Theoretical Perspective of Wage and Salary Administration

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Field Study 2010

INTRODUCTION OF THE STUDYNEED FOR THE STUDY:The wage and salary administration plays a vital role in Human Resource Management. The Human Resource Management is also plays a vital role in any organization. One of the biggest factors affecting industrial relations is the salary or wage of an employee receives for a fair days work. It is necessary to understand clearly the implications of various concepts and `principles that are related to the area of wage and salary administration. The wage and salary structure is the most important element in the Management of the employees. It includes areas as job evaluation, maintenance of wage structure, incentives, profit sharing, supplementary payments and control of compensation and other related pay items. The attention has been devoted to the study of internal structure and Human Resource Management Policies.

Need for Sound Salary Administration: Management has to formulate and administer the salary policies on sound lines as: Most of the employees satisfaction and work performance are basedALVAS COLLEGE, MOODBIDRI Page 67

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Field Study 2010on pay. Internal inequalities in pay are more serious to certain employees. Employees compare their pay with that of others. Employees act only to gross external inequalities. Employee comparisons of pay are uninfluenced by levels of aspirations and pay history. Employees compare the pay of different employees with their skill, knowledge, performance, etc. Evaluating the unsatisfied wants and unreached goals of the employees. Finding out the dissatisfaction arising from unfulfilled needs and unattained goals. Adjusting the salary levels accordingly with a view to enabling the employees to reach unreached goals and fulfill the unfulfilled needs.

OBJECTIVES OF THE STUDYTo know about the Wage and Salary administration of the CICBChemicon Pvt Limited, Baikampady, Mangalore. To know about the different types of allowances in the CICB-Chemicon Pvt limited, Baikampady, Mangalore. To study about the employees Pay structure in the company.


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Field Study 2010To assess the employees perception about the Wage and Salary structure of the company. To identify problems, if any, in the Wage and Salary administration of the company and to make suggestions.

METHODOLOGY OF THE STUDY The information for the study has been gathered from two sources namely Primary data Secondary data

Primary data:

Primary data have been collected through personal observations, discussions and interviews with various officials and management and from the Human Resource Department. To evaluate the effectiveness of Wage and Salary administrations of the company a survey was conducted on a sample of 30 employees. For this purpose, a structured Questionnaire with close-ended questions was prepared. The results were tabulated, interpreted and the findings were


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Field Study 2010drawn.

Secondary data:

Secondary data have been collected from the books, company records, manuals and the reports provided by Human Resource Department, websites and magazines.

FRAME WORK OF THE STUDYThe Project Work has been organized in five Chapters: The First chapter deals with the theoretical perspective of wage and salary administration, followed by objectives, methodology frame work and limitations of the study. The Second Chapter contains profile of the CICB-Chemicon Pvt Limited. The Third Chapter contains profile of CICB-Chemicon Pvt limited, Baikampady, Mangalore. The Fourth Chapter deals with wage and salary administration in CICBChemicon Pvt limited, Mangalore. The Fifth and last chapter embodies findings, suggestions and conclusion.


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Field Study 2010LIMITATIONS OF THE STUDY Time had been a constraint for completion of present study and making out a detailed analysis. The present study is limited only to M/s. CICB-Chemicon Pvt limited, Baikampady, Mangalore. The employees are scared to quote their name and suggestions. The employees were not willing to give the detailed information, because of their busy work schedule. The study of project work was only 6 weeks. This period is not sufficient to cover entire area.



ADMINISTRATIONOne of the most important areas of Human Resources Management is


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Field Study 2010Compensation Management. The soundness of Compensation Management depends upon the amount of Wage and Salary paid to an Employee for a fair days work. Despite the conclusions of morale studies wage or salary is significant to most of the employees as it constitutes a major share of their income pay in one form or another is certainly one of the main springs of physical needs. It provides recognition a sense of accomplishment and determines social status. Hence formulation and administration of sound remuneration policy to attract and retain right personnel in right position is the prime responsibility of any organization. Wage And salary Administration is essentially the application of a systematic approach to the problem of ensuring that employees are paid in a logical, equitable and fair manner.

Wage:Wage and Salary are often discussed in loose sense, as they are used interchangeably. But ILO defined the term wage as the remuneration paid by, the employer for the services of hourly, daily, weekly and fortnightly employees. It also means that remuneration paid to


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Field Study 2010production and maintenance or blue collar employees.

Salary:The term salary is defined as the remuneration paid to all clerical and managerial personnel employed on monthly or annual basis. The direct compensation paid to an employee compensating his services to an organization. Salary is also known as basic pay.

Earnings:Earnings are the total amount of remuneration received by an employee during a given period. These include salary (pay), dearness allowance; house rent allowance, city compensatory allowance, other allowances, overtime payments etc.

Nominal wage:It is the wage paid or received in monetary terms. It is also known as money wage.


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Field Study 2010Real Wage:Real wage is the amount of wage arrived after discounting Nominal Wage by the living cost. It represents the Purchasing Power of Money Wage.

Take Home Salary:It is the amount of salary left to the employee after making authorized deductions like contribution to the provident fund, life insurance premium, income tax charges, and other charges.

Minimum Wage:It is the amount of remuneration, which could meet the normal needs of the average employee regarding as a human being living in a civilized society. It is defined as the amount of remuneration, which may be sufficient to enable a worker to live in reasonable comfort, having regard to all obligations to which an average worker would ordinarily be subjected to.


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Field Study 2010Statutory Minimum Wages:It is the amount of remuneration fixed according to the provisions of the Minimum Wages Act, 1948.

The Need-Based Minimum Wage:It is the amount of remuneration fixed on the basis of norms accepted at the 15th session of the Indian Labour Conference held at New Delhi in July 1957. The Conference recommended that minimum wages should ensure the minimum human needs of industrial workers. The norms laid down by it are: In calculating the minimum wage, the standard working class family should be taken to comprise 3 consumption units for 1 earner, the earnings of women, children and adolescents being disregarded. Minimum food requirements should be calculated on the basis of a set in takes of calories as recommended by Dr. Aykroyd for an average Indian adult of moderate activity. Clothing requirements should be estimated on the basis of per capita consumption of 18 yards per annum, which would give for the average workers family of four a total of 72 yards. In respect of housing, the rent corresponding to the minimum area provided for under Government Industrial Housing Scheme should beALVAS COLLEGE, MOODBIDRI Page 67

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Field Study 2010taken into consideration in fixing the minimum wage. Fuel, lighting and other miscellaneous items of expenditure should constitute 20 percent of total minimum wage.

The Living Wage:According to the committee on fair wages, the living wage is the highest amount of remuneration and naturally it would include the amenities which a citizen living in a modern civilized society is entitled 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 Fair Wage:Fair wages are equal to that received by workers performing work of equal skill, difficulty or unpleasantness.

Incentive Wage:This is the amount of remuneration paid to a worker over and above the normal wage as an incentive for employees contribution to the


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Field Study 2010increased production or saving in time or material.

Wage Rate:It is the amount of remuneration for a unit of time excluding incentives, overtime pay, etc.

Standard Wage Rate:It is the amount of wage fixed for a unit of time fixed on the basis of job evaluation standards.

Rewards:An incentive or a reward can be any thing that attracts the workers attention and stimulates him to work. Rewards are of two types:

IntrinsicSatisfaction that the employees get from the job itself such as pride in ones work, having a feel of job accomplishment, job enrichment, being a member of a team.

ExtrinsicExternal to the job and comes from the management namelyALVAS COLLEGE, MOODBIDRI Page 67

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Field Study 2010wage / salary, fringe benefits, welfare measures, promotions, incentives etc.

Financial Vs. Non-Financial Rewards:Rewards are two types viz., financial rewards and non-financial rewards. Financial Wages/Salaries, allowances, incentive payments, bonuses, profit sharing etc. Non-Financial Canteen facilities, Conveyance facilities, Medical care, paid vacations, paid sick leave etc.

Performance based Vs Membership based Rewards: The rewards that the organization allocates are based on either performance criteria or membership criteria. Performance based Performance based rewards are exemplified by the use of Commissions, incentive pay, piece work; pay plans, Group bonuses etc. Membership basedALVAS COLLEGE, MOODBIDRI Page 67

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Field Study 2010Membership rewards are allocated to all employees as they are the employees of the organization. These include basic salary or pay, dearness allowance based on the cost of living index, house rent allowance, city compensatory allowance etc.

Fringe Benefits:Fringe benefits refer to various extra benefits provided to the employees, in addition to the compensation paid in the form of wage / salary. These include employee benefits like Provided fund, Gratuity, Medical care, Hospitalization, Accident relief, Health and Group, insurance, Canteen, Perquisites: These are allowed to the executives and to retain competent executives. Company car Club membership paid holidays furnished house Stock option schemes.

Wage and Salary Objectives of Management


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Field Study 2010

To establish a fair and equitable remuneration: There should be internal and external equity in remuneration paid to employees. Internal equity means similar pay for similar work. External equity implies pay for a job should be equal to pay for a similar job in other organizations.

To attract competent personnel: A sound wage and salary administration helps to attract qualified and hardworking people by ensuring an adequate payment for all jobs.

To retain present employees: By paying at competitive levels, the company can retain its personnel; it can minimize the incidence of quitting and increase employee loyalty. To improve productivity: Sound wage and salary administration helps to improve the motivation and morale of employees which in turn lead to higher productivity.

To control costs: Through sound wage and salary administration labour and administrative costs can be kept


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Field Study 2010inline with the ability of the company to pay. It facilitates administration and control of pay roll.

To improve Union management relations: Wages and salaries based on systematic analysis of jobs and prevailing levels are more acceptable to trade unions. Therefore, Sound wage and salary administration simplifies collective bargaining and negotiations over pay. It reduces grievances arising out of wage inequities.

To improve public image of the company: Wage, Salary administration programme also seeks to project the image of a progressive employer and to comply with legal requirements relating to wage and salary administration.

Principles of Wage and Salary Administration:There are several principles of wage and salary plans, policies and practices. The important among them are: Wage and salary plans and policies should be sufficiently flexible or responsive to changes in internal and external conditions of the organization.


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Field Study 2010Wage and salary administration plans must always be consistent with overall organizational plans and programs. Wage and salary administration plans and programs should be in conformity with the social and economic objectives of the country like attainment of equality in income distribution and controlling inflationary trends. Management should ensure that employees know and understand the wage policy of the company. Workers should be associated in formulation and implementation of wage policy. All wage and salary decisions should be checked against the standards set in advance in the wage policy. Wage and salary plans should simplify and expedite other administrative processes.

Factors affecting wages:1. Demand for and supply of labour: Wage or salary is the price for the services rendered by a worker. Forces of demand and supply of labour determine the going wage rate. When there is no dearth of labour (as in India) wages tend to be low. On the other hand, executive salaries have increased in India after liberalization due to rise in demand for professionally trained managers.


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Field Study 20102. Ability to pay: An organizational ability to pay its employees is an important determinant of wage level. Ability to pay depends upon the profit earning capacity of the...


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