WAGE & SALARY

Wage: A sum of money paid by an employer to a worker for services rendered Remuneration paid to labour / worker or Blue collar employees by the employer ILO: The remuneration paid by the employer for the services of hourly, daily, weekly and fortnightly employees

Method / Systems of Wage Payment:

1.
2.

Time / Hour wage system

The Piece wage/rate system

2.

The premium Bonus Method

1. Time / Hour wage system: Worker is paid a certain sum for a fixed period of time. i.e. so much per hour or day or month Ex: Rs. 50/- per hour & if a labour works for 8 Hours per day & 26 days in a month; his earnings will be, 50 * 8 = 400/- per day 400 * 26 = 10,400/- per month

Advantages:

Simple in calculation Quality of products will be good Guaranteed minimum wage

Disadvantages:

No motive to work hard or productively No reward for extra hours

2. The Piece wage/rate system: Worker is paid a fixed rate per unit produced Earnings are calculated by multiplying the units of output by the price per unit

Ex: Rs. 50/- per unit & if a labour produce 100 units per days; he will be paid, 50 * 100 = 5000
Advantages:
More Productivity as the wage is calculated on unit produced No Guaranteed minimum wage

Disadvantages:
Chances of accident is more Quality of work will be low Tools & Machinery's will be handled

3. The premium bonus method

Besides being guaranteed a minimum wage based on certain time, the employee will be promised an extra reward in case the output during that time period exceeded the standard prescribed. Bonus will be calculated in terns of hours saved

Different Theories of Wages

Subsistence Theory (David Richard ) Wage Fund Theory (Adam Smith ) Surplus Value Theory of Wages (Karl Marx ) Residual Claimant Theory (F A Walker) Marginal Productivity Theory (Philips Henry & John Bates) The Bargaining Theory (John Davidson)

Factors influencing Wage/Salary Levels:

Organization's Ability to Pay Cost of Living Productivity

Supply & Demand

Wage / Salary

Managerial Attitude

Government Legislations

Union Pressure

Prevailing Market Rate

Job evaluation :
Process of systematically determining a relative internal value of a job in an organization. Job evaluation is the process of determining the worth of one job in relation to that of the other jobs in a company so that a fair and equitable wage and salary system can be established Analysis of the skill & training required for a job helpful even for framing compensation plans by the personnel manager Job analysis is a systematic approach to defining the job role, description, requirements, responsibilities, evaluation, etc. It helps in finding out required level of education, skills, knowledge, training, etc for the job position. It also depicts the job worth i.e. measurable effectiveness of the job and contribution of job to the organization. Thus, it effectively contributes to setting up the compensation package for the job position

Need For Job Evaluation

Reduction in inequalities in salary structure Specialization Helps in selection of employees Harmonious relationship between employees and manager Standardization

Components of Job Evaluation

Principles of Wage Determination

Preserving real income Labour productivity The capacity of business to afford wage increases The capacity of the Economy to absorb wage increases

Minimum Wage
It is the wage determined according to the provisions of Minimum Wages Act 1948 It is obligatory on the part of organisation to pay minimum wage Organisation unable to pay minimum wage does not have the right to exist

Norms for fixing Minimum Wage

Three consumption units per earner, Minimum food requirement of 2700 calories per average Indian adult, Cloth requirement of 72 yards per annum per family, Rent corresponding to the minimum area required Fuel, lighting and other miscellaneous items (20%) Children education, medical requirement, minimum recreation, festivals/ceremonies, provision for old age, marriage etc. (25%)

Elements of Good Wage Plan

Easy to understand Easy to Compute Motivate the employees Stable Quick Realisation

Wage and Incentive

An incentive or reward can be anything that attracts employees attention and stimulates him to work.

Features of incentive Plan

Monetary & non Monetary Timing and Frequency Proper communication

Objectives of Incentives
To improve profitability Avoid additional investment Increase workers earnings Better utilisation of resources

Taylor's differential piece rate system:

This system was introduced by Taylor, the father of scientific management. This system introduced to penalize a slow worker by paying him a low piece rate for low production and to reward an efficient worker by giving him a higher piece rate for a higher production. Thus if a worker completes the work within or less than the standard time, he is paid a higher piece rate and if he does not complete the work within the standard time, he is given a lower piece rate.

Merricks multiple piece rate:

Under this method, three piece rates are applied for workers with different levels of performance. Wages are paid at ordinary piece rate to those workers whose performance is less than 83% of the standard out put. 110% piece rate is given to workers whose performance is between 83% and 100% of standard. 120% of ordinary piece rate is given to those workers who produce more than 100% of the standard output

Gants's task and bonus plan:

This plan is based on careful time and motion study. A standard time is fixed for doing a particular job, worker's actual performance is compared with the standard time and his efficiency is determined. If a worker takes more time then the standard time to complete the job (Below 100%) he is given wages for the time taken by him and if a worker takes the standard time to perform job (100% efficiency), he is given wages for the standard time and bonus of 20% of wages earned. If the worker take less time than the standard time his efficiency is more than 100% and he is given wages for the actual time and bonus at a higher rate.

Halsey premium plan:

Under this method standard time is fixed for the job and worker is given wages for the actual time taken to complete the job at the agreed rate per hour plus a bonus to one half on the wages of the time saved

Thank You