Unit-4: Human Resource Development 4.

UNIT – V
HUMAN RESOURCE DEVELOPMENT

HUMAN RESOURCE DEVELOPMENT (HRD)

HRD (Human Resources Development) is a new concept that has evolved in the last
decade. HRD in the USA is identified with training and development and it is only in recent
years other components of human resources development are being included under the term
HRD. In our country some organizations have taken the lead of evolving and implementing
an integrated human resources development system. The HRDs consists of subsystems like
performance appraisal, potential appraisal, career planning and development, feedback and
counselling, training. HRD can be formal such as in-classroom training, a college course, or
an organizational planned change effort. HRD can be informal as in employee coaching by a
manager. Healthy organizations believe in HRD and cover all of these bases.
In the organizational context, human resources development may be defined as a
continuous process to ensure the development of employee competencies, dynamism,
motivation and effectiveness in a systematic and planned way. HRD is a process concerned
with an organized series of learning activities designed to produce behavioural changes in the
human resources in such a way that they acquire the desired level of competence for present
and future roles. In other words, HRD brings about ‘all-round development’ of the people so
that they can contribute their best to the organization society and nation.

Definition:
According to the T.V. Rao, “HRD is a continuous planned process by which
employees are helped to”:
• To acquire or sharpen capabilities required to perform various functions associated
with their present or expected future roles.
• Develop their general capabilities as individuals and discover and exploit their own
inner potentials for their own or/and organizational development purposes.
• Develop an organizational culture in which supervisor-subordinates’ relationships,
teamwork and collaboration among sub-units are strong and contribute to the
professional well being, motivation and the pride of the employees.
Human Resources Development may be defined as the development of people by
providing the right environment where each individual may grow to fullest extent.
Megginson viewed resources as ‘the total knowledge, skills, creative abilities, talents and
attitudes of an organization’s workforce as well as the values, attitudes and beliefs of the
individual involved”.

Nature of the HRD:

Human resource development is considered as an important part of developing
knowledge of the employees of an organisation.
1. System perspective
2. Behavioural science knowledge
3. Quality of life
4. Continuous process

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1. System Perspective: HRD is said to be the core of a larger system known as Human
Resource System. It is concerned with providing learning experience for the
organizational members to develop their competencies. HRD is only a sub-system of
the organization which is integrated with all other sub-systems such as production,
finance, marketing etc.
HRD is viewed as a system consisting of several interdependent and
interrelated sub-systems. These include performance appraisal, potential appraisal,
role analysis, training, job enrichment, communication etc. In designing a human
resources development system enough attention should be paid to building linkages
can be established in a number of ways depending upon the companies of the system.
2. Behavioural Science Knowledge: Human Resources Development makes the use of
the principles and concepts of behavioural science for the development of the people.
It uses knowledge drawn from the psychology, sociology and anthropology for
planning and implementing various programs for the development of individuals,
groups and organization.
3. Quality of life: In general, HRD has its relevance to the “quality of human life
improvement”. At the organizational level, it is concerned with improving the quality
of work-life so as to achieve greater satisfaction of employees and higher level of
productivity.
4. Continuous Process: As a dynamic and proactive process, HRD believes in and
emphasize the need for “continuous development” of personnel to face the
innumerable challenges in the functioning of an organization. However, HRD
mechanisms, process, policies, etc. differ from organization to organization to suit the
need of the situation. HRD sub-systems are deeply interlinked with social, cultural,
economic and political factors.

Objectives of HRD:
Human Resources Development is multipurpose. It has the following objectives:
1. Provide the opportunity and comprehensive framework for the development of human
resources in the organization full expression of their talents and manifest potentials.
2. Develop a constructive mind and overall personality of each employee.
3. Develop each individual’s capabilities to perform the present job and to handle future
roles.
4. Develop and maintain high motivation level of employees.
5. Strengthen superior-subordinate relationships.
6. Develop the sense of team spirit, teamwork and inter-team collaboration.
7. Develop the organizational health, culture and climate.
8. General systematic information about human resources.
The relationships of the above goals will ultimately contribute to organizational
effectiveness reflected through better quality, higher productivity, cost reduction, higher
profits, and better public image. This explains the increased relevance of HRD for modern
organizations operating in the uncertain social, political, economic, technological and
international environment.

Benefits of HRD:
In general, HRD is ‘mental preparation’ and is carried out remote from the actual
work area, training is the systematic development of the attitude, knowledge, skill pattern
required by a person to perform a given task or job adequately and development is ‘the
growth of the individual in terms of ability, understanding and awareness’. Within an
organization all three are necessary in order to:
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Unit-4: Human Resource Development 4.3

1. Develop workers to undertake higher-grade tasks;

2. Provide the conventional training of new and young workers (e.g., as apprentices,
clerks, etc.);
3. Raise efficiency and standards of performance;
4. Meet legislative requirements (e.g., health and safety);
5. Inform people (induction training, pre-retirement courses, etc.).

RELATIONSHIP BETWEEN HRM AND HRD

Human Resource Management (HRM) is a branch of management; that is concerned
with making best possible use of the enterprise’s human resources, by providing better
working conditions, to the employees. It involves those activities that arrange and coordinates
the human resources of an entity. Further, it aims at maintaining good relations at various
levels of management.
Human Resource Development (HRD) is a wing of HRM that keeps focusing on the
growth and development part of the organisation’s manpower. There are many people, to
whom HRM and HRD convey the same meaning, but this is not true. We have compiled an
article here, to make you understand the differences between HRM and HRD.

Basis for HRM HRD

Comparison
Meaning Human Resource Management Human Resource Development
refers to the application of means a continuous development
principles of management to function that intends to improve the
manage the people working in the
performance of people working in the
organization. organization.
Nature Management function. Subset of Human Resource
Management.
Function Reactive Proactive
Objective To improve the performance of To develop the skills, knowledge and
the employees. competency of employees.
Process Routine Ongoing
Dependency Independent It is a subsystem.
Concerned with People only Development of the entire
organization.

TRAINING AND DEVELOPMENT

Training is an organized activity for increasing the knowledge and skills of people for
a definite purpose. It involves systematic procedures for transferring technical know-how to
the employees, so as to increase their knowledge and skills for doing specific jobs with
proficiency. In other words, the trainees acquire technical knowledge, skills and problem-
solving ability by undergoing the training programme.
Training makes newly appointed workers fully productive in the minimum of time.
Training is equally necessary for the old employees whenever new machines and equipment
are introduced and/or there is a change in the techniques of doing the things. In fact, training
is a continuous process. It does not stop anywhere. The managers are continuously engaged
in training their subordinates. The purpose of training is to bring about improvement in the

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performance of work. They should ensure that any training programme should attempt to
bring about positive Changes in the Knowledge, Skills, and Attitudes of the workers.

Definition:
According to Edwin B. Flippo, “Training is the act of increasing the knowledge and
skills of an employee for doing a particular job”.

Need and Importance of Training:

1. Increasing Productivity: Instruction can help employees increase their level of
performance on their present job assignment. Increased human performance often
directly leads to increased operational productivity and increased company profit.
2. Improving Quality: Better informed workers are less likely to make operational
mistakes. Quality increases may be in relationship to a company product or service, or
in reference to the intangible organizational employment atmosphere.
3. Helping Company fulfils its Future Personnel Needs: Organizations that have a
good internal educational programme will have to make less drastic manpower
changes and adjustments in the event of sudden personnel alternations. When the need
arises, organizational vacancies can more easily be staffed from internal sources if a
company initiates and maintains and adequate instructional programme for both its
non-supervisory and managerial employees.
4. Improving Organizational Climate: An endless chain of positive reactions results
from a well-planned training programme. Production and product quality may
improve; financial incentives may then be increased, internal promotions become
stressed, less supervisory pressures ensue and base pay rate increases result.
5. Improving Health and Safety: Proper training can help prevent industrial accidents.
A safer work environment leads, to more stable mental attitudes on the part of
employees. Managerial mental state would also improve if supervisors now that they
can better themselves through company-designed development programmes.
6. Obsolescence Prevention: Training and development programmes foster the
initiative and creativity of employees and help to prevent manpower obsolescence,
which may be due to age, temperament or motivation, or the inability of a person to
adapt to technological changes.
7. Personal Growth: Employees on a personal basis gain individually from their
exposure to educational experiences. Again, Management development programmes
seem to give participants a wider awareness, an enlarged skin, an enlightened
altruistic philosophy, and make enhanced personal growth possible.

METHODS OF TRAINING:
The following methods are generally used to provide training i.e. On-the-Job Training
and Off-the-Job Training:

On-the-Job Training Methods:

This type of training is imparted on the job and at the work place where the employee
is expected to perform the duties. It enables the worker to get training under the same
working conditions and environment and with the same materials, machines and equipment’s
that an individual will be using ultimately after completing the training.
1. On Specific Job: On the job training methods is used to provide training for a specific
job such electrician, motor mechanic, pluming etc.

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a) Experience: This is the oldest method of on-the-job training. Learning by

experience cannot and should not be eliminated as a method of development, though
as a sole approach, it is time consuming and inefficient.
b) Coaching: On-the-Job coaching by the superior is an important and potentially
effective approach is superior. The technique involves direct personnel instruction
and guidance, usually with extensive demonstration.
2. Job Rotation: The major objective of job rotation training is the broadening of the
background of trainee in the organisation. If trainee is rotated periodically from one job
to another job, he acquires a general background.
3. Special Projects: This is a very flexible training device. The trainee may be asked to
perform special assignment, thereby learns the work procedure. Sometime a task-force
is created consisting of a number of trainees representing different functions in the
organisation.
4. Apprenticeship: Under this method, the trainee is placed under a qualified supervisor
or instructor for a long period of time depending upon the job and skill required. Wages
paid to the trainee are much less than those paid to qualified workers. This type of
training is suitable in profession, trades, crafts and technical areas like fitter, turner,
electrician, welders, carpenters etc.
5. Vestibule Training: Under this method, actual work conditions are created in a class
room or a workshop. The machines, materials and tools under this method is same as
those used in actual performance in the factory. This method gives more importance to
learning process rather than production.
6. Multiple Management: Multiple management emphasizes the use of committees to
increase the flow of ideas from less experience managers and to train them for positions
of greater responsibility.

Off-the-job Training Methods:

The following are the off the job training techniques:
1. Special Courses and Lectures: Lecturing is the most traditional form of formal
training method. Special courses and lectures can be established by business
organizations in numerous ways as a part of their development programmes.
a) First, there are courses, which the organizations themselves establish to be taught by
members of the organizations.
b) Second approach to special courses and lectures is for organizations to work with
universities or institutes in establishing a course or series of course to be taught by
instructors by these institutes.
c) Third approach is for the organizations to send personnel to programmes established
by the universities, institutes and other bodies.
2. Conferences: This is also an old method, but still a favourite training method. In this
method, the participants pools, their ideas and experience in attempting to arrive at
improved methods of dealing with the problems, which are common subject of
discussion; Conferences may include buzz sessions that divide conferences into small
groups of four or five intensive discussion. These small groups then report back to the
whole conference with their conclusions or questions.
3. Case Studies: This technique, which has been developed, popularized by the Harvard
Business School, USA is one of the most common forms of training. A case is a written
account of a trained reporter of analyst seeking to describe an actual situation. Some
causes are merely illustrative; others are detailed and comprehensive demanding
extensive and intensive analytical ability. Cases are widely used in variety of

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programmes. This method increases the trainee’s power of observation, helping him to
ask better questions and to look for broader range of problems.
4. Brainstorming: This is the method of stimulating trainees to creative thinking This
approach developed by Alex Osborn seeks to reduce inhibiting forces by providing for a
maximum of group participation and a minimum of criticism. A problem is posed and
ideas are invited. Quantity rather quality is the primary objective. Ideas are encouraged
and criticism of any idea is discouraged.
5. Laboratory Training: Laboratory training adds to conventional training by providing
situations in which the trains themselves experience through their own interaction some
of the conditions they are talking about. Laboratory training is more concerned about
changing individual behaviour and attitude. There are two methods of laboratory
training: simulation and sensitivity training.
a) Simulation: An increasing popular technique of management development is
simulation of performance. In this method, instead of taking participants into the
field, the field can be simulated in the training session itself Simulation is the
presentation of real situation of organisation in the training session. There are two
common simulation methods of training: role-playing is one and business game.
b) Sensitivity Training: Sensitivity training is the most controversial laboratory
training method. Many of its advocates have an almost religious zeal in their
enhancement with the training group experience. Some of its critics match this
favour in their attacks on the technique.

PERFORMANCE APPRAISAL

Performance appraisal is a method of evaluating the behaviour of employees in a

work place, normally including both the quantitative and qualitative aspect of job
performance. Performance appraisal is a systematic evaluation of the employee’s
performance at work. Performance appraisal is a process of evaluating an employee’s
performance on a job in terms of its requirement. It is a process of estimating or judging the
value, excellence, qualities of status of some object, person or thing. It indicates how well an
individual fulfilling the job demands. Performance is measured in terms of results. Thus,
performance appraisal comprises all formal procedures used in organisations to evaluate
contributions, personality, and potential of individual employees. In other words,
performance appraisal includes the comparison of performance scales of different individuals
holding similar areas of work responsibilities and relate to determination of worth of the
scales for the achievement of organisation objective.

Definition:
According to Edwin Flippo, “Performance appraisal is the systematic, periodic and an
impartial rating of an employee’s excellence in matters pertaining to his present job and his
potential for a better job.”

Objectives of Performance Appraisal:

1. To effect promotions based on competence and performance.
2. To confirm the services of probationary employees.
3. To assess training and development needs of the employees.
4. To decide upon a pay raise when regular pay scales have not been fixed.

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5. To let the employees, know where they stand in so far as their performance is
concerned and to assist them with constructive criticism and guidance for the purpose
of their development.
6. To improve communication between rater and ratee.
7. Finally, Performance appraisal can be used to determine whether human resource
programmes such as selection, training & development, and transfers have been
effective or not.

Performance Appraisal Process

Performance appraisal can be undertaken either on informal basis or on formal and
systematic basis. In comparatively smaller organizations appraisal either based on traits or
performance or a combination of both, is done informally through the observation of
concerned employees. In larger organization, appraisals are more systematic as evaluation
reveals lot of useful information. Following is the systematic performance appraisal:

1. Defining Objectives: The first step in the systematic appraisal system is to define the
objectives of the appraisal itself. Appraisal is used for different purposes from
motivating appraise to controlling their behaviour. In each case, the emphasis on
different aspects of appraisal differs. For example, reward providing appraisal, such as
salary revision or promotion differs from appraisal for training and development.
2. Defining Appraisal Norms: Appraisal is done in the context of certain norms or
standards. These may be in the form of various traits of apprises or their expected
work performance results. Since one of the basic long-term objectives is to improve
performance, appraisal is more performance oriented. Hence, performance norms are
to be specified in the beginnings of the period for which appraisal is concerned.
3. Designing Appraisal Programme: In the design for appraisal programme, types of
personnel to act as appraisers, appraisal methodology and types of appraisal are all to
be decided. Ideally speaking all personnel of the organization should be covered by
the appraisal system. But generally various organizations keep lower level employees
out of the purview of formal appraisal. Generally, the superior concerned appraises
his subordinates. However, the present trend in appraisal suggests the concept of 360-
degree appraisal, which involves appraisal by the apprises himself known as self-
appraisal. The next issue is the methodology to be used in appraisal system. Should it
be through structured forms and questionnaire or personal interview of appraises or a
combination of both is to be decided. Along with this the time period and tuning of
the appraisal should be decided.
4. Implementing Appraisal Programme: In implementing appraisal programme, the
appraisal is conducted by the appraisers and they may also conduct interview if it is
provided in the appraisal system. The results of the appraisal are communicated to HR
department for follow up actions which should be oriented towards the objectives of
the appraisal.

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5. Appraisal Feedback: Appraisal feedback is the most crucial stage in appraisal

process. If they are rated high or performance highly applauded, naturally they are
happy and feel their self – esteem is high. On the other if they are rated low they
resent, cry and may even be ill-tempered. But the fact is fact. Even in such cases, their
plus points should be listed out. Their weaknesses may be put clearly through
counsellors and advised.
6. Post – Appraisal Action: Rewards, promotions, training and patting on the back
follows in the post –appraisal action.

Methods or Techniques of Performance Appraisal

Several methods and techniques are used for evaluating employee performance. They
may be classified into two broad categories as shown.
Traditional Methods:
There are different techniques/methods which are used for performance appraisal of
employees. Some of the methods of performance appraisal are:
1. Ranking Method: Ranking method is the oldest and simplest method of rating. Here,
each employee is compared with all others performing the same job and then he is
given a particular rank i.e. First Rank, Second Rank etc. It states that A is superior to
B. B is superior to C and so on. This method ranks all employees but it does not tell
us the degree or extent of superiority i.e. by how much one employee is superior to
another. Secondly, this ranking is based on only mental assessment so it is not
possible to give any objective proof about why the rater has ranked one employee as
superior to another. In this method, the performance of individual employee is not
compared with the standard performance. Here, the best is given first rank and poorest
gets the last rank.
2. Grading Method: Under this method of performance appraisal, different grades are
developed for evaluating the ability of different employees and then the employees
are placed in these grades. These grades may be as follows: (i) Excellent; (ii) Very
good; (iii) Good; (iv) Average; (v) Bad; and (vi) Worst.
3. Man-to-Man Comparison Method: This method was first used in US army during
the 1st World War. Under this method, few factors are selected for analysis purposes.
These factors are: leadership, dependability and initiative. After that a scale is
designed by the rate for each factor. A scale of person is also developed for each
selected factor. Each person to be rated is compared with the person in the scale, and
certain scores for each factor are awarded to him/her. In other words, instead of
comparing a whole man to a whole man personnel are compared to the key man in
respect of one factor at a time.
4. Graphic Rating Scale Method of Performance Appraisal: This is the very popular,
traditional method of performance appraisal. Under this method, scales are established
for a number of fairly specific factors. A printed form is supplied to the rater. The
form contains a number of factors to be rated. Employee characteristics and
contributions include qualities like quality of work, dependability, creative ability and
so on. These traits are then evaluated on a continuous scale, where the rater places a
mark somewhere along the scale. The scores are tabulated and a comparison of scores
among the different individuals is made. These scores indicate the work of every
individual.

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Modern Method of Appraisal:

Most of the traditional methods emphasize either on the task or the worker‘s
personality, while making an appraisal. For bringing about a balance between these two,
modern methods have been developed. The details of these methods are as follows:
1. Management by Objective (MBO): It was Peter F. Drucker who first gave the
concept of MBO to the world in 1954 when his book The Practice of Management
was first published. Management by objective can be described as, a process whereby
the superior and subordinate managers of an organization jointly identify its common
goals, define each individual‘s major areas of responsibility in terms of results
expected of him and use these measures as guides for operating the unit and assessing
the contribution of each of its members.
2. Assessment Centre Method: This concept was first applied to military situations by
Simoniet in the German Army during 1930s and the War office Selection Board of the
British Army in the year 1960. The main objective of this method was and is to test
candidates in a social situation, using a number of assessors and variety of procedures.
The most important characteristic of the assessment centre is job-related simulations.
These simulations involve characteristics that managers feel are important to the job
success. The evaluators observe and evaluate participants as they perform activities
commonly found in these higher-level jobs.
3. Human Asset Accounting Method: This technique refers to money estimates to the
value of a firm’s internal human organization and its external customer goodwill. If
well trained employees leave a firm, the human organization is worthless; if they join
it, its human assets are increased. If distrust and conflict prevail, the human enterprise
is devalued. If team work and high morale prevail, the human organization is a very
valuable asset.
4. Behaviourally Anchored Rating Scales (BARS): This method is also called
behavioural expectation scales. These are the rating scales whose scale points are
determined by statements of effective and ineffective behaviour. They are said to be
behaviourally anchored in that the scales represent a range of descriptive statements
of behaviour varying from the least to the most effective. A rater must indicate which
behaviour on each scale best described an employee’s performance. Behaviourally
anchored rating scales (BARS) are having 5 steps: Generate Critical Incidents,
Develop Performance Dimensions, Reallocate Incidents, Scale of Incidents, and
Develop Final Instrument.
5. 360o Appraisal: In 360-degree performance appraisal technique a manager is rated by
everyone above, alongside and below him. 360-degree approach is essentially a fact-
finding, self-correcting technique, used to design promotions. The personality of each
top manager – their talents, behavioural traits, values, ethical standards, tempers,
loyalties – is to be scanned, by their colleagues as they are best placed to diagnose
their suitability for the job requirements. In this method a question is structured to
collect required data about a manager from his bosses, peers, subordinates.

JOB EVALUATION
Job evaluation is a technique of assessing systematically the relative worth of each
job. The fundamental pre-requisite to the establishment of a compensation policy is the
determination of the comparative values of jobs throughout the hierarchy. These values form
the basis to build the pay and the benefits package.

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Objectives:
1. To establish correct wage differentials for all jobs within the factory.
2. To bring new jobs into their proper relatively with jobs previously established.
3. To help clarify lines of authority, responsibility and promotion.
4. To accomplish the foregoing by means of the facts and principles, this can be readily
explained to and accepted by all concerned.
5. To establish a general wage level for a given factory which will have parity with those
of neighbouring factories.

Advantages:
1. It is simple, inexpensive and expeditions.
2. It is easily understood and easily administered.
3. It helps setting better rates based purely a judgment and experience.
4. Same unions prefer it because it leaves more room for bargaining.

Disadvantages:
1. A job may be ranked on the basis of incomplete inform action and without the
benefits of well-defined standards.
2. The rank position of different jobs is likely to be influenced by prevailing wage ranks.
3. No one committee number is likely to be familiar with all the jobs.

JOB EVALUATION METHODS

It is broadly be classified as Qualitative Method and Quantitative Method
Qualitative Method:
It can broadly be classified as ranking or classifying the job from lowest to highest.
1. Ranking technique: In this method, the jobs in the organization are arranged in either
in the ascending or descending order and numbered serially. The basis of such an
arrangement could be the job description in terms of duties, responsibilities,
qualifications needed, relative difficulty involved in don the job, or value to the
company.
Amount of work involved
Supervision needed
The extent of responsibility required
Difficulties involved in the work conditions

2. Classification Method: This is also called job-grading method. Here, the number of
grades and the salary particulars for each grade are worked out first. The grades are
clearly described in terms of knowledge, skill and so on. Major steps for job
evaluation:
Deciding the number of grades
Writing grade descriptions
Identifying/listing of the jobs to be evaluated
Preparing job descriptions

Quantitative Method:
Where point values are assigned to the various demands of a job and relative value is
obtained by summing all such point values.
1. Factor comparison method: Every job requires certain capabilities on the part of the
person who does the job. These capabilities are considered as critical factors, which
can be grouped as follows:

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Mean effort
Skill
Physical
Responsibility
Working conditions
Step involved in the factor comparison method:
i) Identify the key jobs
ii) Rank the key job, factor by factor
iii) Apportion the salary among each factor and rank the key jobs
iv) Compare factor ranking of each job with its monetary ranking
v) Develop a monetary comparison scale
vi) Evaluate non-key jobs based on the monetary comparison scale

2. Point-rating method: There are four widely accepted factors used in the point rating
method, skill, effort, responsibility and job conditions each of these factors is divided
into sub-factors.
• Skills: It includes the rating factors such as Education and training,
Experience, Judgment and initiative.
• Efforts: This factor includes Physical and Mental abilities of an individual.
• Responsibility: It includes the factors like Materials or product, Equipment or
process, Safety of others, and Work of others.
• Job conditions: It includes the working environment of the organisation.

WAGE AND SALARY ADMINISTRATION

Administration of employee compensation is called wage and salary administration.

Wage and salary administration is a collection of practices and procedures used for planning
and distributing company-wide compensation programs for employees. These practices
include employees at all levels and are usually handled by the accounting department of a
company. Wage and salary administration procedures usually involve activities such as
calculating the number of hours worked in order to determine compensation, administering
employment benefits, and answering payroll questions from employees. The main objective
of wage and salary administration is to establish and maintain an equitable wage and salary
system. This is so because only a properly developed compensation system enables an
employer to attract, obtain, retain and motivate people of required caliber and qualification in
his/her organization.
It is a process of fixing wage or salary for different jobs in the organization through
negotiations with unions, job evaluation, etc. When the wage is paid on time spent in the
organization it is called Time Wage System. In production or sales department, the staff can
be paid on units produced or sold known as Piece Wage System.
The salary constitutes of the Basic Salary, Dearness Allowance (DA), House Rent
Allowance (HRA) and other allowances. Some other benefits include profit sharing, bonus,
leave travel concessions, medical reimbursement, provident fund, gratuity, group insurance
schemes, pension, accident compensation, leave with pay, educational allowance, etc.
After the independence and particularly after 1948, some new terms relating to wages
began to be used. These are:
i. Statutory Minimum Wages
ii. Basic Minimum Wages
iii. Minimum Wages

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iv. Fair Wages

v. Living Wages
vi. Need Based Wages
1. Statutory Minimum Wages: By it we mean the minimum amount of wages which
should essentially be given to the workers as per provisions of the Minimum Wages
Act, 1948.
2. Basic Minimum Wages: This minimum wage is fixed through judicial
pronouncement, awards, industrial tribunals and labour. The employers are essentially
to give this minimum wage to the workers.
3. Minimum Wages: The concept of minimum wages has developed due to different
standards in different countries. In Indian context, minimum wage means the
minimum amount which an employer thinks necessary for the sustenance of life and
preservation of the efficiency of the worker. According to Fair Wage Committee, the
minimum wages must also provide for some measures of education medical
requirements and amenities.
4. Fair Wages: In order to bring about improved relations between labour and
management an effort has been made in modern times that the labour gets a fair deal
at the hands of owners and managers of industries. Various proposals were
undertaken at the Industries Conference in 1947 and a resolution known as the
Industrial Truce Resolution was passed. It is provided for the payment of fair wages
to labour. The government of India appointed a Fair Wages committee in 1948 to
determine the principles on which fair wages should be based and to suggest the lines
on which those principles should be applied. According to the report on this
Committee, Fair Wages is that wages which the labourer gets for his work just near to
minimum wages and living wages. Generally, the current rates of wages being paid in
the enterprises are known as fair wages.
5. Living Wages: According to Fair Wage Committee Report, “The living wage should
enable the male earner to provide for himself and his family not merely the bare
essentials of food, clothing and shelter, but also a measure of frugal comfort including
education for children, protection against ill health, requirements of essential social
needs and a measure of insurance against the more important misfortunes including
old age.” According to the Committee on Fair Wages, the living wages represent the
highest level of the wages and include all amenities which a citizen living in a modern
civilized society is to expect when the economy of the country is sufficiently
advanced and the employer is able to meet the expanding aspirations of his workers.
The Living Wage should be fixed keeping in view the National income and the
capacity of the industry to pay.
6. Need Based Wages: The Indian Labour Conference at its 15th session held at New
Delhi in July, 1957 suggested that minimum wage fixation should be need based.
Following are the important points of the Resolution of the Conference.
a) The standard working-class family should include three consumption units for
the one earner.
b) Calculation of minimum food requirements should be made on the basis of the
recommendation of Dr. Aykoroyed i.e. 27000 calories for an average Indian
adult.
c) Calculation of cloth should be made @ 18 yards annually for one member. As
such, a family consisting of four members will require 72 yards of cloth.
d) The workers should get minimum rent as per guidelines fixed by the
government in the industrial housing policy.

Organisational Structure and Human Resource Management

Unit-4: Human Resource Development 4.13

e) Expenses for fuel, light and so on should be equal to 20% of the entire
minimum wages.

Significance of Wage & Salary Administration

Wage & salaries have two different purposes from point of employers & employees.
1. Employers perceive as a cost of business effort and attempt to reduce it. But they also
realize that it is not possible because of these reasons:
a) Wage & salary are essential to attract and retain an effective work force.
b) Wage and salary are required to motivate, employees for positive attitudes
and better performance.
c) Employees have to be provided compensation for service rendered by them
to the organization.
2. Employees consider wage as a means for satisfying their need to maintain their
standard. They also want it equitable with similar skills for doing similar work.

Purpose of Wage & Salary Administration

1. To acquire qualified and competent personnel: Candidates decide upon their career in
a particular organization mostly on the basis of the amount of remuneration the
organization offers. Qualified and competent people join the best-paid organization.
As such, the organization should aim at payment of salaries at that level, where they
can attract competent and qualified people.
2. To retain the present employees: If the salary level does not compare favorably with
that of other similar organization, employees quit the present one and join other
organization. The organization must keep the wage & salary structure at the
competitive level, with those of similar organization.
3. To secure internal and external equity: Internal equity does mean payment of similar
wages for similar jobs within the organization. External equity implies that payment
of similar wages to similar jobs in comparable organizations.
4. To ensure desired behavior: Good rewards reinforce desired behavior like
performance, loyalty, accepting new responsibilities and changes etc.
5. To keep labor and administrative costs in line with the ability of the organization to
pay.
6. To project a good image of the company and to comply with the wage legislations.
7. To pay according to the content and difficulty of the job and in tune with the effort
and merit of the employee.
8. To facilitate pay roll administration of budgeting and wage and salary control.
9. To simplify collective bargaining procedures and negotiations.
10. To establish job sequences and lines of promotion wherever applicable.
11. To minimize the chances of favoritism while assigning the wage rates.

REVIEW QUESTIONS
1. Describe training and development. Explain methods of training and its significance.
2. Define performance appraisal. Discuss the importance and methods of performance
appraisal.
3. Explain the methods of job evaluation and its significance.
4. Discuss the significance and purpose of wage and salary administration.

Organisational Structure and Human Resource Management