HUMAN RESOURCE MANAGEMENT

WAGES AND SALARIES

ADMINISTRATION
AZCARRAGA | CANDIDO | FRIALES | LIM
 WAGES AND SALARIES DEFINED
• Wages – paid to blue-collar employees; paid daily, weekly or
monthly; paid to jobs which can be measured in terms of
money’s worth.
• Salary – paid to white-collar employees; paid in monthly basis;
paid to employees whose contribution cannot be measured
easily.
• Compensation – a comparative term; includes wages and all
other allowances and benefits. (e.g. allowances, leave
facilities, housing, travel, and non-cost such as
recognition, privileges, and symbols of status)
 WAGE AND SALARY ADMINISTRATION
• A group of activities involved in the
development, implementation, and maintenance of a
pay system.
• An ongoing process of managing a wage and salary
structure.
 WHY DO WE NEED TO STUDY WAGE
AND SALARY ADMINISTRATION?
• To have a scientific, rational, and balanced wage and
salary structure.
• In a 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.
 THE ROLE OF HUMAN RESOURCES IN
THE PAYMENT OF SALARIES
• One of the most important functions of Human Resources is the payment of
the proper salaries and the wages to all company employees. The pay that
the employees receive from their employer is the very reason for their being
in the job.

• The function of the payroll in a company is usually the wage and salary
administration and it is carried out by the Human Resources Department.
 THEORIES OF WAGES
1. Classical Wage Theory
• This theory is based upon the fundamental concept that labor is a
commodity and we have to pay the price according to supply and
demand.

2. The Just Wage Theory of St. Thomas Aquinas

•A just wage is described as wage which permits the recipient worker
to live in a manner in keeping with his position in the society.
 THEORIES OF WAGES
3. The Wage Fund Theory
•This theory is expounded by John Stuart Mill and his followers based on
the Malthusian theory of population and the law of diminishing returns.

4. Bargaining Theory of John Davidson

•This theory proposes that the labor is a commodity like anything that
could be bought at a price by the user
 THEORIES OF WAGES
5. The Marginal Productivity Theory
•This theory offers the best explanation of wages in modern industry

6. The purchasing Power Theory

•This theory tries to establish the relationship between wages and the
level of economic activity.
 THEORIES OF WAGES
7. Labor Theory of Value
•It emphasizes that labor is the source of all the products and that
without this important component, there could be no goods for human
consumption.

8. The Standard of Living Theory of Wages

•A recent development in the labor market is the theory of living wages
that means that wages should be based on the cost of living.
 WAGE AND SALARY SURVEYS

• Once the worth of a job has been established, using one of the
job ratings systems, the actual salary to be paid for each job
must be determined.
• A major factor in making the determination is the wage survey.
• Since salaries paid by other companies have an effect on
employment, morale and turnover rate, close attention is paid to
the salary that is prevailing in the community and industry for
specific jobs.
 WAGES AND SALARY SURVEYS
• A survey of employers in the same industry and the same
area showing the wages and salaries they pay to
their employees.
• Wage and salary surveys are useful because they show the
prevailing compensation in a given city or other
place, which may result in employers making upward or
downward adjustments.
 WAGES AND SALARY SURVEYS
• The actual salary to be paid for each job must be
determined.
• Wage survey is a major factor.
• Informal surveys may be conducted through telephones or
informal interviews.
• Formal surveys use questionnaires based on benchmarks
jobs.
• The Human Resource Department are preparing sets of
questionnaires.
 PROCEDURE IN CONDUCTING
WAGE AND SALARY SURVEYS
1. Defining the Labor Market
2. List of key Job Position
3. Detailed Description of Jobs
4. Collection of Salary Data
5. Compilation of Salary Data
6. Results of Survey
 CONSIDERATIONS IN MAKING
DECISIONS
• Whether the salaries will be above, below, or the same
level.
• Whether pay in a single rate for each job.
• How many pay grades or salary ranges to use, and how
wide each pay grade should be.
• The range of the amount in terms of money value.
 DATA TREND GRAPH
• One tool that is often used to simplify the process in decision
making is the use of two-dimensional graphs.
• Horizontal line, where the points for key jobs are plotted.
• Vertical line, where the range of pay is plotted.
 TECHNIQUES IN INDICATING THE
TREND OF THE DATA PLOTTED.
1. Eye Inspection- This technique is the least scientific and reliable as this does
not require scientific computations. It is more of a judgmental
analysis.
2. The Least Squares- This uses the statistical formula. It presents more
accurately the relationships between the money value and the
key jobs.
3. The Second Degree Curve- The trend Line will normally take the form of a
curve, and may more accurately indicate the trend of the data.
 THE DEVELOPMENT OF WAGE AND
SALARY STRUCTURE
• Wage and Salary Structure
The hierarchy of jobs to where the pay rates are attached.

The Advantages:
1. Affects the workers’ and standard of living.
2. Eases the recruitment and maintenance of an effective labor force.
3. Develops employee morale and increases work efficiency.
4. Represents cost and competitive advantage in the industry
5. Helps in preparing budgetary allocations.
6. Eliminates pay distortions and inequities in employee compensation.
7. Establishes an equitable salary range for various jobs.
 WAGE STRUCTURE DESIGN
• The design of the wage and salary structure is the
establishment of job classes and rate ranges. All jobs
within a class are treated in the same way for purposes
of economical administration.
 GREEN CIRCLE RATE
• When employees’ salaries fall below the minimum of the
pay grade for the job.
• The decision to bring salaries to the minimum of the grade
should be based on the employees’ performance.
 RED CIRCLE RATE
• Situation whereby the employee with high seniority is either so
competent or has received so many increases that his salary is
above the maximum of the pay grade.

• This can be handled in two-ways:

1. Review the performance of the employee.
2. If the performance review reveals the employee is not worthy to
be promoted and such salary increase was discreetly earned
some obvious reasons, then the employee will not get the normal
merit increase.
 METHODS OF WAGE PAYMENT

• What is Wage Payment?

• It is the way of giving financial compensation to the
workers for the time and effort invested by them in
converting materials into finished products.
• The main purpose of a formal wage and salary
management plan is to have a systematic method of
payment to ensure that employees receive a fair wage
and salary for the work they perform.
 TWO METHODS OF PAYING SALARIES

• By the time worked

• By the Amount of Work Produced
 FIRST METHOD OF PAYING SALARIES
By the time worked- wages are computed in terms of unit of time.

• Day-Work methods of pay - include weekly, biweekly, or on a monthly basis.

- It is common to pay workers by the day and the
term day work was adopted.
• Non-incentive Wage Plan – paying by the time worked.
• No matter how hard an employee works during an hour, the pay will be computed
by the hourly rate and no more.
• Wages under this plan are computed by multiplying the number of hours worked by
the rate hour:
• HxR=W
• H- Hours actually worked
• R- Rate per hour in pesos
• W- Total Wages earned
 FIRST METHOD OF PAYING SALARIES
• Payment on the basis of time worked is more satisfactory under the
following conditions:
1. Employees have little or no control over how much work they
produce.
2. There is no clear-cut relationship between the effort made to
produce the work and the amount of work produced.
3. Work delays occur often and are beyond the employees’
control.
4. Quality of work is very important.
5. Units of work produced cannot be distinguished and cannot
be measured.
 SECOND METHOD OF PAYING SALARIES
By Amount of Work Produced
• Incentive Wage Plan- a method of paying wages where earnings depend
on how much work the employee completes or on a related factor, such as
the quality of work.
• Piecework – most common incentive plan.
- piecework salaries are determined by the number of pieces
produced or completed, and each piece is assigned a piece
value that is called a piece rate.
• The formula for computing salaries under piecework is as follows:
• NxU=W
• N- Number of units produced
• U- Rate per unit in pesos
• W- Wages earned per day or per week
 SECOND METHOD OF PAYING SALARIES
Payment by piecework is satisfactory under the following conditions:
1. When a unit of completed work can be measured easily;
2. When there is clear relationship between a workers’ effort and
the result of his effort;
3. When the quality of work is less important than quantity, or when
quality standards are uniform and measurable.
4. When the flow of work is regular, breakdowns are few, and jobs
follow a standard procedure, with few interruptions.
 WAGE AND SALARY POLICIES

• These policy guidelines that will help the organization

have better relationships with employees and develop
a more comprehensive employee financial planning
program.
 CHARACTERISTICS OF THE WAGE AND
SALARY POLICY

1. The wage and salary plan must be easily understood.

2. Salaries in the wage plan should be easily computed.
3. Salaries should be made relevant with effort.
4. Incentive wage plans should provide payment for incentive
earnings to employees soon after they have been earned by efforts
exerted to reach standards.
5. The method of payment should be stable and unvarying.
 MORAL RENEWAL IN THE WORKPLACE
1.Know that leaders have limitations.
2. Choose character
3. Walk the talk
4. Avoid compromising
5. Use the same measures on yourself.
6. Face the mirror.
7. Show the mirror to your leaders.
8. Don’t just admit mistakes; correct them.
9. Have an improvement plan
10. Rebuild and don’t slide back.
 LABORS AND WAGES
• In the past, the terms used to classify/describe the type of
vocations are:
• Blue Collar: Manual Laborers
• White Collar: Office workers
• Pink Collar: jobs associated with women (e.g.
nursing, secretarial, etc.)
 LABOR AND WAGES
• In the present time, work roles are classified into 3 categories:
• Skilled Labor: workers who received specialized training to do their
jobs; developed & improved a special skill; may or may not need
to be licensed or certified by the state. This may be blue/white
collars workers.
• Unskilled Labor: workers who received no special training; have few
specific skills. These are blue collar workers.
• Professionals: Perhaps the elite of the labor grades. Workers who
need to do an advanced degree to do their jobs. These are white
collar workers.
• These are non-competing labor grades
 THEORY OF WAGES AND SALARIES
• Traditional Theory of Wage Determination:
• the law of supply and demand dictates salary.
• Theory of Negotiated Wages:
• Employees who work in unions where the unions negotiates
salary on behalf of all workers fit into this theory.
 OVERTIME PAY
• All employees required to work beyond eight hours in one workday is entitled
to overtime pay. The basis of overtime pay is found in Article 87 of the Labor
Code.
• Article 87. Overtime work. Work may be performed beyond 8 hours a day
provided that the employee is paid for the overtime work an additional
compensation equivalent to his regular wage plus at least 25% thereof. Work
performed beyond 8 hours on a holiday or rest day shall be paid an additional
compensation equivalent to the rate for the first 8 hours on a holiday or rest day
plus at least 30% thereof.
 OVERTIME PAY | OVERTIME WORK |
WORKDAY
• Overtime Pay is the additional compensation payable to employee for
services or work rendered beyond the normal eight hours of work.
• OT Pay = OT rate x No. of hours in excess of the regular 8 hours of work
• Overtime Work. Any work performed beyond the normal 8 hours of work in
one workday is considered as overtime work.
• Workday is the consecutive 24-hour period which commences from the
time the employee starts to work and ends at the same time the following
day.
• To illustrate, if the employee regularly works from 8AM to 4PM, his regular
workday is the 24-hour period from 8AM to 8AM of the following day. Workdays
do not necessarily corresponds to calendar days.
 OVERTIME PAY RATES
• Overtime pay rates depend upon the day the work is
performed, whether it is ordinary working day, special
day, holiday or rest day.
 COMPUTATION FOR OVERTIME PAY
• For ordinary working day:
a. 25% of the hourly rate x the number of hours
b. 10% more on 125% (based on letter (a) above) if OT is
rendered between 10pm-6am
• For holiday, special day and rest day:
a. 100% additional if work is done on 10 legal regular holidays
(marked color red in the calendar) and 5 legal Muslim
holidays (as declared by OMA)
b. 30% more if work is done on special holidays and Sundays
 ADDITIONAL INFORMATION
• TYPES OF EMPLOYEE REWARDS
• Service Awards
• Employee of the Month
• Attendance Awards
• Safety Awards
• Company Advancement
 COLLECTIVE BARGAINING
• A process of negotiating an agreement regarding the
terms and conditions of employment through system of
shared responsibility and decision making between
labor and management.
 WHY IS COLLECTIVE BARGAINING AN
IMPORTANT ASPECT OF LABOR-
MANAGEMENT RELATIONS?
• Collective bargaining is important because it promotes the
rights and ideals of labor.
• A means of improving workers’ standard of living through just
compensation and humane working conditions
• It guarantees security of tenure and employees promotion on
the basis of seniority
• It defines the right and responsibilities of labor and
management
• It affords participation to labor in running an enterprise
through shared decision making, control, management, and
ownership of the means of production.
• It includes machinery for settling grievance or labor-disputes
on employment-related issues.
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 CONCLUSION
• Compensation is a hot potato for the Human Resource
Department. The motivation level of the employees to great
extent lies in monetary rewards.
• Hot Potato - A problem that is so controversial or sensitive that
those handling it risk unpleasant consequences.
• The major challenge that managers face today is retention of
manpower and its major cause is that they are paid better in
other organizations.