost i!p# factor affecting industrial relations#

TYPES OF WAGES:
'# MINIMUM WAGE: according to Co!!ittee of (air wage wage !ust provide not for !erely bare sustenance of life but for the preservation of the efficiency of wor)ers# (or this purpose, !in wage also !ust provide for so!e !easure of education, !edical re*uire!ents and other a!enities"# +ini!u! wages were also proposed as a way to control the proliferation of sweat sh !s in !anufacturing industries# The sweat shops e!ployed large nu!bers of wo!en and young wor)ers, paying the! what were considered to be substandard wages# The sweatshop owners were thought to have unfair bargaining power over their wor)ers, and a !ini!u! wage was proposed as a !eans to !a)e the! pay ,fairly,# Over ti!e, the focus changed to helping people, especially fa!ilies, beco!e !ore selfsufficient# Today, !ini!u! wage laws affect wor)ers in !ost low-paid fields of e!ploy!ent# M"#"$%$ wage &aw +ini!u! wage law is the body of law which prohibits e!ployers fro! hiring e!ployees or wor)ers for less than a given hourly, daily or !onthly !ini!u! wage# +ore than ./0 of all countries have so!e )ind of !ini!u! wage legislation# +in wage is fi1ed by the govt# under the !ini!u! wage 2CT,'.34#

Ec # $"cs

' the $"#"$%$ wage

5# NEED (ASED MINIMUM WAGE: This wage gained i!portance after the !eeting of '6 th session of Indian labour Conference in '.67# The I8C is tripartite in character representing govern!ent, labour 9 !anage!ent 9 convenes annually, decided to use need" criterion for defining a !in wage for industrial wor)ers# 2 resolution adopted at the '6th I8C !eet, !in wage ought to be need based and should ensure fulfill!ent of the !in hu!an needs of the industrial wor)er, irrespective of any other consideration# To calculate the !in wage, the co!!ittee accepted the following nor!s: a$ The need based !in wage !ust be calculated for a wor)ing class fa!ily consisting of : adults, supported by a single wor)er# 2 total of 3 consu!ption unit# b$ +in food re*uire!ent should be calculated on the basis of daily inta)e of 5,7// calories per adult engaged in !oderate activity, as suggested by nutritional e1pert# c$ Clothing re*uire!ent is esti!ated as '; !eter per capita annual consu!ption# d$ %ousing needs should be calculated on the basis of house rent charged by the govern!ent for houses that it provides to its e!ployees under the subsidi<ed industrial housing sche!e for low inco!e groups# e$ =1penses on lights,fuel 9 !iscellaneous ite!s should app1# 5/0 of total !in wage

3) MONEY WAGE * REAL WAGE: 2ccording to 2da! >!ith !oney wage level is deter!ined 9 regulated by the interaction between supply 9 de!and of necessaries on one hand 9 de!and of labour on the other# higher !oney wages usually result fro! increase in

the de!and for pdt 9 labour to produce these products# %igher !oney wages, however increases the supply of labour by attracting new wor)ers into industry-often wo!en?old 9young$# There is a direct relation between real wage 9 !oney wage# Real wages are !ore i!portant to the individual wor)er than !oney wage, for real wage !easures the purchasing power of his inco!e# It is possible for a wor)er during business cycle to have a lower standard of living despite an increase in !oney wage# If the prices of goods increases at faster rate than his wage there will be decrease in the real wage# The inco!e of an individual or group after ta)ing into consideration the effects of inflation on purchasing power# F + e,a$!&e, if you received a 50 salary rise over the previous year and inflation for the year was '0, then your real inco!e only rose '0# Conversely, if you received a 50 raise in salary and inflation stood at :0, then your real inco!e would have shrun) '0# DIFFEREN-E (ETWEEN WAGE AND SALARY Wage Sa&a+. how !uch you@ll earn in an hour how much you'll earn either in a month or

a year paid to the labor directly involved in production

wages beco!es part of the product cost entitled to overti!e Aages are paid to ,non-e1e!pt,

paid to the worker or staff related to administration

salary treated as ad!inistrative e1pense Not necessarily entitled to overti!e >alary is paid to ,e1e!pt, e!ployees

the wage is decided as per the hardship of the work

has no fi1ed wor)

wages is direct expense and is included in trading account

fixed on the basis of category / nature of work. have a fixed post and a particular work schedule salary is indirect expense and is included in profit and loss account

FA-TORS INFLUEN-ING WAGE AND SALARY The !ost i!portant proble! in wage and salary ad!inistration is the establish!ent of base co!pensation for the Bob as certain factors have to be )ept in !ind, such as, >upply and De!and, 8abor organi<ation, the fir!"s ability to pay, Cariations in productivity and Cost of living, &overn!ent legislation, Including CICIC> RI&%T> 2CT#

'# 5# :# 3# 6# ;# 7# 1)

1)

3)

The wage policies of different organi<ation differs# >o!e !anagers believe in the econo!y of higher wages# They feel that, by paying high wages, they would attract better wor)ers who will produce !ore than average wor)er in the industry# +ost co# give greater weight to two wage criteria, i#e, Bob re*uire!ents and the prevailing rates of wages in the labour !ar)et# Other factors, such as changes in the cost of living the supply and de!and of labour, and ability to pay are accorded a secondary i!portance# (actors that are ta)en into consideration for wage and salary ad!inistration are: The organi<ations ability to payD >upply and de!and of labourD The prevailing !ar)et rateD The cost of livingD 8iving wageD Esychological and sociological factors# 8evels of s)ills available in the !ar)et The +ga#"/at" #s a0"&"t. t !a.: Aage increases should be given by those organi<ations which can afford the!# Co!panies that have good sales and, therefore, high profits tend to pay higher than those which runs at a loss or earning low profits because of higher cost of production or low sales# 2ll e!ployers, irrespective of their profits or losses, !ust pay no less than their co!petitors# In the long run, the ability to pay is i!portant# During the period of depression, wages are cut because the funds are not available# +arginal fir!s and non profit organi<ation ?li)e hospitals and educational institutions$ pay relatively wages because of low or non profits# S%!!&. a#2 2e$a#2 ' &a0 %+: The labour !ar)et conditions or supply and de!and forces operate at the national, regional and local levels# If the de!and for certain s)ills are high and supply is low, the result is a rise in the price to be paid to these s)ills# The other alternative is to pay higher wages if the labour supply is scarceD and lower wages when it is e1cessive# >i!ilarly, if there is a great de!and for labour e1pertise, wages riseD but if the de!and for !anpower s)ill is !ini!al, the wages will be relatively low# The supply and de!and co!pensation criterion is very closely related to the prevailing pay# P+e3a"&"#g $a+4et +ate: This is )nown as the 5c $!a+a0&e wage6 + g "#g wage +ate6, and is the widely used# 2n organi<ation co!pensation policy generally tends to confor! to the wage rate payable by the industry# This is done for several reasons ) F"+st, co!petition de!and that co!petitors adhere to the sa!e relative wage level# Sec #2, various govern!ent laws and Budicial decisions !a)e the adoption of unifor! wage rates an attractive proposition# Th"+2, trade union encourages this practice so that their !e!bers can have e*ual pay, e*ual wor) and geographical differences !ay be eli!inated# F %+th, functionally related fir!s in the sa!e industry re*uires essentially the sa!e *uality of e!ployees, with sa!e s)ill and e1perience# This results in a considerable unifor!ity in wage and salary rates#

F"#a&&.7 if the sa!e general rates of wages are not paid to the e!ployees as are paid by the organi<ations co!petitors, it will not be able to attract and !aintain the sufficient *uantity and *uality of !anpower# >o!e co!panies pay on a high side of the !ar)et in order to obtain goodwill or to insure an ade*uate supply of labour#

89: The c st ' &"3"#g: This criterion calls for pay adBust!ents based on increases or decreases in an acceptable cost of living inde1# Ahen the cost of living increases, wor)ers and trade unions de!and adBusted wages to offset the erosion of real wages# 8;: The &"3"#g wage: Criterion !eans that wages paid should be ade*uate to enable an e!ployee to !aintain hi!self and his fa!ily at a reasonable level of e1istence# %owever, e!ployers do not generally favor using the concepts of a living wage as a guide to wage deter!ination because they prefer to base the wages of an e!ployee on his contribution rather than on his need# 86: Ps.ch & g"ca& a#2 S c"a& Fact +s: These deter!ine how hard a person will wor) for the co!pensation received or what pressures he will e1ert to get his co!pensation increased# Esychologically, persons perceive the level of wages as a !easure of success in lifeD people !ay feel secureD have an inferiority co!ple1, see! inade*uate or feel the reverse of all these# They !ay not ta)e pride in their wor), or in the wages they get# Therefore, these things should not be overloo)ed by the !anage!ent in establishing wage rate# >ociologically and ethically, people 'ee& that <e=%a& w +4 sh %&2 ca++. e=%a& wages>,they are not e1ploited, and that no distinction is !ade on the basis of caste, colour, gender or religion# To satisfy the conditions of e*uity, fairness and Bustice, a !anage!ent should ta)e these factors into consideration# 8?: S4"&& Le3e&s a3a"&a0&e "# the Ma+4et: Aith the rapid growth of industries business trade, there is shortage of s)illed resources# The technological develop!ent, auto!ation has been affecting the s)ill levels at faster rates# Thus the wage levels of s)illed e!ployees are constantly changing# ADMINISTRATION OF WAGES AND SALARIES This responsibility !ay be entrusted to the personnel depart!ent# >ince the proble! of wages and salary is very delicate and co!plicated, it is usually entrusted to a Co!!ittee co!posed of high-ran)ing e1ecutives# The !aBor functions of such Co!!ittee are: a$ 2pproval andFor reco!!endation to !anage!ent on Bob evaluation !ethods and findingsD b$ Review and reco!!endation of basic wage and salary structureD c$ %elp in the for!ulation of wage policies fro! ti!e to ti!eD d$ Co-ordination and review of relative depart!ental rates to ensure confor!ityD and

e$ Review of budget esti!ates for wage and salary adBust!ents and increases# The plan is first prepared by the Eersonnel +anager in consultation and discussions with senior !e!bers of other depart!ents# It is then sub!itted for final approval of the top e1ecutive# Once he has given his approval, for the wage and salary structure and the rules for ad!inistration, its i!ple!entation beco!es a Boint effort of all heads of the depart!ents# The actual appraisal of the perfor!ance of subordinates is carried out by the various !anagers, who in turn sub!it their reco!!endations to higher authority and the latter, in turn, to the personnel depart!ent# The personnel depart!ent ordinarily reviews reco!!endations to ensure co!pliance with established rules of ad!inistration# In unusual cases of serious disagree!ent, the president !a)es the final decision#

A2&= 8=C=8 9 IT> D=T=R+IN2NT> The wage level is the average wage paid to all e!ployees# This has two i!plications to this# The first is e1ternal: how does the organi<ation co!pare with other organi<ationsG %ow the organi<ation wishes to position itself in the !ar)etplace# The second i!plication is internal# The average wage is a reflection of the total wage bill of the organi<ation# The si<e of the wage bill is a reflection of !oney paid to entry level wor)ers on up to the top e1ecutive# 8abor is one of the clai!ants on organi<ational resources# DETERMINANTS Aages 9 salaries of Bobs in any organi<ation are influenced by the following: Aage legislation# Aage rates in si!ilar Industry# Influence of wor)ers union on !anage!ent# Organi<ational policy# Aage legislations are of 5 types-central govern!ent 9 state govern!ent# These legislations, indicate !ini!u! levels# Influence of Union vary widely in India# It is !ore powerful in public sector co!pared to private sector# Union influence also vary fro! industry to industry# F + eg: union influence in te1tile 9 cotton industry is !ore resulting in higher wage# %owever, Indian Trade Union is highly influenced by political considerations so its influence is di!inished due to disunity a!ong the!# There are : categories of organi<ation in India: H&ood pay !asterI H2verage payerI H=1ploiterI- those organi<ations who !anipulate the wea)ness of labour# WAGES LE@EL (ro! early stages itself, it re!ains the !ost i!portant !otivation factor# >teady wages provide hi! with physiological needs# Regular e!ploy!ent with relative

higher pay!ent also provide hi! to !eet psychological need li)e co!panionship, social recognition, status, prestige 9 satisfies his individual ego# LANAAM FA-TORS: proposes 6 factors which influence the wage level: Erevailing wage rates# 2bility to pay# Eroductivity# Cost of living# 2ttraction 9 retention of e!ployees# P+e3a"&"#g wage +ates: also )nown as Hgoing wage rateI, Hprevailing !ar)er rateI, Hco!parable wageI# This is obtained through wage survey conducted a!ong si!ilar industries in the sa!e area or geographical location# Organi<ational wage level policy depends on prevailing wage rate due to following reasons: a$ &overn!ent policies instruct unifor! wage rate for si!ilar Bobs# b$ >uits trade union which favour e*ual pay for e*ual wor)# c$ Co!petition a!ong fir!s leads to sa!e relative wages for attraction 9 retention# d$ >i!ilar type of industries re*uires si!ilar *ualification, s)ill 9 e1perience# %owever, so!e co!panies pay on high side of !ar)et in order to obtain goodwill 9 ensure ade*uate supply of labour# A0"&"t. t !a.: fir!s who have co!petitive advantage over others, those having si<eable !ar)et share 9 co!fortable profit !argin are li)ely to offer higher wages to their e!ployees# During ti!e of econo!ic prosperity, !anage!ent will be willing to consider de!ands of bonus or pay rise# %owever, during recession wages are cut, denial to bonus 9 other per)s# Non- profit !a)ing organi<ation having !arginal profits will pay their e!ployees lower level wages# Thus, capacity of pay!ent profoundly influences the level of wages# P+ 2%ct"3"t.: increase in productivity raises output 9 i!prove profit# This surplus inco!e beco!es a source for increased level of wages# ERODUCTICITJ I> 8INKD=D TO 82LOUR =((ICI=NCJ# Conse*uently-Hproductivity-lin)ed-wagesI has evolved# In addition to labour, there are other factors which can i!prove productivity, such asM Use of better !achines 9 plants# M Use of better production !ethod# M Use of better production layout# M Use of better !anage!ent techni*ues# Eroductivity can also increase by i!proving M Aor)ing environ!ent# M Letter supervision# M Nob satisfaction M =ffective leadership style# %ence both labour 9 !anage!ent together will help i!prove productivity# - st ' &"3"#g: wages !ust be sufficient to )eep both body 9 !ind healthy# To )eep labors spirit high 9 so that he can bring !a1i!u! effort to the Bob# Increase in Inflation will !a)e wor)ers life !iserable# To safeguard the interest of wor)ers following steps have been ta)en: M Erovide dearness 2llowances or other such allowances to ta)e care of living Inde1 by lin)ing the! together# M Erovide a running scale of wage wherein basic wage levels 9 annual incre!ents are !entioned# Att+act" # * +ete#t" # ' e$!& .ees: wage level !ust attract talents 9 retain the! in organi<ation# %igher wages !otivate people# Eerson who gets higher wage

perceives hi!self as successful# >ense of security# Thus, it has sociological 9 psychological factors#

Wage differentials
No one factor e1plains the gulf in pay that e1ists and persists between occupations and within each sector of the econo!y# >o!e of the relevant factors are listed below: - $!e#sat"#g 2"''e+e#t"a&s - higher pay as a reward for ris)-ta)ing, wor)ing in poor conditions and having to wor) unsocial hours D"''e+e#ces "# acc%$%&ate2 h%$a# ca!"ta& - wages and salaries should help to co!pensate people for !a)ing an "#3est$e#t in education# >taying in full or part-ti!e education# D"''e+e#t s4"&& &e3e&s - the gap between poorly s)illed and highly s)illed wor)ers gets wider each year# One reason is that the de!and for s)illed labour ?in both !anufacturing and service sectors$ grows !ore *uic)ly than the de!and for se!i-s)illed wor)ers# This pushes up average pay levels# %ighly s)illed wor)ers are often in inelastic supply and rising de!and forces up the ,going wage rate, in a particular industry# D"''e+e#ces "# !+ 2%ct"3"t. a#2 +e3e#%e c+eat" # - wor)ers whose efficiency is highest and ability to generate revenue for a fir! should be rewarded with higher pay# (or e1a!ple: Top sports stars can co!!and top wages because of their potential to generate e1tra revenue fro! tic)et sales and !erchandising#

Aages will tend to rise fastest when '"#a& 2e$a#2 for the output that wor)ers are producing is rising - i#e# people will enBoy higher pay in industries where output is rising, as revenues and profits are high#

Employer discrimination - a factor that cannot be ignored despite over twenty years of equal pay legislation in place. Trade Union protection - many workers in low paid jobs do not have trade unions acting on their behalf to protect them from the power of employers.

:// '6/

Aages also differ region wise in every country#

BO( E@ALUATION ob evaluation is the process of valuing or evaluating the worth of the job in comparison with other jobs in the organi!ation. "ased on job evaluation# all jobs in the organi!ation can be arranged in hierarchical order. $he hierarchical order of jobs enables organi!ation to determine the following% a& ob pricing. b& 'age structure. According to I.L.O ( ob Evaluation may be defined as an attempt to determine ) compare the demands which the normal performance of particular jobs makes on normal workers without taking into account individual abilities or performance of the workers concerned* OBJECTIVE: +. ,aintain complete# accurate ) impersonal description of each distinct job in entire plant. -. .rovide a standard procedure for determining relative worth or value of each job within the plant. /. 0etermine a rate of pay for each job which is fair ) equitable with relations to other jobs in an industr . 1. .romote fair ) accurate consideration of all employers for advancement ) transfer. 2. .rovide factual basis for consideration of wage rates for similar jobs within community ) industry. 3. .rovide information for work# employee selection and training. !"I#CI!LE$: +. ob evaluation must attempt to rate %o& and not man.

-. Elements of job selected for evaluation must be common to most jobs# simple to identify and easy to understand. 4or eg% evaluation based on skills. /. 5lear definition of elements ) degrees of such elements will improve job evaluation. 1. 6ecure willing cooperation ) support of supervisors in evaluation. $his can be obtained by selling this idea to them ) obtaining their participation. 'ET(O)$ O* JOB EVALUATIO#: $here are 1 popular methods of job evaluation of employees. +. 7anking method. -. 8rading method. /. 4actor comparison method. 1. .oint rating method. 9t may be remembered that job evaluation of workers job are to be different from managers ) supervisors job. +. 7anking method% ranking is done by (Expert 5ommittee* formed by :rgani!ation. $his committee consists of representatives from management ) employees. $he expert may be on permanent basis or co-opted basis on as per required basis. 9t is advisable to use the statistical tec+ni,ue of paired comparisons. $he assumption is that it is always easier to compare one job with another than to consider a number of jobs and attempt to build up a rank order by multiple comparisons. 'hile using the technique of paired comparison one must compare each job separately with every other job. 9f a job is considered to be more important than the one with which it is being compared# it receives two points; if it is thought to be equally important# it receives one point; and if it is regarded as less important# it receives no point. < matrix can be built showing the scores for each job against all other jobs being ranked. 4inally# one can then total the scores as shown below%
Jo&
A

B
0

D
1

E
1

Total $core
.
6

1 0

0
0

B
C

0
0

D E

9n this example# ob A is compared with obs " to E. 9t is considered to be less important than ob " and 5 and received no points in both the cases; equally important to ob 0 and received one point; and more important than ob E and received two points. $he total score is three. $he same procedure is adopted for obs " to E. $he higher the score# the higher is the rank.

Ad/antages

a& Easily understood and easy to administer. b& 6ets a better rate than the arbitrary rate based purely on judgment. )isad/antages a& $he classification is in general terms. b& 9n a complex industrial organi!ation# it is not possible to be familiar with all the jobs and thus general descriptions must not enable correct assessment of the relative importance of all the jobs. c& $he grading is very much influenced by the existing salary rates. d& 9t does not indicate the degree of difference between jobs# but only indicates that one job is more or less important than another one.

-. 0"A)I#0 'ET(O): =ere different (grades* ) (classes* of jobs are predetermined based on certain criteria# such as# skill# knowledge or responsibility. 9nitially this method was envisaged by 5ivil 6ervices for administration ) clerical jobs# later this concept became popular in defense services# marketing# sales ) managerial cadre jobs. 9n 9ndia# following are the classification methods used. 8ovt. department % 5lass 9# 99# 999>>for officers in descending order. .ublic sector units % 8rade +#-#/>>>for officers in ascending order. 5ivil services % 8roup <# "# 5>>non-officer. 4ollowing are steps involved in classification method% +. "egin the 8rade/classification. -. .repare job description. /. 9dentify key jobs in each grade/class. 1. <llocate all jobs in each grade/class based on criteria. Expert 5ommittee is formed for job evaluation. A)VA#TA0E$: 6imple ) easy to understand ) flexible. ?ew job can be easily fixed into pre-determined classes/grades. Easy to fix wages for jobs. )I$A)VA#TA0E$: 0ifferences of difficulties between jobs within a grade are ignored. < grade does not keep into account special skills ) merits# hence not suitable for modern jobs.

.. *ACTO" CO'!A"I$O# 'ET(O):

$his is a quantitative ) analytical method. 7anking is done based on objective criteria which are called factors. 9n this method each job must have job description. 7anking of factors are made based on job description. a. $tep 1:$elect factor: 6kill. ,ental ability. .hysical ability. 7esponsibility. 'orking condition. b. $tep -:Identif 2e %o&s: typically +2 to -@ key jobs are identified by the committee. c. $tep .:"an2 t+e factors for 2e %o&s:committee evaluates each factor against the key job and assess their interest weightage ) indicate them in the form of ranks. $l. #o. + / 1 2 Jo&s
$2ill 'ental A&ilit

"an2ing of *actors
!+ sical A&ilit "esponsi&ilit Wor2ing Condition

$ool maker <ssembler ,achinist Electrician =elper

+ / 2

+ / / 1 2

2 2 / +

+ 1 2

1 / / 2

4ollowing are the methods of ranking 6ubjective assessment by the committee members. :bjective assessment by using techniques like (paired comparison*. d. $tep 3:!ricing t+e 2e %o&s: Aet us assume that committee has decided to treat ($::A :.E7<$:7* as key job ) has fixed pricing of tool operator as 7s.+1. $his amount is now distributed among the factors by the committee proportional to the ranking allotted to each factor.

S& N )

BO(

SCILL

MENTAL A(ILITY

PAYSI-AL A(ILITY

RESPONSI( ILITY

WORCING -ONDITIO N

' 5 : 3 6

D=>I&N2TION T & $a4e+ Asse$0&e+ Mach"#"st E&ect+"c"a# Ae&!e+

A2& = '3 ': '5 '/#6 ;

R2NK ' : 5 5 6

R2T= 6 : 3 3 '

R2NK ' : : 3 6

R2T= 3 : 5 '#6 /#6

R2N K 6 : 6 : '

R2T = /#6 5 /#6 '#6 :

R2NK 5 ' 5 3 6

R2T= : 3 : '#6 '

R2NK 3 : 5 : 6

R2T = '#6 5 5#6 5 /#6

$hese figures are called (rating of rank*. $hese rates now become standards by which other jobs in the organi!ation are ranked ) rated. e. $tep 4: Jo& pricing: 9n this step committee evaluates all other jobs ) price them in comparison with (key job* selected in each are department. $he following sequence is observed% 7anking the factors in comparison with key jobs. 7ating the rank in terms of money value for each factor. .ricing the job by summing up the rating of rank for each factor. "ating of ran2
S&)N ) ' 5 : 3 6 FA-TORS 1
SCILL MENTAL A(ILITY PAYSI-AL A(ILITY RESPONSI(ILIT Y WORCING -ONDITION 6 3 : 3 :

RATING OF RANC 1 3 9 3 : 5 : 5 : 5#6 5 '#6 5 5 '#6 ' '#6 '#6

; ' /#6 /#6 ' /#6

Jo& pricing of electrician S&)N ) ' 5 : 3 6 FA-TORS RANC >KI88 5 +=NT28 2LI8ITJ 3 E%J>IC28 2LI8ITJ : R=>EON>ILI8ITJ 3 AORKIN& CONDITION : RATE 3 '#6 '#6 '#6 5 1D);

A)VA#TA0E$: +. ,ethod is scientific being analytical ) quantifiable. -. Aimited number of factors makes this method simple ) easy. /. obs are compared with each other to obtain relative value. )I$A)VA#TA0E: +. Bsing just five factors are not realistic. -. 0irect determination of rating shift the focus :4 (job worth* to (job wages* in money value# creating bias. /. 7equires expert. 1. !OI#T "ATI#0 'ET(O): following are the steps of this method% $tep 1: Jo& Clustering: grouping jobs into similar families having common nature ) characteristics. $his arrangement assists realistic assessment of factors ) comparison of jobs. 0on ea 5 Lunner&org have clustered -- occupations in 2 groups as follows% a. Business 0roup obs like salesman# office manager# etc. b. 'asculine 0roup obs like mechanic# chowkidar# etc. c. Aest+etic group obs like artist# author# interior decorator# etc. d. $er/ice 0roup obs like social worker# doctors# etc. e. $cientific 0roup obs like technician# scientist# etc. $tep -: Identification of factors: based on the cluster Cfamily& of jobs# identify relevant factors which are common to these jobs. $here are no restrictions on the number of factors. ?ormally factors do not exceed +2 no.

4ollowing are the consideration given for selecting the factors% 4actors must be clearly defined to avoid duplication or overlapping. 4actors which have same rating for all jobs can be eliminated since such factors do not differentiate jobs. *or e6ample: eliminating (working condition* as factors if all jobs are carried out under the same working condition. 9f a job is of highly repetitive in nature# like# cutting# printing etc.# (monotony* can become a factor for comparison.

$tep .: Assigning degrees to factors: for the purpose of fine tuning the difference between jobs# each factor is subdivided into different degrees. *or e6ample% (education* factor can be divided into various degrees% 9lliterate. =igh school level. 8raduate. .ost 8raduate.etc. (experience*>.DDD $tep 3: fi6ing relati/e 7eig+tage: all factors will not carry same weightages. $his weightage varies from cluster to cluster# 5ommittee of Experts assign weightage. *or e6ample: in manual work (physical ability* carries higher weightage as compared to (mental ability*. $hese weightage are then converted to percentages. <fter this percentages are counted as points for first degree. .oints for higher degrees for the same factor are obtained by multiplying the first degree points by the corresponding number -# /# 1 etc. $tep 4: assign mone /alue to points: expert 5ommittee 'ork out money value in terms of rupees per hour for a range of points having grouped them into different classes/grades Con/ersion of Ta&le points to 'one /alue
Class8grade + / 1 2 3 E "ange of points 2@-+@@ +@+-+2@ +2+--@@ -@+--2@ -2+-/@@ /@+-/2@ /2+-1@@ "ate per +our 7s. +.@2-+./@ 7s. +.-2-+.2@ 7s. +.12-+.E@ 7s. +.32-+.F@ 7s. +.G2--.+@ 7s. -.@2--./@ 7s. -.-2--.2@

Wage 9pa : $tructure

<fter ob Evaluation is over# its data can become basis for developing wage structure for the organi!ation. <ny of the four methods discussed above form the input for developing wage structure. =ere we will consider .oint 7ating ,ethod as it is the most important ) popular of all the methods. '<8E 5B7HE/ A9?E 'age 5urves% wage curve can be drawn by obtaining following information% $otal .oints received from ob Evaluation. 'age levels fixed by organi!ation based on 'age 6urvey.

'age curve is drawn with marking the points on X axis ) hourly wage rate on Y-axis. :ne method to plot the points on this graph for (key jobs*. Iey jobs are plotted on graph either on actual payment made or against desired levels. oining these points indicate relationship between points of established pay grades ) base rate of wages. $his is trend line. 'e now plot the remaining jobs. < comparison of points ) trend line indicate which are the jobs for which wage rate is high ) those for which it is low.

'<8E 6$7B5$B7E

'age structure can be developed from wage line by grouping jobs similar in terms of rank# grade or points. "y this process# we can bring down a large no. of jobs in an organi!ation to +@ or +2 groups or grades.
Class8grade + / 1 2 3 E "ange of !oints 2@-+@@ +@+-+2@ +2+--@@ -@+--2@ -2+-/@@ /@+-/2@ /2+-1@@ "ate per +our 7s. +.@2-+./@ 7s. +.-2-+.2@ 7s. +.12-+.E@ 7s. +.32-+.F@ 7s. +.G2--.+@ 7s. -.@2--./@ 7s. -.-2--.2@

4rom the above diagram jobs are classified into E grades. Each grade consists of various ranges. $he rate of jobs also varies. .lotting these ranges we find wage curve. 4ollowing aspects may be noted% i. ii. iii. Each pay grade has a range# minimum rate ) maximum rate. 7anges are designed to take care of service ) merit. "etween grades there is certain overlap. WA0E *I;ATIO# =aving decided wage rate# the next step is to find out (individual rate*. $here are - types of system where individual wage rate is fixed% a& 4lat rate b& ,erit rate. *lat rate is the system where all individuals working in same grade doing more or less similar job are paid the same amount. 9ncrement will be on same amount given at regular intervals# say# annually. 'erit rate is provided to reward an employee for his outstanding achievement# such as#% a& "etter performance which is more than average. b& 6pecial qualification. c& 6peciali!ed training undergone. d& :utstanding achievement in areas like sports# arts# etc.

,erit rate is in addition to annual increment which is provided for in the wage structure. <t the end of each year of service. <llowance is allowed in addition to merit increment. 'erit rating 9t is a term given to evaluating performance of workers by their respective supervisors every year. :ther terms used are .erformance appraisal. .erformance rating. .rogress report. 0evelopment report. 6ervice rating. <bility rating. Wage differential: wage differentiate exist within an organi!ation where employees doing similar jobs in different industries or locations. $his phenomenon is called wage differentials. $hough 8overnment brings out legislation to reduce disparity in wages# such as# (Equal .ay for Equal work*# (4air wages 5ommittees*# and legislative measures like (,inimum 'age <ct*. Jet wages differentials exist. $here are number of reasons# which is classified under / broad headings% ,arket factors. :ccupational factors. 6ocio-economic factors. "riefly discussed below% <. Wage differentials due to mar2et factor% labour market controls the supply ) demand of labour which in turn profoundly influence the wages. i. $uppl 5 demand% when labour supply is in abundance the wage rates come down. 'here scarcity exists on specific skill which is called Kscarcity differentialL# wage level of such jobs goes up. KAaw of supply and demandL applies here. "egional /ariations% is also called regional differences wherein the going rate is different. "ural 5 ur&an differences% Kcost of livingL of urban areas is high compared to rural areas. Clusters 5 0eograp+ic Concentrations% industries are widely dispersed. .olicies of most government are also to disperse industries to 8reenfield areas to prevent urban congestion ) also for balanced growth of regional economy.

ii. iii. iv.

=owever in remote areas industries find it difficult to secure number of skilled labour. v. )ifferences &et7een Industries 5 firms% wage level ) structure vary between industries. 9t also vary between firms within each industry. 6ome of the reasons are% a. b. c. d. e. 5apacity to pay. Established different wage standard in each industry. ?ature of work. 'orking environment. "argaining power of trade union.

". Wage differentials due to Occupational factor: wages differ due to specific attributes# achievement of a person. Mualification# skill ) experience of employees vary from one another. 'ages differ due to many factors% a. Educational qualification ) speciali!ed training. b. Inowledge ) skill. c. ,ental ) physical ability. d. 6eniority ) merit. e. $rade speciali!ation. f. 5onditions for employment. C. Wage differentials due to $ocio<Economic factor: a. b. c. d. ?ational economy. .er-capita income of people. ?umber of educated unemployed. 6ocial prejudice against taking up certain jobs ) occupations. e. .rejudice against women employee getting paid less than their male counterparts. f. .ractice of employing under aged persons ) children at less pay. g. Exploiting illiterate ) unorgani!ed villagers# tribal person or certain ethnic group by paying them less.

T=!E$ O* WA0E !A='E#T $=$TE' $here are - types of system% .ayment by time.

 .ayment by result. !a ment & time% this system is in vogue from ancient times. 'orkers are hired for a given time and paid for his labour. .aid at the end of the time period. =ere the payment is not conditional to the output. $his system is most popular among (white collar* employees# supervisors ) managers. $his system inculcates a sense of security in them. Jear-end annual increment# merit increments# bonuses ) promotion chances are means of motivation in this system. !a ment & result% payment is given to employees in relation to his work output. $his system is known as (piece-rate system* or (incentive payment system*. $his system establishes payment with output. $here are 1 types of such relationship payment in the same proportions to output. .ayment in a proportion less than the output. .ayment in a proportion higher than the output. .ayment in different proportion with different levels of output. WA0E I#CE#TIVE !LA# 9ncentive wage plans are extra wages in the form of monetary and non-monetary ways for increasing the efficiency of employees and workers. 9t is also known as bonus to workers. 9n incentive wage plans# free house facility# free education of children of workers# free medical treatment and other excess money gifts. T pes of incenti/e plan: I#)IVI)UAL I#CE#TIVE !LA#
'# Aa&se. P+e$"%$ P&a#: This incentive plan was !ade by (#2# %alsey in '4.'# It for!ula is given below# The bonus is fi1ed at 6/0 T ta& Wage E Ta4e# T"$e F Sta#2a+2 Rate G 8Sa3e2 T"$e F Sta#2a+2 Rate: F ;DH1DD -a&c%&ate the wage w"th "#ce#t"3e ' a w +4e+ '+ $ ' && w"#g "#' +$at" #) >tandard ti!e to produce units 56/ hrs# Ti!e ta)en to produce the units 55/ hrs# %our rate of wages Rs# 3 F-

+ethod of pay!ent %alsey pre!iu! plan s &%t" # : Wage E Ta4e# T"$e F Sta#2a+2 Rate O 55/ P 3 O Rs# 44/ I#ce#t"3e Wage + 0 #%s E T"$e sa3e2 F Sta#2a+2 Rate F ;DI O :/ P 3 P 6/F'// O ;/ Total wage O Rs# 44/ Q Rs# ;/ E Rs) 99D A23a#tages: a) S"$!&e a#2 eas.) D"sa23a#tage: a) S%''"c"e#t "#ce#t"3e "s # t !+ 3"2e2 t

'aste+ w +4e+)

5# R wa# P&a# This incentive wage plan was !ade by Na!es Rowan in './'# (or!ula of this plan is below# T ta& Wage E T"$e ta4e# F sta#2a+2 +ate G 8 t"$e ta4e# F t"$e sa3e2 F sta#2a+2 +ate : H sta#2a+2 t"$e F + E,a$!&e 2 wor)er ta)es '5 hrs to co!plete a Bob to ti!e wage and . hrs on a sche!e of pay!ent by result# The rate of pay!ent is Rs# 6F- per hr# Calculate his earning if he is paid on the basis of Rowan plan# S &%t" # : Ly analysis, we get the following facts : >tandard ti!e O '5 hrs# Ti!e ta)en O . hrs# hourly rate O Rs# 6FWage O t"$e ta4e# F sta#2a+2 +ate O . P 6 O Rs# 36 I#ce#t"3e wage + 0 #%s E 8 t"$e ta4e# F t"$e sa3e2 F sta#2a+2 +ate : H sta#2a+2 t"$e O . P : P 6 F '5 O Rs# ''#56 Total Aage O 36 Q ''#56 ERs ;6)1; A23a#tages: a) S"$!&e a#2 eas.) D"sa23a#tage: 0) S%''"c"e#t "#ce#t"3e "s # t !+ 3"2e2 t

'aste+ w +4e+)

0"OU! I#CE#TIVE !LA#

+. T+e scalan plan: the productivity of the entire work force is taken into consideration. "onus is paid at the rate of +N for every +N increase in production. "enefit is given to all employees except to management. 'orkers are not paid full amount of bonus earned by them in same month. 9nstead a certain percentage is set aside as a (7eserve 4und* to take care of fluctuation. -. !riestman !lan: here bonus is paid when output exceeds standard output or when average output of a worker per hour shows an increase as compared to that of the previous year. T=!E$ O* I#CE#TIVE !LA# *O" BLUE COLO" E'!LO=EE$: +. 6traight .iece 7ate .lan% let us assume the work- while turning a piece in a lathe machine# study has shown that the standard time is +2 minutes. $his means # an average worker is capable of producing 1 piece per hour or /- piece per shift of G hours duration. Aet us assume that monthly pay of a lathe operator is 7s /#-@@ per month in most of the firm. ,eaning earning per day is 7s +-G# considering -2 working days. =ence piece 7ate O+-G//-O7s 1/<s per straight piece rate plan# workers are paid on their output. Aet us consider the earning of / workers% $traig+t !iece "ate !lan .roduction per day Earning per day -2 /1@

$ypes of worker 6low worker 6tandard 4ast worker

Earning per month

a& b& c& a& b& c& d&

Ad/antage: Easy to understand. 9mprove productivity. 8ood incentive for workers to increase their output. )isad/antage: 'orkers focus is on quantity rather than quality. ,akes workers insecure. 8reat disparity of earning between slow ) fast workers. 'orkers interpersonal relation suffers.

-. 6traight .iece 7ate with guaranteed ,inimum 'age% here the minimum guaranteed wage is fixed on hourly basis. Aet us assume that guaranteed minimum wage is fixed at 7s +3/hr. $he standard time per piece is +2 min. piece rate O7s 1. <ccordingly we will have%

.roduction standard per shiftO1PGO/8uaranteed ,in wage per dayO+3PGO7s +-G 'ork out the earning of / workers t pe of production 7or2er per da slow -2 average /fast 1@ earning per da On piece rate guaranteed min +@@ +-G +-G +-G +3@ +-G earning per mont+ 7s. /#-@@ 7s. /#-@@ 7s. 1#@@@

pa ment +-G +-G +3@

Ad/antages: i. 0isparity between slow ) fast workers is reduced. ii. ,inimum guarantee improves sense of security. )isad/antage: i. 0ifference between average ) slow worker is nil.

9ncentive .lan for W+ite Collar Wor2ers $here are / types of payment% <. 6alary plan. ". 5ommission .lan 5. 5ombination plan. <. $alar plan: employees are paid monthly salary. Employee knows what he gets at the end of the month and can plan his expenditure accordingly. $here are no incentive content. <ll persons are paid same amount irrespective of their individual efforts. $here is a sense of security. ". Commission !lan: employees are paid for his effort ) efforts only. =ighly motivates salesman. 0isadvantages% i. 9nsecure as income fluctuates based on performance. ii. ?o guaranteed wage. iii. 6alesmen focuses only on Kmoney earningL. 5. Com&ination !lan: employees are paid fixed salary in addition to commission which is proportional to effort.

Ad/antage: 6ense of security ) less worries "etter control on employees.

 Employees become more company oriented. )isad/antage: 6alary is not related to performance. E;ECUTIVE CO'!E#$ATIO# !LA# ,anagers/executives in any organi!ation are a live wire. $hey cannot be treated as yet another employee. $hey play a vital role in management functions. $hey are the decision maker. $herefore# keeping managers contended is an important aspect. ,ore than motivation# the objective here is empowerment of managers. E6ecuti/e Compensation !olic % according to 7udrabasavaraj Executive compensation policy has three components% a. T+e &asic pa ment. b. *ringe &enefits. c. "etirement &enefits. !rinciples of E6ecuti/e Compensation !lan: a& "onus in order of /@N of basic salary ) above. b& "onus is made on individual effort ) not on group task. c& "onus amount is related ) linked to the profit. d& "onus must be continuous ) approved by "oard ) must not be left to the whims ) fancies of individual or group.

Te+$s "# wages

'# -ONSUMER PRI-E INDEF: < consumer price inde6 C5.9& measures changes in the

price level of consumer goods and services purchased by households.

-. )EA"#E$$ ALLOWA#CE% dearness allowance C0<& is calculated as a percentage of an

9ndian person's basic salary and was introduced to mitigate against the impact of inflation upon low income earners. :# CO$T O* LIVI#0% 5ost of living is the cost of maintaining a certain standard of living. 5hanges in the cost of living over time are often operationali!ed in a cost of living index. < 5ost of Aiving <llowance C5:A<& adjusts salaries based on changes in a cost-of-living index C5.9&. 6alaries are typically adjusted annually. $hey may also be tied to a cost-ofliving index that varies by geographic location if the employee moves. 6tipends or extra pay provided to employees who are being temporarily relocated may also be called costof-living adjustments or cost-of-living allowances. 6uch adjustments are intended to offset changes in welfare due to geographic differences in the cost of living.

Wage Fixation
)efinition 'hen industrial tribunals establish appropriate wage levels for workers# rather than letting workers and their employer work it out themselves through enterprise bargaining. <lso known as centrali!ed wage fixation. ('ageQ or QwagesQ mean remuneration payable to an employee for personal services# including salaries# commissions# holiday and vacation pay# overtime pay# severance pay or dismissal pay# supplemental unemployment benefit plan payments when required under a binding collective bargaining agreement# bonuses and any other similar advantages agreed upon between the employer and the employee or provided by the employer to the employees as an established policy. Wage !a ment 9t requires employers to pay all workers all wages earned at least monthly with no longer than /+ days between pay periods. Employers may establish more frequent pay periods Ce.g.# weekly# biweekly or semi-monthly&. Employees who quit or who are discharged from their job must be paid in accordance with the employerLs regular pay schedule. 5ommissioned employees should be paid based on whatever pay system was established throughout employment unless there is a specific written agreement. Wage Claims Employees have the right to file a wage claim with the department of unpaid wages if there is a dispute with the employer in the amount of wages owed# or if an employer fails to pay the wages agreed upon for the time actually worked. 9f the employer refuses to pay wages earned on the

regularly established payday# the employee should request payment. 9f the employee does not receive payment after 3 days# the employee may file a claim with the department. :nce a claim is filed# the department will seek to resolve the matter with the employer. T+e department ma ta2e action on t+e follo7ing t pes of 7age claims: P 6alaries P 5ommissions P Expenses P =oliday pay P "onuses P Hacation pay P 9llegal deductions from wages P :ther similar advantages agreed upon between the employer and the employee P :ther similar advantages provided by the employer to his employees as an established policy T+e department ma not +a/e aut+orit to ta2e legal action on some claims> including: P Bnpaid bills owed to the employee P 5laims made by independent contractors P 5laims already filed in court P :ut-of-state employers in some cases.

WA0E !OLIC= I# I#)IA $he term Kwage policyL refers to all the systematic efforts of 8overnment in relation to national wage ) salary system. $he policy lays down guidelines concerning the level ) structure of wages. $he guiding principles of national wage policy are as follows%

+. 6erves the national objective of economic growth with social justice. -. .romote employment and increase productivity. /. 7emove imbalances in wage differential. 1. .romote price stability. 2. Ensure rising real wages consistent with the national economy. 3. =ave relationship with national income# state of the industry ) prevailing wage rates. .ay structure in 9ndia generally consists of the following components% +. "asic wage/salary. -. 0earness allowances ) other allowances. /. "onus ) other incentive. 1. 4ringe benefits. +. Basic 7age8salar % basic wage is the foundation of pay structure. 9t varies according to mental ) physical requirement of the job as measured through job evaluation. a. ,inimum wage. b. 4air wage% wage depending on following factors% .roductivity if labour. .revailing rate of wage in same or similar occupation. Aevel of national income. .lace of 9ndustry in the economy. EmployerLs capacity to pay. c. Aiving wage% not merely of bare sustenance but should be enough for education# health care ) insurance. -. )A% protects the real wage of workers during inflation. Bnder 6ection / of ,inimum 'age <ct it is described as 5:A<. ,ethods to calculate 0<% 4lat rate% 0< is paid at the flat rate to all workers irrespective of their wage level ) regardless of change in 5.9. 9n '"# this method is used in ute# 5otton ) Engineering 9ndustry. 8raduate 6cale% 0< increases in each slab of salary.

 $ype of allowance paid to employees% for eg% if 7s.+.2@/- is a flat rate given than if there is +@ point rise in 5.9 than the rate will be 7s.+@/-. $his method is used in cotton mills of ,umbai ) 5hennai ) in many central 8ovt. Bndertakings. 0< liked to .ay 6cale% higher rate of 0< is prescribed to lower pay scale and lower rate of 0< to high pay scale. $his method is used in .ublic 6ector Bnit and 8ovt. :ffices. /. Bonus: is a deferred wage aimed at bridging the gap between actual wage ) need based wage. "onus is a share of workers in the prosperity of an enterprise. 9t is also an incentive to higher productivity. <ccording to Bonus Commission 91?@1& # Ksharing by the workers in the prosperity of the concern in which they are employed. 9n the case of low paid workers such sharing in the prosperity augments their earnings and helps to bridge the gap between the actual wage and the need based wageL.

!A='E#T O* BO#U$ ACT 1?@4: the main provision of the act are as follows% Every employee drawing a salary Cbasic payR0<& not exceeding 7s./#2@@/- per month is entitled to bonus provided he has worked for not less than /@ days in a year. Every employer is bound to pay bonus of G.//N of the salary of the employee once in a year. ?o minimum bonus is payable by a newly setup establishment in the circumstances prescribed under 6ection +3 of the <ct. "onus is paid within G months from the close of the accounting year. $he employee dismissed from service for fraud# theft or sabotage of property# violent behaviour in the premises is not entitled to bonus.

$=E .<J,E?$ :4 '<8E6 <5$# +F/3

<..A95<"9A9$J :4 $=E <5$-

.ersons employed in%- <ny factory Ca saw mill# ginning factory# godowns# yards etc as defined in 4actories <ct# +F1G&. $ramway service or motor transport service engaged in carrying passengers or good or both by road for hire or reward. <ir transport # ,ine# quarry or oil-field plantation 'orkshop or other establishment etc. '<8E6 $: "E .<90 9? 5B77E?$ 5:9?6 :7 5B77E?5J ?:$E6 %- <ll wages shall be paid in current coins or currency notes or in both. 5heque or by crediting the wages in employees banks <ccount S6ection 3T <ndhra .radesh 6tate <mendment% (.rovided further that the 6tate 8overnment may# by notification in the <ndhra .radesh 8a!ette# specify the industrial establishments # the employers of which shall pay to the persons employed therein# the wages either by cheque or by crediting the wages in their bank account*-UHide <ndhra .radesh <ct +2 of +FG-# sec.- Cw.e.f E-+@-+FG-&. $9,E :4 .<J,E?$ :4 '<8E6 $he wages of every person employed is paid. 'hen less than +@@@ persons are employed shall be paid before the expiry of the Eth day of the following month. 'hen more than +@@@ workers# before the expiry of the +@th day of the following month. C6ection 2&. 0rawing average wage upto "s.@4AA pm as amended with effect from 3th 6eptember -@@2. 5:HE7<8E :4 E,.A:JEE6 0E0B5$9:? ,<0E 47:, '<8E6 0eductions such as# fine# deduction for amenitiesCfacilities& and services supplied by the employer# advances paid# over payment of wages# loan# granted for house-building or other purposes# income tax payable# in pursuance of the order of the 5ourt# .rovident 4und contributions# cooperative societies# premium for Aife 9nsurance# contribution to any fund constituted by employer or a trade union# recovery of losses# Employees 6tate 9nsurance contribution etc. C6ection E&. 0E0B5$9:? 4:7 <"6E?5E 47:, 0B$9E6 4:7 B?<B$=:796E0 <"6E?5E <bsence for whole or any part of the day V 9f ten or more persons absent without reasonable cause# deduction of wages upto G days S6ection FT