Wages & Salary Administration

Incentive Plans & Fringe Benefits Click to edit Master subtitle style

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Concepts of wages & salary Administration

Salary: It is a compensation to an employee for services rendered on a weekly, monthly, or annual basis. It is usually associated with office staff, supervisors, managers etc. whose performance cannot be measured directly. (for white collar workers) Wages: It may be defined as the aggregate earnings of an employee for a given period of time such as a day, a week or a month. Wage is basically the price paid for the services of a lobour in the process of production. (for blue collar worker) Compensation management aims at designing a cost effective pay structure that will attract, motivate and retain competent employees

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Minimum Wages: Its is the amount of remuneration, which is just sufficient to enable an average worker to fulfill all his obligations. It can be either the minimum piece rate or minimum time rate. It is fixed by government & enforced by law with respect to all the scheduled employments, and is revised at least once in 5 years based on consumer price index. It is applicable to across the country and is governed by Minimum Wage Act,1948. It follows the basic six norms:

Types of Wages

In calculating the minimum wage, the standard working class family should be taken to consist of 3 consumption units Minimum Food requirement should be calculated on the basis of net intake of calories, of an average Indian adult. Clothing requirements, fuel lightning and other miscellaneous requirement Childrens education, medical requirements, minimum recreation including festivals, ceremonies

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Fair Wage : Workers performing work of equal skill, difficulty or unpleasantness should receive equal or fair wages. Fair Wage should also take into consideration the financial capacity of employer. Fair wage may therefore be higher than minimum wage level but never lower that it. In India, the fair wages committee recommended that a fair wage should be less than the living wage and more than the minimum wage. Living Wage: The fair wage committee observed Living wages should enable the male earner to provide for himself and his family, (not only) the bare essentials of food, clothing and shelter, but also a measure of frugal comfort including education for the children, protection against ill-health, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age.

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Components of wage & Salary

Compensation = Wage or salary + Employee Benefits + Non-recurring financial rewards (sales promotion, profit sharing) + Non- Pecuniary rewards (challenging work assignment etc.)
Compensation Base Salary, Variable Pay Job Evaluation Performance Management Development & learning Training, Career Development Learning Experiences Succession Planning Benefits Health Care , Retirement Savings, Other Insurance

Work Environment Work life balance, Leadership Performance Support Organizational Climate

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Basic Wage Plans

Time Wage System :

Wages = Number of hour worked * Rate per hour

Suitability of the Time Wage System:

1. 2. 3. 4.

5. 6.

7.

When it is difficult to fix the standard time for doing a job. When quality of job is of utmost importance. When the job relates to office or clerical work. When collective effort of group of persons are necessary for the completion of a job. Where mental work is involved, such as policy making and administration. Where machine, equipment, and tools used for production are delicate and very costly. Where production process is complicated and demands higher degree of skill.

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Basic Wage Plans (contd..)

Piece Wage System

Wages = Number of units produced * Rate per unit

Suitability of the Piece wage system

1.

2. 3. 4.

5.

When methods of production are standardized and the job is of repetitive nature. When productivity of worker is to be increased. When the job involves more physical work than the mental work. Where output can be measured and quality control system exists to discourage low quality production. Where work does not require personal skill of higher order.

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Basic Wage Plans (contd..)

Skill-Based Pay:

Under this system of wage payment, employees are compensated for their job-related skills. This is also called knowledge-based pay. Under a typical skill-based system, companies hire employees at below-market rates. Once they gain extensive knowledge and new skills, they are promoted and rewarded with an increased pay.

Competency-based pay:

The competencies of the best performing employee are identified vis--vis the job and the employee is compensated for these competencies that he/she brings to the job.

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Basic Wage Plans (contd..)

Broad banding Broad banding as a base-pay technique, reduces the number of salary levels into broad salary bands. E.g. entry level is fixed as Rs10,000-18000, the salary band for the next level can be 12,500 22,000 The major advantage of broad banding is that it gives managers a free hand to fix the pay of individual workers, but with in set limits.

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Objectives of Compensation management

To establish fair & equitable pay structure. To attract competent and qualified personnel. To retain present employees by competitive pay structure. . To reduce biases while fixing up the wages or salaries. To establish job sequences and lines of promotion wherever applicable. To keep labour & administrative costs in line with the ability of the organization to pay. To improve motivation & morale of the employees. To project good image of the company. To deal with the legal requirements relating to wages & salaries.

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Process of Determination of wages

A pay grade is comprised of jobs of equal difficulty or importance Survey Data used to price benchmark jobs etc. Describe the relative worth of the various jobs in an organization Describe duties, Responsibilities 1.Developing Rate Ranges 2. Correcting out of line rate Finally Development of the rules

Job Analysis

Wage or Salary Survey

Group Similar Jobs into Similar Grades

Price Each Grade

Fine tuning rates of pay

Wages & Salary Administration rules

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Part-II

Click to edit Master subtitle style

Incentive & Rewards

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Rewards
What an individual do to satisfy some need and they look for a payoff or reward. Anything that attracts an individuals attention and stimulates him to work. Rewards can be monetary or non monetary Purpose of Rewards: Improve the employee Morale Improve Job Satisfaction leads to improved performance Improve loyalty to the organization.

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Types of Rewards

Intrinsic Rewards: Are intangible in nature and are internal to an individual. Intrinsic rewards (personal satisfactions) come from the job itself, such as: pride in ones work, feelings of accomplishment, being part of a work team Extrinsic rewards: Are tangible in nature and are normally under the control of the organization. comes from a source outside the job such as: include rewards offered mainly by management, Money, Promotions, Benefits Financial Rewards- rewards that employees receive in monetary terms. (bonus, incentive, paid leaves purchase discounts.) Non Financial Rewards- Are paid in kind. Measured in terms of their value to the employee. Non-financial rewards emphasize making life on the job more attractive; employees vary greatly on what types they find desirable.

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Incentives

Incentives are the rewards to an employee over and above his base wages/salary, in recognition of his performance and contribution. Also termed as performance based rewards. Types of Incentive Plans
Short-Term Plans Halsey Plan Rowan Plan Barth System of wages Task Bonus System Point-rating system Progressive Bonus Long-Term Plans Annual Bonus Profit Sharing Distributive Deferred Combination Gain Sharing Employee Stock Plans

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Fringe Benefits
DEFINITION:- fringe benefits are those monetary and non- monetary benefits given to the employee during and post- employment period which are connected with employment but not to the employees contributions to the organization. For example, you could receive a benefit when you: use a work car for private purposes. are provided with a cheap loan. are provided with free private health insurance. are provided with cleaning services for your private residence

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Fringe benefit categories

Car fringe benefits v Debt waiver fringe benefits v Housing fringe benefits v Car parking fringe benefits v Living-away-from-home allowance
v

Loan fringe benefits vExpenses payment fringe benefits vAirline transport fringe benefits. v Property fringe benefits
v

Basically, a fringe benefit is a benefit provided to an employee or an associate (for example- family, spouse and children) because of his employment. Fringe benefits provide output in terms of employee loyalty and cooperation, employee welfare and create organizational image.

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Various other benefits

Merit scholarships for employees Medical facilities to employees Company Accommodation and his family

Free or subsidized lunches

Paid holiday/vacation Retiral benefits Employee insurance Maternity leave Child-care centers Education allowance

Company transportation facilities Cafeteria and rest rooms Study leave Company sponsored study Club Members Recreational Facilities

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