UNIT- 1 Wage & Salary Administration

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Introduction Wages: Payment made to labour is wages. Salary: Payment made to professionals, administrative, clerical, managerial position. Wage and Salary Administration: ‡ It refers to establishment and implementation of sound policies of employee compensation. or It is the process of managing a companies compensation programme. ‡ It is concerned with financial aspects of need, motivation & reward.
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Conti« Wage and Salary Administration:  Objective: To establish and maintain an equitable wage and salary structure.  To design the lowest cost pay structure that will attract, motivate and retain competent employees«  And will also be perceived fair by employees._

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Goals of Wage & Salary Administration         To acquire qualified and competent people. To retain present employees. To secure Internal and External Equity. To ensure and reward desired behaviour. To control labour and administration cost. To comply with Legal regulations. To facilitate payroll administration. To simplify collective bargaining process. These goals are achieved by Job Evaluation..
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Job Evaluation Job Evaluation: It is the grading and weighing of jobs to determine the value of one job with other jobs. It is the ranking of job, not people. Job evaluation can be defined as ³a systematic procedure designed to aid in establishing pay differentials among jobs«´

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Objectives of Job Evaluation ‡ To compare duties and demands of a job with other jobs. ‡ To determine the hierarchy and place of various jobs in an organization. ‡ To determine the grades of each job. ‡ To ensure fair and equitable wages.

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Techniques of Job Evaluation: 1. Qualitative techniques/ method 2. Quantitative techniques/ method

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Techniques of Job Evaluation:

Qualitative methods

Quantitative methods

Ranking:

Classification

Points Ranking Factor comparison

1. Simple Ranking 2. Ranking key jobs 3. Paired comparison 4. Single factor ranking

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Conti«  Simple ranking Method: It is the simplest comparison of one job with others based on duties, responsibilities, and demands made by jobs. In this method jobs are arranged from highest to lowest in order of their value.  Ranking the key jobs: The evaluator identifies the key jobs or representative jobs and ranks them first other jobs are then identified and ranked.
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Conti«  Paired Comparison Method: One job is evaluated against all other jobs in pair and paired ranking is obtained.  Single Factor Rating Method: One single important task or factor is identified and compared with other jobs. Classification/ Grading Method: - Determine the shape and size of organization. - Prepare job description and grade description - Establish job description and divide jobs in to grades - Discuss and negotiate with trade union and finalize - Select key jobs and grade them
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Conti.. -Grade the entire jobs -Classify the jobs - Assign money value to grades.

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Quantitative technique/ method: Types method: [A] Points Ranking method: Steps:  Select sample jobs & prepare job description.  Select the factors (skill, responsibility, experience etc.)  Determine the weight of each factor & assign percentage value to each (total 100).  Divide each factor into levels.  Determine relative value of each level.  Convert point scores into money value..
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Conti.. [B] Factor Comparison method- Steps: method- Steps: Determine critical factors (responsibility, skills, mental & physical effort, working conditions etc.). Determine key jobs. Eg: Mechanic & Secretary. Allocate current wage for key jobs depending on importance of factors. (See table: 1) Place key jobs on factor comparison chart (Table: 2) and evaluate other jobs.

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TABLE: 1

mechanic

secretary

Responsibility

Rs. 8

Rs. 24 rate Resp.

Table 2:
Skills mental effort Physical effort Working condition

Skills

Rs. 8

Rs. 20 25 Sect Sect

Mech Mech Sect

Mental effort

Rs. 5

Rs. 18 20

Physical effort

Rs. 27

Rs. 7

15 10 5 Mech Mech

working condition

Rs. 19

Rs. 6

Mech

Sect

Sect

Total

Rs. 67

Rs. 75 0

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Wage and Salary Survey

Job evaluation ensures Internal Equity. Q. How to ensure External Equity? Ans. Wage and Salary Surveys. It gathers the information on pay practices in comparable industries in same labour market. Sources of data: Employers association, professional association, employment office, government agencies, Internet etc..

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Conti« Information received in Wage survey: survey:  Entry-level wage rate Entry Maximum-wage rate Maximum Average wage rate  Shift differentials  Overtime practices  Length of work day (Hours)  Length of work week (Hours) etc.. etc..

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Conti.. The following survey methods are used to collect relevant wage related information: -Formal and Informal Surveys -Key Job matching -Key class matching -Occupational Method -Job Evaluation Method

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Methods of Wage Fixation 1) Time Rate System: - It is the oldest and most common system of payment. - It includes payment of a predetermined rate of normal time of work, the limit may be hour,day,week or month - Basic wage worries with time not output. - It is suitable for jobs where output cannot be measured. - It is adopted for clerical, supervisory and administrative employees

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Conti.. Advantages: ‡ It is simple to calculate ‡ It provides a regular and stable income ‡ Employees are not in a hurry to finish the work ‡ There is no rough handling of machinery. ‡ It needs less administrative attention. Disadvantages: ‡ Better performers have no motivation to work hard. ‡ There is a possibility of avoidance of work. ‡ Relative efficiency of employees can not be determined (during promotion)
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Conti« 2) Piece Rate System: - Payment is made on the basis of no. of pieces produced or sold and rate per piece - It pays according to the ratio of output - It does not ignore the time aspects. - it is suitable for standardized jobs where output can be measured, divided and counted. Advantages: ‡ It pays according to efficiency ‡ Employees are motivated to perform better. ‡ Output and wages or salaries are increased. ‡ There is no chance of avoidance of work.
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Conti« Disadvantages: ‡ Employees neglect the quality of output. ‡ Excessive speeding causes rough handling of machinery. ‡ It needs carefull administrative attention.

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Conti« 3) Balance Rate System: - It combines time and piece rate. Worker is guaranteed an hourly or a day rate with an alternative piece rate. - If piece rate earnings exceeds time rate, he gets credit. - If piece rate is less than time rate, the balance is carried forward as debt.

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Factors affecting wage payment. 1) Organisation¶s ability to pay: MNCs pay big pay: salary and wages. 2) Supply & demand of Labour: At all levels. Labour: 3) Economic stage of country: Boom/ Recession. country: 4) Prevailing Wage rate 5) Productivity: Output per man-hour. * Productivity: man6) Trade Union¶s bargaining power: 7) Job requirements: More task, more pay. requirements: 8) State Regulation 9) Job needs
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Apart from job-evaluation based pay« job1. Skill-based pay: SkillIn this method, the company pays for the Range of jobs the employee can do, rather than for the job title he holds. The employees are rewarded for each new job or skill. Increased skills & job expertise gives management greater flexibility..

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Conti.. ‡Skill-based pay (SBP) differs from job evaluation-based pay Skillevaluation(JBP). ‡ In SBP skill is paid, in JBP skill is secondary. ‡ In SBP there is no effect of job change, while in JBP pay changes with jobs. ‡ In SBP it pays for skills, not for seniority. Advancement opportunities are higher in SBP because it focuses more on skills. Most global organizations use skill-based pay. skill-

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Conti« Merit Pay: Merit pay is a reward based on how well an employee has done the assigned job. ‡ The payment is dependent on individual employees performance ‡ Rewarding the best performance with the largest pay is claimed to be a powerful motivator.

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Conti« Disadvantages: ‡ There should be a chance of Biasness. ‡ It is difficult to define and measure performance objectively. ‡ Lack of Co-operation and honesty between mgmt & employees.

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