HRM-Part-VI Wages & Salary Administration

Human Resource Management (HRM)-Part-VI

Wages and Salary Administration

Purpose:

n  To attract prospective employees for recruitment.

n  To motivate Human Resource to achieve organizational goal.

n  To maintain and regulate the labour cost.

Two types of Compensation:

n  Direct (Money in terms of Wages)

n  Indirect (Benefits such as life, health, insurance, social security etc.)

‘Wages’ refers to – Blue collar workers (PR / TR employees)

‘Salary’ refers to – White collar workers (Clerk, Supervisor, MR employees etc.)

Job Cluster:  A group of work assignments or job classifications in an organization which are linked together by technology, production process etc. is called Job Cluster.

Process of Determining Wages:

Wage = Basic Wage + Other Allowances

Basic Wage is the remuneration by way of basic salary and allowances.

Allowances: - are paid in addition to basic wage to maintain the value of basic wage over a period of time.

Wage Level: - is an average of the rates paid for the job of an organization.

Wage Structure: - is a hierarchy of jobs to which wage rates have been attached.

Theories of Wages: -

a) Subsistence Theory (also called Iron Law of Wages): - This theory express that a subsistence level of wage is to be paid – if paid above this level, labourer will grow and subsequently wage rate goes down, if paid below this level, labourer will decrease (death due to hunger, diseases, malnutrition etc.) and hence the wage rate would go on hike.

b) Fund Theory: - This theory express that payable wages are determined by the size of the fund available. Greater the size of the fund, rate of wages would be high, if size is small wage rate would be small.

c) Surplus Value Theory (Labour Power is a commodity): - This theory express that the wages to be paid depends ipon the time taken by the labour to produce. Labour is not paid as per consumption of time rather the expenses of other resources are incurred by the surplus.

d) Marginal Productivity Theory: - This theory express that wages depend upon the demand and supply of labour.

e) The Bargaining Theory: - This theory express that wages to be paid are determined by the bargaining power of workers and unions. Here wages are determined by the relative strength of the organization and the trade unions.

Types of Wages: -

i) Statutory Minimum Wages: - Set by the Govt. under the Minimum Wages Act, 1948 to be paid by the employer.

ii) Bare or basic minimum wages: - Set by Labour Court/Tribunals/National Tribunals in terms of awards and are obligatory on the employers.

iii) Subsistence Wages: - The amount that are required to maintain a minimum subsistence level is called Subsistence Wages.

iv) Minimum Wages: - Amount that not only required to maintain subsistence level but also to increase efficiency of employee by providing medical facilities, basic amenities and measures for health and education of the family

v) Fair Wages: - Includes such wages as greater than minimum wages and less than living wages. In other words the capacity of industry to pay forms such wage structure.

vi) Living Wages: - Includes such wages as required not only for subsistence but also for good life style, education, clothing, essential commodities, social status, self-satisfaction etc. as per the current requirement.

Basic Kind of Wage Plans:

n Time Wage Plan – Where time taken to produce goods by an employee is considered for wage calculation irrespective of quantity and quality of output.

n Piece or Output Wage Plan – Where output and pther factors of productivity is considered rather than time taken to produce. It means to earn more one has to put more labour to produce more.

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