Compensation & Wages

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Employee

Compensation

Wages


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Monday, October 06, 2014 2


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COMPENSATION



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Definition of Compensation:

According to HRM, compensation is as money andother benefits received by an employee for providing

services to his employer.

Compensation is something value given in exchange forsomething else.

Example of compensation:

The money a company pays to its employee to do work .

When a person gets into a car accident and injures

someone, the money he pays to the injured victim for his

losses.



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Nature of Compensation:

Nature ofCompensation

Return

System ofRewarding

OrganizationalTool

ManagementInstrument



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Objectives of Compensation:

Objectives

Equity

Retain the besttalent

Reward newideas &

behaviours

CostControl

Compliance



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Other Objectives

To recruit & retain qualifiedemployees

To increase or maintain morale

To determine basic wage

& salary

To reward for job performance



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Need of Compensation:

Compensation

Motivation

NeedSatisfaction

EmployeeRetention



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Evolution of Strategic Compensation:

Today the compensation systems are designed, alignedto the business goals & strategies. The employees are

expected to work and their own decisions. Authority is

being delegated. Employees feel secured and valued

in the organisation. Organisations offer monetary &

non-monetary benefits to attract and retain the best

talents in the competitive environment.



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Principles of Compensation:

Principles

of

Compensation

EquityConsiderations

Non-Discriminatory

PerformanceOrientation

Simplicity &

Flexibility

Legal

Compliance

Ability to pay



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Components of Compensation:

Components

Direct Compensation

Non-MonetaryCompensation

IndirectCompensation



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Direct Compensation:-



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Indirect Compensation:-



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Non-Monetary

Compensation:-Promotes social relationship with co-

workers.

Allocate sufficient resources to perform

work assignments.

Offer supportive leadership &

management.

Enhance physiological health, intellectualgrowth.



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Levels of Compensation:



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Factors influencing

Compensation:

Internal Factors

Ability to pay

Productivity of Labour

Job Need / Requirement

Government Policy

Good Will of the Company

External Factors

Labour Market

Bargaining Power

Cost of Living

Condition of Product

Market

Comparative Wages



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Conclusion:

We can say that good compensation

can increase the productivity of an

organisation because it provides various

rewards, bonus, schemes etc. & its

compulsory for every organisation.



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WAGES

SALARIES



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Wage & Salary:

Wages:

A wage is monetary compensation (or) remuneration

paid by an employer to an employee in exchange for

work done at an hourly or daily rate.

Salaries:

Salary refers to how much you get paid every year.

Salary earners rarely have to punch a time clock, or keep

an accurate account of their hours, because they get paidfor performance rather than by the hour. Salaried

workers are much more likely to have paid sick days and

paid vacations, and are not docked pay for being late or

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Purpose of Wage & Salary:

Attracting talented resources

Financial Management

Legal Requirements

Retaining & motivating employees



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Difference between Wage & Salary:

Wages Salaries

Wage earners are paid by

the hourly/daily basis

Salary earners are paid by

the yearly basis

Wage earners often have to

give up pay for time off

Salary earners usually

receive paid time when they

are not working.

Wage earners get paid more

for working more than 40

hours per week

Salaries are often calculated

as packages



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Types of Wages:

Wages are broadly based on the needs ofthe workers, capacity of the employer to

pay, and the general economic conditions

prevailing in a country.Wages

Subsistence

Wages

Minimum

WagesFair Wages

LivingWages

Real Wages



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Subsistence Wages: The wage that

can meet only to bare physical needs

of a worker and his family is called

subsistence wage.

Minimum Wages:Minimum wage is the wage that

is able to provide not only for

bare physical needs but also

for preservation of efficiencyof worker plus some measure

of education, health and other things.



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Living Wages: "A living

wage is one which should

enable the earner to provide

for himself and his family

not only the bare essentials

of food, clothing and shelterbut a measure of frugal

comfort including education for his 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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Fair Wages: Fair wages is an adjustable step that

moves up according to the capacity of

the industry to pay, and the prevailingrates of wages in the area of industry.

Real Wages: Real wage means that the total amount of

things that this can buy, is equal to real wage. Real wages

are generally taken to be money wages adjusted for

Variations in value of money:

Wr =Wn / PgWhere: Wr =Real Wages

Wn=Nominal or Money Wages

Pg =General Price Level



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Wage as a Motivator:

Motivation

AffiliationMotivation PerformanceMotivation



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Methods of Wage Fixation:

Wages and Salary incomes in India are fixed

through several institutions , those are:

Collective bargaining

Industrial wage bound

Govt. appointed pay commissions

Adjudication by courts & tribunals



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Collective Bargaining:

Collective bargaining relates to those

arrangements under which wages and

conditions of employments are

generally decided by agreements negotiated between

the parties.

Industrial Wage Boards:a) Statutory wage board: Statutory wage board means a body set up

by law or with legal authority to establish minimum wages and

other standards of employment which are then legally enforceable

in particular trade or industry to which boards decision relate.

b)Tripartite wage board: Tripartite wage board means a voluntary

negotiating body set up by discussions between organized

employers, workers and govt. to regulate wages, working hours

and related conditions of employment.



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Government Appointed Pay Commissions:


Central Pay

Commission

Date of

Appointment

Date of

Submission of

Report

Related With

1st May 1946 May 1946 Living Wages

2nd August 1957 August 1959 Salaries have to

be determined

3rd April 1970 March 1973 Pay Structure

4th June 1983 May 1986 Examine Structure

of central govt.

5th April 1994 January 1997 Restricting Pay

Scale

6th October 2006 March 2008


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Adjudication by Courts & Tribunals:

Courts and Tribunals were primarily

intended to deal with settlement of

industrial disputes. Numerous wage

disputes in many industries have been referred

for adjudication to labour courts and tribunals. Theawards given by these authorities not only helped in

formulation of a body of principles governing wage

fixation but laid foundation for present wage structure

in many of major industries.



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Principles of Wages & Salary

Administration:

Wage policy should be developed keeping in view theinterests of the employer, the employees, the

consumers and the community

Wage policy should be stated clearly in writing to ens

ure uniform andconsistentapplication.

Wage and salary administration should be consistent

with the overall plans of the company. Compensation

planning should be an integral part of the financial

planning.

Wage and salary plans should be sufficiently flexible

or responsive to changes internal and external

conditions of the organization.



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Factors influencing Wage &

Salary Determination:


Internal Factors

Ability to pay

Job Requirements

Management Strategy

Employee


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External Factors

Demand & Supply

Cost of Living

Trade Unions Barriers

Power

Government Legislation

Psychological & Social

Economy

Technological Development

Prevailing Market Rates

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Compensation & Wages