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Concepts

Significance of Wage and Salary Administration

Contents

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Also known as wage and salary administration/

Remuneration Management/ Reward Management

Compensation

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Refers to the establishment and implementation of sound policies

and practices of employee compensation.

It includes such areas as Job evaluation, Survey of wages and salaries,

Analysis of relevant organizational problems, Development and

maintenance of wage structure, Establishing rules for administering

wages, wage payments, incentives, Profit sharing, Wage changes and

adjustments, Supplementary payments, Control of compensation

costs and other related items.

Wage & Salary Administration

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Compensation includes direct cash payments,

indirect payments in the form of employee benefits

and Incentives to motivate employees to strive for

higher levels of Productivity- Casio

Compensation Definition

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The basic purpose of wage and salary administration is to

establish and maintain an equitable wage and salary

structure

Its secondary objective is the establishment and

maintenance of an equitable labour-cost structure, i.e an

optimal balancing of conflicting personnel interests sothat the satisfaction of employees and employers is

maximised and conflicts minimised

Nature & Purpose

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The wage and salary administration is concerned with the

financial aspects of needs, motivation and rewards

Managers should analyse and interpret the needs of their

employees so that reward can be individually designed to

satisfy these needs

Nature and Purpose

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Attracting and Retaining Talent

Motivating Personnel

Optimising the Cost of Compensation

Consistency in Compensation

Objectives of Compensation Management

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The various components of Compensation area) Wage and Salary Basic Salary+DA+Addl

DA+CCA+HRA

b) Incentives

c) Fringe Benefits-PF, Gratuity, Insurance, Maternity

benefits

d) Perquisites Driver, Housing, LTA, Petrol etc

Components of Compensation

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Money is included under direct compensation

Benefits come under indirect compensation and may consist of life,

accident and health insurance, vacation allowance, PF etc

A wage or pay is the remuneration paid, for the service of labour in

production, periodically to an employee/worker

Wages usually refer to the hourly rate or daily rate paid to such groups as

production and maintenance employees (blue collar workers)

Salary normally refers to the weekly or monthly rates paid to clerical,

administrative and professional employees (whitecollar workers)

Concepts

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Wage levels represent the money an average worker

makes in a geographic area or in his organisation

Wage Structure is used to describe wage/salary

relationships within a particular grouping

The grouping can be according to occupation,

organisation etc

Concepts

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Steps in Wage Determination

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Job Analysis

Wage Surveys

What are other firms paying?

What are they doing by way of social insurance?

Level of pay-other firms-similar jobs

A wage survey to be useful must satisfy the following points: Frequency

Scope

Accuracy

Steps in Wage Determination..

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Whether the organisation will recruit new employees

after salary revision? Are the prevailing rates in industry inconsistent with the

results of job evaluation?

Result of paying lower and higher compensation?

Wage Structure & Fringe Benefit What is the

relationship?

Relevant Organizational Problems

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Whether the organization wishes to or is able to pay above or

below or equal to the average in the community or industry

Whether wage rates should provide for merit increases or whether

there should be single rates

Pay Grades , Which Jobs

Assignment of Money to these Pay Grades

Differentials between pay plans

What to do with salaries that are out of line once these decisions

have been made?

Preparation of Wage Structure

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A wage curve shows the relationship between:

Value of the job

Average Wage Rates of these jobs

Wage Curve

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1. Management Wage Philosophy

Assumptions are made concerning what and how much

remuneration should be and when increases should be

given

Individual Wage Rate Determination: Steps

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2. Wage Theory

Management has a theory concerning the source funds

from which wages can be paid


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3. Overall general wage rate

Philosophy and theory are modified by the interaction

of the law of supply and demand, governmental

factors, comparable wages, standard and cost of living,

collective bargaining ability to pay


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3. Job Wage rate for ranges

Job analysis is performed which results in job

specification, which are then evaluated to determine a

jobsworth to an organisation


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5. Performance Appraisal

Performance standards are established and each

individuals job performance and personal

characteristics are appraised by means of some form of

employee appraisal

This results in individualswage rate.


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Compensation Management Process

Organization strategy

Evaluation & Review

Organization Policy

Job Analysis & Evaluation

Analysis of Contingent Factors

Design &

Implementation of Compensation Plan

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Principles and objectives of wage and salary

administration

Factors influencing wage and salary administration

Module 3

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1. There should be definite plan to ensure that

differences in pay for jobs are based upon variationsin job requirements, such as skill effort,

responsibility or job or working conditions and

mental and physical requirements

Principles of Compensation

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2. The general level of wages and salaries should be

reasonably in line with that prevailing in the labourmarket


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3. The plan should carefully distinguish between jobs

and employees

4. Equal pay for equal work

5. An equitable practice should be adopted for the

recognition of individual differences in ability and

contribution


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6. There should be a clearly established procedure

for hearing and adjusting wage complaints

7. The employees and the trade union, if there is one

should be informed about the procedure used to

establish wage rates


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8. The wage should be sufficient to ensure the

worker and his family reasonable standard of living 9. The wage and salary structure should be flexible

so that changing conditions can be easily met

10. Prompt and correct payments of the dues of theemployees must be ensured and arrears of payment

should not accumulate


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11. For revision of wages, a Wage Committee should

always be preferred to the individual judgement,however unbiased or a manager

12. The wage and salary payments must fulfil a wide

variety of human needs including the need for self

actualisation


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1. The organisationsability to pay

2. Supply & Demand of Labour

3. The prevailing market rate

4. The Cost of Living

5. Living Wage

6. Productivity

Factors influencing Compensation

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1. Trade UnionsBargaining Power

2. Job Requirements

3. Managerial Attitudes

4. Psychological and Sociological Factors

5. Levels of Skills available in the market

Factors influencing Compensation

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Foundation of Compensation Strategies

Need for a formal Compensation Plan

Gaining Support from Management

Where to Start?

Communication Strategy

Creating the Compensation Strategy

Implementing the Plan

Other Points to note

Module 2

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1. Good business sense

2. Compensation is one of your largest single costs of doing business

3. Attract, retain and engage the talent you already have within yourorganization

4. Supports the desired mission, strategy and culture of the organization.

5. Can ensure equity and fairness among employees

6. Improves employee morale

7. Can reduce risk to the organization

Need for a formal Compensation Plan

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Focus on the business case

1. Know what matters

2. Use data to support your case

3. Make it relevant

4. Provide an example

5. Identify risk to the organization6. Be prepared and well-rehearsed with your recommendation

7. Have an outline of the plan

8. Be prepared with resource requests (financial, HR, etc)

Gaining Support from Management

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Get the right people involved

1. Buy-in from ALL key decision makers

2. Have a project champion

3. Identify the right decision-making

4. process

5. Consider employee involvement

6. Agree on goals7. Set a project deadline

8. Create a communication strategy

Where to Start?

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Communicate about the project

1. What is the organization doing and why

2. What is the process

3. Choose the right messenger

4. Be transparent about the process

5. Be realistic about the goal no promises should be made

6. Dontgive employees the opportunity to assume what the

7. outcome will be

8. Let employees know what to expect in terms of additional

communication regarding the project.

Communication Strategy

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Creating the Compensation Strategy

Start with: Where is theOrganization Now?

Growth cycle Demographics

Culture/managementstyle

Then: Where Do We WantTo Be? Importance of attraction,

motivation and retention Market competitiveness vs.

internal equity

Competitors and degree ofcompetitiveness

The right mix ofcompensation elements

Salary administration anddecision making

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1. Benchmark the organization

2. Perform a gap analysis

3. Create a proposal(s) for implementation

4. Decide what to do with anomalies

5. Get buy-in again

6. Communicate with employees

7. Assesses project effectiveness and next steps

Implementing the Plan

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Scan market salary

Turnover (Voluntary/ Involuntary)

Employees above their maximum salary range

Executive or Leadership Compensation

Compensation Pitfalls

Some other Points to Note..!

CR Modules1 3

Documents

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