JUNE 6, 2022

MARY JO-ANN BUGNA

BSBA HRM 1-1

THE PAY MODEL,

WAGE AND SALARY ADMINISTRATION &
SIGNIFICANCE OF RENUMERATION
SYNTHESIS
 The Pay Model

The Pay Model shown serves as both a framework for examining current pay systems
and its guide. It contains three basic building blocks; the compensation objectives, the
policies that form the foundation of the compensation system, and the techniques that
make up the compensation system.
Compensation systems are created in accordance with the Pay Model of Compensation
in order to fulfill organizational goals. These include efficiency, honesty, and following
the rules, as seen in the illustration. In order to attain specified goals, the pay system
puts the strategy into action. Speaking of specific goals or objectives, these are the
detailed explanation of it:

Efficiency- Effective remuneration systems contribute to efficiency in the form of

improved potential and performance, greater quality, satisfied customers, or lower
costs.
Fairness- It refers to the creation and implementation of a reward system that rewards
achievement while also meeting the requirements of employees. Fairness is the
foundation for strong working relationships, thus it's critical that employees are treated
fairly and paid appropriately for their work.

Compensation models have

to conform to the
requirements of various
central and
national salary
legislation and
regulations. Conforming
with regulations is an
integral part of any
organisation that wants to
act in accordance with the
law. When
laws change, the
compensation system has
to be changed as well.
Compliance- The needs of various central and national salary rules and regulations
must be met through compensation models. Compliance with regulations is an essential
component of every organization that wishes to follow the law. When the legislation
changes, the compensation mechanism must also adjust.

Next is THE POLICIES:

The compensation system must be related to internal consistency, competitive
performance, and employee contribution, according to the Pay Model of Compensation.
These are the four pillars that support a compensation structure's policy.

1. Alignment- Internal alignment- is the process of aligning wages for similar types
of positions as well as the rewarding of different forms of effort. Positions are
evaluated based on how well they contribute to the organization's goals.
2. External Competitiveness- refers to whether or not the remuneration plan is
competitive in comparison to what competitors are offering. The plan must
provide enough perks for the potential employee to be interested and stay.
Salary levels cannot be too high, as this would reduce the competitiveness of the
products and services.
3. Contributions- Employee contribution refers to how crucial the employees'
performance is in the remuneration plan. Employee contribution means that
incentives and awards are based on what the employees bring to the table.
4. Management- Administration, or administering the pay structure, is the final
component of the four policy techniques of the Pay Model Compensation. Here,
too, efficiency is the goal. The system must function well enough to meet the
objectives, as well as be versatile enough to respond to new requirements.
Now, these are the middle pillar of the pay model, or also known as the “techniques”;
1. Within an organization, the pay structure displays linkages between positions and
abilities or competencies.
2. It's based on the work's relative importance in attaining the organization's goals.
3. Employee attitudes and behaviors, as well as the organization's regulatory
compliance, are influenced by the compensation model's fairness objective.
4. The pay techniques in the pay model assist in defining the relevant labor markets in
which the employer competes, conducting surveys of other employers' pay, and
combining that knowledge with the organization's policy decisions to develop a pay
structure.
5. The pay structure also has an impact on the organization's ability to attract and retain
qualified employees while also keeping labor expenditures under control.
6. External competitiveness aids in setting the organization's pay level by allowing
employees to know what their competitors are paying for the same position. It evaluates
pay structures and places a premium on employee contributions through seniority pay
increases, stock options, performance-based approaches, retention strategies, and
other means of attracting fresh talent and motivating existing employees.
Wage & Salary Administration

Nature and Characteristics of Wage and Salary Administration:

1. Wage and pay administration's major goal is to create and maintain a fair wage
and salary structure.
2. It is focused with the creation and maintenance of an equitable labor cost
structure, i.e., an ideal balancing of conflicting personnel interests in order to
maximize employee and employer satisfaction while minimizing disputes.
3. The financial components of needs, incentive, and rewards are all addressed by
wage and salary administration.
4. Employees should be compensated in accordance with the demands of their
jobs; for example, highly skilled positions should be compensated more than low
skilled jobs.
5. To reduce the possibility of favoritism.

6 . Base pay tends to

reflect the valve of work
or skills and generally
ignores
7. differences attributed
to individual employees
8 .  Distinction
usually made between
wage and salary.
9 . Base pay tends to
reflect the valve of work
or skills and generally
ignores
10.differences attributed
to individual employees
1 1 .  Distinction
usually made between
wage and salary.
 1 2 . Base pay tends
to reflect the valve of
work or skills and
generally ignores
13.differences attributed
to individual employees
1 4 . Distinction 

usually made between

wage and salary.
o Base pay tends to reflect the valve of work or skills and generally ignores

differences attributed to individual employees

o Distinction usually made between wage and salary.

Its characteristics:
1. Pay is made in line with the provisions of the employment contract between the
employer and the employee.
2. Wages are calculated using a time-rate system or a piece-rate method.
3. Wages vary according to the amount of time worked by the laborer.
4. Wages make things useful.
5. Wage is the payment made to workers in exchange for their services.
 6. Wages include a wide range of allowances.
Its objectives are as follows:
1. To compare or design a company's human resources policy.
2. Determine the level of income and return ratio of similar industries.
3. To comprehend pay disparities.
4. Examine the competitiveness of entry-level personnel
5. Establish community-friendly hiring rates vi. Maintain wage and salary rates in
line with production costs.
6. To reduce labor turnover caused by wage disparities.
7. To improve employee morale and satisfaction.
8. To understand about the market's perks and benefits trend.
9. To address existing remuneration issues in the workplace.
 Significance of Remuneration

Compensation, or remuneration, is one of the most crucial aspects of human resource

management. As a result, it is critical to establish sound compensation rules and
procedures. In the minimum amount of 13th month pay, it says there that an employee's
"basic salary" for the purposes of calculating all remunerations or earnings earned by
his or her employer for services done are included in the thirteenth-month salary.
Basically, the remuneration an employee receives in exchange for his or her
contribution to the company is known as remuneration.
Remuneration has twelve (12) main objectives, and these are:
 To acquire qualified competent personnel.
 To retain the present /existing employees.
 To secure internal and externals equity means similar wages for jobs within an
organization. External equity implies payment of similar wages to similar jobs in
comparable organizations.
 To facilitate growth and survival of the organization and to promote organization
feasibility.
 To ensure desired / positive behavior of employees.
 To satisfy people/employees to reduce the labor turnover, grievances and
frictions over pay inequities.
 To enhance employee morale and motivation.
 To keep control on labor and administrative cost.
 To protect in public as progressive employers and to comply the wage legislation.
 To pay according to the content, challenges, difficulty, risk of the job and
according to the effort and merit of the employees.
 To facilitate pay roll administration of budgeting and wage and salary control.
 To simplify and facilitate collective bargaining procedure and negotiations.

Components of Remuneration: Basic Wage, Dearness Allowance and Overtime

a) Basic wage
 It is a regular wage that is paid on a monthly, weekly, or daily basis. It can
also be thought of as the usual rate for a given output level. As a result, a
price is set for a certain task that includes a variety of needs such as
abilities and training. As a result, a price is set for a certain task that
includes a variety of needs such as abilities and training. The statutory
minimum wage, industrial tribunal awards, pay commission instructions at
the national and state levels, and collective bargaining are all factors to
consider when determining the basic salary.
 b) Dearness Allowance (DA)
 The primary goal of the DA payment was to provide relief to workers
facing inflation by seeking to offset the expense of living with increased
allowance. DA is usually linked to the cost of living using the consumer
price index (CPI). However, different procedures for determining DA exist
across industries, geographies, sectors, and governmental and private
enterprises.

c) Overtime
 The overtime compensates for the extra workload. Overtime rates are
frequently one and a half times the normal wage on working days, and two
times the standard wage on holidays. As a result, overtime cannot be
regarded a regular and guaranteed pay component.
There are two (2) major factors of Remuneration:
1. INTERNAL
The company's business plan, the value of a job, the employee's relative worth, and the
employer's ability to pay are all internal elements that influence employee salary. The
institution also handles collective bargaining and productivity levels.
2. EXTERNAL
In the remuneration system, labor market conditions, prevalent local wage rates, cost of
living, collective bargaining capacity, and government rules and regulations are all key
external factors that influence employee remuneration.
There are mainly two (2) types of Employee Remuneration:

1. Time Rate Method

The Time Rate Method produces high-quality production, and it is especially
advantageous to new employees because it allows them to learn their jobs without
sacrificing their pay.

2. Piece Rate Method

It is a type of compensation in which an employee is compensated according on the
number of units or pieces produced. The emphasis in this method is on quantity rather
than quality output. Because salaries vary with output, determining labor cost per unit is
simple under this system.
Sources / References:

Pay Model:
Photo from:

The pay model chapter PPT DOWNLOAD. SlidePlayer. (n.d.). Retrieved June 7, 2022, from
https://slideplayer.com/slide/14497500/

Compensation-chapter 2 pay Model - Compensation Management: Chapter 2 Pay Model (year

question) QS1: StuDocu. (n.d.). Retrieved June 7, 2022, from
https://www.studocu.com/row/document/university-of-chittagong/human-resource-
management/compensation-chapter-2-pay-model/15674180

Pay model - doc download all discussions (list). CiteHR. (n.d.). Retrieved June 7, 2022, from
https://www.citehr.com/40540-pay-model-doc-download.html

Wage and Salary Administration:

Google. (n.d.). Adobe Acrobat: PDF Edit, convert, sign tools. Google. Retrieved June 7, 2022,
from https://chrome.google.com/webstore/detail/adobe-acrobat-pdf-edit-co/
efaidnbmnnnibpcajpcglclefindmkaj?hl=en-GB

Significance of Remuneration:

Remuneration: Meaning, definitions, functions, role, methods, theories. Essays, Research Papers
and Articles on Business Management. (2020, May 14). Retrieved June 7, 2022, from
https://www.businessmanagementideas.com/human-resources-management/remuneration/
remuneration/21244