Meaning

The term compensation Administration or wage and salary administration

denotes the process of managing a company's compensation program:

 The goal of compensation administration is to design cost effective

pay structure that will attract, motivate, and retain competent
employees.

 Employee compensation may be classified into two types- base

compensation and supplementary compensation

 Base compensation refers to monitory payments to employees in the

form of wages and salaries

 ‘Wages’ implies remuneration to workers doing manual work.

 ‘Salaries’ is usually defined to mean compensation to office,

managerial, technical and professional staff.

 Base compensation should be noted here is a fixed and non incentive

payment on the basis of time spent by an employee on the job

 Supplementary compensation signifies incentive payments based on

actual performance of an employee or a group of employees

 Objectives:

 A sound plan of compensation administration seeks to achieve the

following objectives:

 - To establish a fair and equitable remuneration offering similar pay for

similar work

 - To attract qualified and competent personnel

 - To retain the present employees by keeping wage levels in tune with

competing units

 - To control labor and administrative cost in line with the ability of the
organization to pay

 - To improve motivation and morale of employees and to improve

union management relations
  - To project a good image of the company and to comply with legal
needs relating to wages and salaries

Principles of Wage and Salary Administration

There are several principles of wage and salary plans and practices.

1. Wage and salary plans should be sufficiently flexible.

2. Job evaluation must be done scientifically

3. Plans must always be consistent with overall organizational plans and

programmes.

4. These plans and programmes should be in conformity with the social

and economic objectives of the country like attainment of equality in
income distribution and controlling inflationary trends.

5. These plans and programmes should be responsive to the changing

local and national conditions

6. These plans should simply and expedite administrative processes.

7. Measuring the actual performance

8. 6) Comparing the performance with the salary received

9. 7) Measuring the job satisfaction of the employees

10.8) Evaluating the unsatisfied wants and unrealized goals aspirations of

the employees

11.9) Finding out the dissatisfaction arising from unfulfilled

12. needs and unattained goals.

13.10) Adjusting the salary levels accordingly with a view to enabling the
employees to reach undetached goals and fulfill the unfulfilled needs
and aspirations.

Factors influencing compensation levels

The amount of compensation received by an employee should reflect the

effort put in by the employee and also the degree of difficulty experienced
while expending his energies.
a) Job needs: Jobs vary greatly in their difficulty, complexity and
challenge

b) Ability to pay: Projects determine the paying capacity of a firm

c) Cost of living: Inflation reduces the purchasing power of the employees

d) Prevailing wage rates : Competent firms within an industry are taken

into account while fixing wages, otherwise it is difficult to attract and
retain the talent

e) Unions : High unionized sectors can exert presence on management

and obtain all sorts of benefits and concessions to workers.

f) ) Productivity :If your job performance is good you get good wages.

g) g) State regulation : The legal stipulations determine the wage

structure in an industry.

h) h) Demand and supply of labor : The demand for and the supply of
certain skills determine prevailing wage rates.

i) Wage Policy

j) A wage bill is an important part of the production cost. If the wage

bill increases beyond the paying capacity of an employer, the very
survival of the firm becomes difficult.

k)

l) And from the employees point of view wages determines his

standard of living, so its an important issue.

m)

n) Recognising this the constitution of India guaranteed equal pay for

equal work for both men and women which ensure a decent standard
of life.

Fair Wage : This is the wage which is above the minimum wage but
below the living wage, lets see the factors, - The productivity of labor

– The prevailing rates of wages in the same or similar occupations

– The level of national income and its distribution

– The place of industry in the economy of the country

– The employers capacity to pay.

Living Wage : Living wage is the highest among the three, it is

dynamic concept and grows in line with growth of the national
economy. It must provide,

- Basic amenities of life

- Efficiency of the worker

- Satisfy social needs of the workers such as, medical, education,

retirement etc.

Legislations regarding wages

The Govt. has adopted various methods to regulate wages in India,

following are the institutions involved in fixation of wages,

Employer

Collective bargaining

Legislations Minimun Wages Act

Wage boards Payment of wages Act

Pay Comissions Adjudication Machinary

Wage Differentials

Differentials in wages for jobs are inevitable in any industry, the

reasons are not far to seek,

Ability of employers to pay, bargaining power , skill needs