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Compensation Planning
Unit II
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What is Wage ?
Wages may be defined as the aggregate earnings of
an employee for a given period of time, such as a day or aweek or a month.
What is Salary?
The term salary is defined as the remuneration paidto the clerical and managerial personnel employed onmonthly basis.
What is wage & Salary Administration?
Wage & Salary Administration is essentially theapplication of a systematic approach to the problem ofensuring that the employed are paid in logical, equitable andfair manner. The main objective of wage & salary
administration is to establish and maintain an equitable wage& salary system to obtain, retain and motivate people ofrequired skills in an organization.
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Compensation management
Compensation is what employees
receive in exchange for their
contribution to the organisation.
Total compensation =
Direct + Indirect Compensation
Base Pay Incentives Benefits
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Components of Employee Remuneration
Remuneration
Financial Non-financial
Basic wages Incentives,
Individual plansGroup plans
Fringe benefits
P.F.
Medical care
Accident relief
Health and
Group insurance
Perquisites
CarClub membership
Paid holidays
Furnished house
Stock option scheme
Job context
Challenging job
Responsibilities
Growth prospects
Supervision
Working conditionsJob sharing etc
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Concepts of Wages
Minimum Wages
Fair Wages
Living wages
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Objectives of compensation
planning Internal equity
External equity
Individual equity
Attract talent
Retain talent
Ensure equity
New and desired behaviorControl costs
Ease of operation
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Motivation and performance model
Employees set
Goals and
expectations
Performance
Is rewarded
Employee considersEquity of
Performance
rewards
Feedback to
employees
Rewards are
given
Employee sets new goals and
Expectations based on prior experiences
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Wage Fixation
There are 2 system of Wage Payment-
Time Wage System- Under this system the workeris paid for the amount of time spent on the job. Theunit of time may be a day, a week or a month.
Wage = No. of Hours worked * Rate/Hour
Piece Wage System-Under this system, the outputor work is the basis of payment. Worker is paidaccording to the amount of work completed or the
number of pieces produced.Wage=No. of Pieces produced* Rate/Piece
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Systems of Wage Payment
Time Piece Incentive
GroupIndividual
Based onTime
Based onProductivity
PreistmansBonus
ScanlonPlan
Co-Partnership
Taylor
Merricks plan
Halsey
Rowan
Bedeaux
Emerson
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Halsey Plan
In this method bonus paid to a worker is equal to
50% of time saved multiplied by rate per hour. A
standard time is fixed on the basis of previous
performance for the completion of a job. When the
work is completed in less than the standard time,
he is paid at an hourly rate on a percentage (50%)
of the time saved by him.
Total Wages= T * R + 50% ( S - T) * R
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Rowan Plan
This is a modified version of Halsey Plan. Under
this, a minimum time wage is guaranteed to every
worker. Unlike a fixed percentage in case of Halsey
plan, it considers premium on the basis of the
proportion which the time saved bears to the
standard time.
Total Wage = T * R + ( T * R * Time Saved )
Std. Time
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Importance of an ideal remuneration
systemDesire for performancemore pay strikes
grievances
search for options absenteeism
turnoverPay dissatisfaction
lower job psychological
attractiveness dissatisfaction withdrawal
of jobs absenteeism visits to the
Doctor
poor mental
health
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Influencing factors of Remuneration
Remuneration
External Internal
Labour MarketCost of Living
Labour Unions
Govt. Legislations
Society
Economy
Business StrategyJob evaluation &
PA
The Employee
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Devising a remuneration plan
Job Description
Job Evaluation
Job Hierarchy
Pay Survey
Pricing Jobs
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Challenges of remuneration
Remuneration
Skills-based
pay
Employee
participation
Comparable
worth
Pay
secrecy
Salary
reviews
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Wage &Salary Differentials
When wages differ in different industries
firms,jobs,area, skill or geographical region it is
known as wage differential.
Wage differentials perform important economic
functions like labour productivity,attracting potential
candidates to different jobs,maximizing
productivity,development of skills, utilization of
human resources and labor mobility amongdifferent regions.
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Reasons for wage differentials
Occupational Differential.
Inter-firm Differentials.
Inter-area or Regional Differentials.
Inter-industry Differentials. Inter-personal wage Differentials.
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Wages Policy in India
Payment of Wages Act, 1936
Industrial Dispute Act, 1947
Minimum Wages Act, 1948
Equal remuneration Act, 1976
Payment of Bonus Act, 1965
Wage Board
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THANK YOU!!!!
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