HRM Unit 5 Salry Wage Admn

8/8/2019 HRM Unit 5 Salry Wage Admn

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Salary & wageSalary & wage

AdministrationAdministrationByBy

Dr.Gowri RamachandranDr.Gowri Ramachandran


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The activities of wage & salaryThe activities of wage & salary

administration are:administration are: Job EvaluationJob Evaluation

Surveys of wage & salariesSurveys of wage & salaries

Analysis of relevant organizationalAnalysis of relevant organizationalproblemsproblems

Development & mtce of wageDevelopment & mtce of wagestructurestructure

Establishing rules for administeringEstablishing rules for administeringwageswages

Wage paymentWage payment


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Contd..Contd..

IncentivesIncentives

Profit sharingProfit sharing

Wage changes adjustmentsWage changes adjustmentsSupplementary paymentsSupplementary payments

Control of compensation & otherControl of compensation & other

related items.related items.


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Nature & purposeNature & purpose

Primary objectivePrimary objective establish &establish &maintain equitable wagesmaintain equitable wages

SecondarySecondary -- Labour Labour--costcoststructure.structure.


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(A )For Employees(A )For Employees

--Paid acc to requirements of theirPaid acc to requirements of theirjobs.jobs.

-- Chances of Favouritism isChances of Favouritism isminimized.minimized.

-- Job sequences & lines of promotionJob sequences & lines of promotionare established.are established.

-- Employee morale & motivation areEmployee morale & motivation areincreased.increased.


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(B ) To Employers(B ) To Employers

-- Systematically plan & controlSystematically plan & controllabour cost.labour cost.

-- Trade union can be better dealt.Trade union can be better dealt. -- Reduces the grievances over wageReduces the grievances over wage

inequities.inequities.

-- attracts qualified employees .attracts qualified employees .Wage determination processWage determination process


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The following steps are followed.The following steps are followed.

Performing job analysisPerforming job analysis

Wage surveysWage surveys

Analysis of organizational problems &Analysis of organizational problems &wage structurewage structure

Framing rules of wageFraming rules of wage

administration.administration.Explaining these to employeesExplaining these to employees

Assigning grades & price to each job.Assigning grades & price to each job.


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Factors influencing wage &Factors influencing wage &

salary structure & admn.salary structure & admn. Organisations ability to pay.Organisations ability to pay.

Supply & demand of labourSupply & demand of labour

The prevailing market rateThe prevailing market rate

The cost of livingThe cost of living

Living wageLiving wage


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Factors contd..Factors contd..

productivityproductivity

Trade unions bargaining powerTrade unions bargaining power

Job requirementsJob requirements

Managerial attitudesManagerial attitudes

Psychological & sociological factors.Psychological & sociological factors.


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Principles of wage & salaryPrinciples of wage & salary

administrationadministration Common principles for fixation of wages &Common principles for fixation of wages &

salary are:salary are:

Definite plan to ensure pay for differentDefinite plan to ensure pay for different

type of job with varied skill set.type of job with varied skill set.

Labour market criteriaLabour market criteria

Distinguish between job & employees.Distinguish between job & employees.

Equal pay for equal work.Equal pay for equal work. Equitable practice in recognizing the job.Equitable practice in recognizing the job. ((

incentive plan, grade promotion etc )incentive plan, grade promotion etc )


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Principles contdPrinciples contd

Procedure for addressing complaints.Procedure for addressing complaints.

Employee should be informed about hisEmployee should be informed about hisposition.position.

Minimum wage should be ensured.Minimum wage should be ensured. It should be flexible.It should be flexible.

Prompt & correct payments.Prompt & correct payments.

Wage committee is preferred for wageWage committee is preferred for wagerevision.revision.

It should address the needs of all class ofIt should address the needs of all class ofemployees.employees.


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Theory of Wages:Theory of Wages:

Subsistence theory ( also known as Subsistence theory ( also known as Iron Law of wages Iron Law of wages David Ricardo )David Ricardo )

Wages fund theory ( Adam smith )Wages fund theory ( Adam smith )

The surplus value theory ( karl marx )The surplus value theory ( karl marx ) Residual claimant Theory ( Francis AResidual claimant Theory ( Francis A

walker )walker )

Marginal productivity theory ( PhilipsMarginal productivity theory ( Philips

henry wicksteed )henry wicksteed ) The bargaining theory of wagesThe bargaining theory of wages

Behavioural TheoriesBehavioural Theories


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Compensation PlanCompensation Plan

Straight salaries,Straight salaries,

bonuses,bonuses,

stock purchase plans &stock purchase plans &profit sharing are compensation forprofit sharing are compensation for

HIGHER executivesHIGHER executives


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Bonuses operate effectively in increasingBonuses operate effectively in increasing

motivation whenmotivation when the followingthe following conditionsconditions

existexist The amount paid is related to the level ofThe amount paid is related to the level of

individual performance.individual performance. Significant rise in the NET take home pay.Significant rise in the NET take home pay.

Depending upon the companyDepending upon the companyperformance.performance. There is a decrease when there is aThere is a decrease when there is a

decrease in performance.decrease in performance. Individual is given clear information aboutIndividual is given clear information about

the relationship between Bonus &the relationship between Bonus &performance.performance.

In addition . Medical careIn addition . Medical care


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Contd..Contd..

Facilities for entertaining customersFacilities for entertaining customers

Companys recreational area (Companys recreational area (Swimming pool, gym)Swimming pool, gym)

Cost of education, training ofCost of education, training ofexecutives, scholarships for theirexecutives, scholarships for theirchildren.children.

Allowance to buy business magazine.Allowance to buy business magazine.Free well furnished accommodation,Free well furnished accommodation,

conveyance & servants.conveyance & servants.


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Wage IncentivesWage Incentives-- Definition.Definition.

Acc to Hummel & Nickerson, It refers toAcc to Hummel & Nickerson, It refers toall the plans that provide extraall the plans that provide extraperformance in addition to regular wagesperformance in addition to regular wages

for a job.for a job. Acc to Scott , It is any formal &Acc to Scott , It is any formal &

announced programme under which theannounced programme under which theincome of an individual , a small group, aincome of an individual , a small group, aplant work force or all the employees of aplant work force or all the employees of afirm are partially or wholly related to somefirm are partially or wholly related to somemeasure of productivity output. measure of productivity output.


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Objectives of wage incentiveObjectives of wage incentive

sch

eme:sch

eme: Improve the profit of a firm thro reductionImprove the profit of a firm thro reduction

in labour & material cost.in labour & material cost.

To avoid or minimize additional capitalTo avoid or minimize additional capital

investment for the expansion ofinvestment for the expansion ofproduction capacity.production capacity.

To increase a workers earning regardlessTo increase a workers earning regardlessof productivity.of productivity.

Useful tool for securing a better utilizationUseful tool for securing a better utilizationof manpower,& more effective personnelof manpower,& more effective personnelpolicy.policy.


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Type of wage Incentive plans: /Type of wage Incentive plans: /

Financial incentivesFinancial incentives Plan for bluePlan for blue--collar workerscollar workers

Plan for whitePlan for white--collar workerscollar workers

Plans for managerial personnelPlans for managerial personnel


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Incentive plan for blue collarIncentive plan for blue collar

workers : For individualworkers : For individual ( A ) Short term( A ) Short term plansplans

This is classified into 3 categories.This is classified into 3 categories.

Systems under which the rate ofSystems under which the rate ofextraextra

incentive is in proportion to the extraincentive is in proportion to the extraoutput.output.

the extra incentive is proportionately at athe extra incentive is proportionately at alower ratelower rate than the increase in output.than the increase in output.

the rate of incentive is proportionatelythe rate of incentive is proportionatelyhigher thanhigher than the rate of increase inthe rate of increase inoutput.output.


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( B ) Long( B ) Long--term wage incentiveterm wage incentive

plansplansThis is classified in to 3 typesThis is classified in to 3 types..

Standard outputStandard output

The Value added by manufacturerThe Value added by manufacturerBonus calculationBonus calculation Value of salesValue of sales

increased due to increasedincreased due to increased

production.production.


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The Group incentive plan :The Group incentive plan :

The profit sharing schemesThe profit sharing schemes

ii ) The Scanlan Planii ) The Scanlan Plan


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Features ofProfitFeatures ofProfit-- sharing :sharing :

The agreement is voluntary & based on JCMThe agreement is voluntary & based on JCMbetween the employer & employee.between the employer & employee.

Payment may be in the form of cash or stockPayment may be in the form of cash or stockoptionoption

The employee should have some minimumThe employee should have some minimumqualifications as stipulated by mgtqualifications as stipulated by mgt

It is binding on the part of employer , once theIt is binding on the part of employer , once theagreement is accepted.agreement is accepted.

It is based on some agreed formulaIt is based on some agreed formula Amount to be distributed depends on the profitAmount to be distributed depends on the profit

earned.earned.


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Types of ProfitTypes of Profit Sharing:Sharing:

This regarded as supplementary benefitThis regarded as supplementary benefitprog.prog.

Current ( cash ) profits are paid as soonCurrent ( cash ) profits are paid as soon

as it is determined. ( monthly, biannually,as it is determined. ( monthly, biannually,or annually )or annually )

Deferred profits are credited to employeeDeferred profits are credited to employeeaccounts at the time of retirement./accounts at the time of retirement./

death..death.. Combination of both. ( amount is placed inCombination of both. ( amount is placed in

a trust fund )a trust fund )


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Objectives of profit sharing :Objectives of profit sharing :

To promote industrial harmony & stabilizationTo promote industrial harmony & stabilizationof the work force.of the work force.

Eliminate waste in use of material.Eliminate waste in use of material.

Instill a sense of partnership.Instill a sense of partnership. Reduce the attritionReduce the attrition

Encourage employee thrift.Encourage employee thrift.

Provide a group incentive for a larger output.Provide a group incentive for a larger output.

Ensure employee security.Ensure employee security. Demonstrate social justice to employees.Demonstrate social justice to employees.


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NonNon-- Financial incentives (Financial incentives (

Fringe benefits )Fringe benefits ) This is offered by the employer to the employee.This is offered by the employer to the employee. Different terms have used to this benefits. VizDifferent terms have used to this benefits. Viz

Fringe benefits,Fringe benefits, Welfare expenses,Welfare expenses,

-- Wage supplements,Wage supplements, Sub wages, or social charges,Sub wages, or social charges, Perquisites other than wages ,Perquisites other than wages , Transpecunary incentives. Also called ExtraTranspecunary incentives. Also called Extra

wages,wages, hidden payroll,hidden payroll, NonNon--wage labour costs or selected supplementarywage labour costs or selected supplementary

compensation practices. compensation practices.


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DefinitionDefinition of Fringe benefitof Fringe benefit

Cockman views employee benefits asCockman views employee benefits as those benefits which are supplied those benefits which are suppliedby an employer to or for the benefitsby an employer to or for the benefitsof an employee, and which are not inof an employee, and which are not inthe form of wages, salaries, andthe form of wages, salaries, andtimetime--rated payments.rated payments.


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Special features of Fringe benefits :Special features of Fringe benefits :

Directly related to the work done& areDirectly related to the work done& arepaid regularly. ( in addition to wages. )paid regularly. ( in addition to wages. )

Given in order to stimulate their interest inGiven in order to stimulate their interest in

the work.the work.

It is not a direct reward geared to theIt is not a direct reward geared to theoutput.output.

It is a benefit for all employees.It is a benefit for all employees.

Positive cost to the employer & employeePositive cost to the employer & employeebenefit.benefit.


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The objectives of fringe benefit:The objectives of fringe benefit:

As per the prevailing practices in the similarAs per the prevailing practices in the similarindustry.industry.

To retain the best personnel.To retain the best personnel.

Protect the employees from certain hazards.Protect the employees from certain hazards.

Improve employee morale.Improve employee morale.

To make the organization a dominant influenceTo make the organization a dominant influencein the life of its employees.in the life of its employees.

To improve the organization image beforeTo improve the organization image before

public.public. To recognize the bargaining power of tradeTo recognize the bargaining power of trade

union .union .


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WPIWPI

Wholesale Price IndexWholesale Price Index measures themeasures themean of the changes of goods andmean of the changes of goods andservices' price on the basis of wholesaleservices' price on the basis of wholesaleprice.price.

-- It explains the market economy and asIt explains the market economy and aswell as the economy growth.well as the economy growth.

-- Usually the change of prices of 26Usually the change of prices of 26groups of selected goods are taken togroups of selected goods are taken to

determine the Wholesale PriceIndex.determine the Wholesale PriceIndex.

-- In India, it is the most popular priceIn India, it is the most popular priceindex used in the business industry andindex used in the business industry andpolicy market.policy market.


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Calculation of the WholesaleCalculation of the Wholesale

Price Index:Price Index:

To determine the Wholesale Price Index,To determine the Wholesale Price Index,data of 33 provincial capital cities and 111data of 33 provincial capital cities and 111other cities are taken into consideration.other cities are taken into consideration.

The data are taken directly from theThe data are taken directly from therespondents by interview.respondents by interview.

These respondents are chosen from suchThese respondents are chosen from suchcompanies who will be able to representcompanies who will be able to representthe commercial commodities.the commercial commodities.

By this way, all commodities willBy this way, all commodities willrepresent the wholesale price for everyrepresent the wholesale price for everysingle province.single province.


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Different Commodity Groups:Different Commodity Groups:

Wholesale Price Index is divided into fiveWholesale Price Index is divided into fivecommodity groups. These are:commodity groups. These are:

Agriculture (X),Agriculture (X), Manufacturing (X),Manufacturing (X),

Quarrying (X),Quarrying (X), Import and Export (X),Import and Export (X), Mining (X).Mining (X). Where X represents the number of commodities.Where X represents the number of commodities.

This is the way to express the number ofThis is the way to express the number of

commodities in each sector. Each of thesecommodities in each sector. Each of thesedivision has again been grouped into many subdivision has again been grouped into many subcommodity group. Altogether there are 257commodity group. Altogether there are 257commodities.commodities.


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Wholesale Price Index'sWholesale Price Index's

offerings:offerings:

Wholesale Price Index captures the priceWholesale Price Index captures the pricemovement extensively.movement extensively.

Wholesale Price Index is published weekly, withWholesale Price Index is published weekly, withthe shortest possible time gap of only two weeks.the shortest possible time gap of only two weeks.

In economics, Wholesale Price Index is taken asIn economics, Wholesale Price Index is taken asan indicator of the rate of inflation.an indicator of the rate of inflation.

Wholesale Price Index analyzes the market andWholesale Price Index analyzes the market andmonetary conditions.monetary conditions.

Wholesale Price Index focuses on the changingWholesale Price Index focuses on the changingnature of the economy of different kinds ofnature of the economy of different kinds ofservices like railway, road transportation,services like railway, road transportation,telecoms and banking sector etc.telecoms and banking sector etc.


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WPI as on 26.12.09WPI as on 26.12.09


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HRM Unit 5 Salry Wage Admn