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VIJAY KAMBOJ

+919466500020

Wage and Salary Administration

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Principles of wage and salary administration

• Formation of a sound wage and salary policy an important

function of personnel department. A sound and salary policy is

essential to procure, maintain and develop employees and to

get effective results from them. A well structured salary and

wage system provide many advantages to the employees ,

employers, consumer and at the same time society also. So

while designing a wage and salary structure proper care should

be taken. Some of the important principles are described as

under:-

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Principles of wage and salary administration

• Wage policy should be carefully drafted keeping in view the

interests of employees, employers, consumers and the

community.

• There should be definite plan to ensure that differences in

wages for different jobs are justified on solid grounds. This

can also be said like that the wage plans should be flexible.

• The most acceptable wage and salary ploicy is one which

relates wages and salary levels in an organization to those of

its competitors.

• The organization’s goal should be directly studied and

analyzed, while structuring wage and salary plan.

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Principles of wage and salary administration

• Wage and salary policy should recognize the changes in cost

of living and productivity and other changes in the society. So

wage and salary policies should be related to the changing

local and national conditions.

• Wage policy should be clearly expressed in writing so as to

ensure uniformity and stability. At the same time government

rules, regulations, relations to labour should be considered

seriously while framing the wage policy.

• The wage plan should be in simplest from, thus avoiding

unnecessary confusions.

• Wage policy should be evaluated from time to time so as to

meet the latest changes and trends in industries and societies.

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Principles of wage and salary administration

• While structuring the wage and salary policy economy should

not be ignored. The main objective of economy is attainment

of equitable distribution of income, price stability, increase in

standard of living etc.

• The feeling and expectation of employees must be considered

while designing wage and salary policy. The employees and

union must be taken in to confidence while deciding wage and

salary policy.

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Wage Theories

• The standard of living theory wage:- This theory has been

propounded by Dr. Marshall. According to this theory wages

of the laborers should be equal to their standard of living. The

laborers must get so much wages as to maintain their standard

of living. The term standard of living includes along with food,

clothing and shelter all those items of comforts and luxuries to

the consumption of which he has been accustomed. Difference

in wage rate is natural as the standard of living of different

laborers is different.

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The wage Fund Theory

• The Wage Fund Theory:- This theory is propounded by John

Mill. According to this theory, wages depend upon two

quantities:

• Wage fund or the circulating capital set aside for the purchase

of services of laborers

• The number of laborers seeking employment.

Rate of wage, as per this theory, is determined by the following

formula:

Wage-Rate= Wage Fund/ No of workers

According to this theory, wages cannot rose unless either the

wage fund increases or the number of workers decreases.

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Residual Claimant Theory of Wages

• This theory has been propounded by American economist

Walker. According to him, wages are the residue left over, after

all other factor of production have been paid. It means after

deducting from total production, rent, interest and profit, what

remains is paid to laborers in the form of wages.

• Wages= Total production-Rent-Interest-Profit

• The main feature of the theory is that it lays special emphasis

on the relation between the efficiency of the laborers and

productivity. Greater the efficiency of the laborers more is the

production. As a result, there is the possibility of increase in

wages.