intro wage a dmn

7/29/2019 Intro Wage a Dmn

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3/18/13 Manoj Mathew, RCBS

Wage concepts

Money paid to the workers is considered as wages

Wage is the payment made to the workers for placing theirskill and energy at the disposal of an employer, the methodof use of that skill and energy being at the employers

discretion and the amount to the payment being inaccordance with terms stipulated in a contract service.

British Ministry of Labour and National Services

Manoj Mathew, RCBS


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Wage concepts

Wages are remuneration for labour. Like interest and rent,wages are contractual income. Wage rates, whether piecerates or time rates or whether fixed in money or in goods,are agreed upon by the payers and the recipients of wages

before the product is sold.

Encyclopedia of Social sciences. 1957

Compensation is a comprehensive term which includeswage and all other allowances and benefits. The process of

compensation is a complex network of sub-processesdirected towards remunerating people for the servicesrendered and motivating them to attain a desired level ofperformance.

Manoj Mathew, RCBS


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Wage Administration

Refers to the establishment and implementation of sound policyand practices of employee compensation . It includes such areas as

job evaluation, survey of wages and salaries analysis, development

and maintenance of wage structure, establishing rules foradministrating wage payments, incentives, profit sharing, wagechanges and adjustments, supplementing payments, control ofcompensation costs and other related areas.

Manoj Mathew, RCBS


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Remuneration

financial

Hourly andMonthlyRatedWages

Salaries

IncentivesIndividualplansGroup plans

FringeBenefitsPFGratuity

MedicalcareAccidentreliefHealth andGroup

Insuranceetc

PerquisitesCompanycarClub

MembershipPaidholidaysFurnishedhouse

Stockoption

Components Of Employee Remuneration

N F

JobContentsChallenging

JobResponsibilities

Recognitiongrowthprospect

sManoj Mathew, RCBS


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3/18/13 Manoj Mathew, RCBSManoj Mathew, RCBS

Components of the Wage Mix

WAGEMIX

Labor Market

Conditions

Area WageRates

Cost ofLiving

CollectiveBargaining

LegalRequirements

Compensation Strategy

of the Organization

Worth ofthe Job

EmployeesRelativeWorth

EmployersAbilityto Pay


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Legal Frameworkfor WageDetermination in India

Payment of Wages Act 1936

Minimum wages Act 1948

Industrial Dispute Act 1947

Equal Remuneration Act 1976 Payment of Bonus Act 1965

Wage Boards

Pay Commission

Manoj Mathew, RCBS


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Report of the Committee on Fair Wages1948

Minimum wage the wage which must provide not only forthe bare sustenance of life, but for the preservation of theefficiency of the worker. For this purpose the minimum wagemust provide for some measure of education, medical

reimbursements and amenities

Manoj Mathew, RCBS


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Living wage

Living wage is one which should enable the earner to providefor himself and his family not only the bare essentials of food,clothing and shelter but a measure of frugal comfort, includingeducation for his children, protection against ill health,

requirements of essential social needs and a measure ofinsurance against the more important misfortunes, includingold age.

Manoj Mathew, RCBS


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Fair wage

It is the wage which is above the minimum wage but below theliving wage..

Manoj Mathew, RCBS


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Wage Theories

Manoj Mathew, RCBS

Subsistence TheoryWages tend to settle at the minimum subsistence level

Originated by Pysiocratic School and developed by AdamSmith and classical economists

Thomas Malthus- Theory of Population Karl Max The reserve army of labour- capital

accumulation leading to technological unemployment


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Wage Theories

Manoj Mathew, RCBS

Wage Fund Theory Associated with J S MillWages depend upon two quantities:

the wage fund or the circulating capital set aside forthe purchase of labour, and

the number of labourers seeking employment


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Wage Theories

Manoj Mathew, RCBS

Marginal Productivity Theory Associated with Alfredmarshall and J R HicksWages depend upon marginal productivity of labour.

the wages received by the marginal labourer

determines the wages paid to all the other labourerson the same grade.


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Wage Theories

Manoj Mathew, RCBS

The residual claimant Theory Associated with Francis AWalkerWages are that part of residual surplus which is left afterother factor charges (rent, interest and profits) are met.


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Wage Theories

Manoj Mathew, RCBS

Bargaining Theory The actual wage rate which isultimately decided in a collective bargaining agreement willdepend upon the relative bargaining strength of theemployers and employees.


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Wage Theories

Manoj Mathew, RCBS

Employment Theoryo Two schools of thoughto J B Say and Pigou

Unemployment will disappear if the workers

were to accept a voluntary cut in wages.o J M Keynes General Theory of Employment,

Interest and Money (1936) Advocated wage rigidity in place of wage

flexibility Aggregate Effective Demand


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Wage Theories

Manoj Mathew, RCBS

Labour theory of valueo Karl Marx surplus value


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Click to edit Master subtitle style


JOB EVALUATION


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Job Evaluation

Job Evaluation

The systematic process of determiningthe relative worth of jobs in order to

establish which jobs should be paid morethan others within an organization.
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Different Job EvaluationSystems

JOB AS JOB PARTSBASIS FOR A WHOLE OR FACTORSCOMPARISON (NONQUANTITATIVE)

(QUANTITATIVE)

Job vs. job Job ranking Factor comparisonsystem system

Job vs. scale Job classification Pointsystem system

SCOPE OF COMPARISON
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Job Evaluation Systems

Job Ranking System

Oldest system of job evaluation bywhich jobs are arrayed on the basis of

their relative worth.

Disadvantages

Does not provide a precise measure of

each jobs worth.

Final job rankings indicate the relativeimportance of jobs, not extent ofdifferences between jobs.

Method can used to consider only a


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Paired-Comparison Job RankingTable

Directions: Place an X in the cell where the value of a row job is higher than thatof a column job.

index
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Job Evaluation Systems

Job Classification system

A system of job evaluation in which jobsare classified and grouped according to a

series ofpredetermined wage grades.

Successive grades require increasingamounts of job responsibility, skill,

knowledge, ability, or other factorsselected to compare jobs.

index


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Point System Point System

A quantitative job evaluation procedurethat determines the relative value of a

job by the total points assigned to it.

Permits jobs to be evaluatedquantitatively on the basis of factors orelementscompensable factorsthatconstitute the job.

Point Manual

A handbook that contains a description

of the compensable factors and thede rees to which these factors ma exist

P i t V l f J b F t


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Point Values for Job Factorsof The American Association of Industrial

Management

1ST 2ND 3RD 4TH 5TH

FACTORS DEGREE DEGREE DEGREE DEGREE DEGREE

Skill1. Education 14 28 42 56 702. Experience 22 44 66 88 1103. Initiative and ingenuity 14 28 42 56 70

Effort4. Physical demand 10 20 30 40 505. Mental or visual demand 5 10 15 20 25

Responsibility6. Equipment or process 5 10 15 20 257. Material or product 5 10 15 20 258. Safety of others 5 10 15 20 25

9. Work of others 5 10 15 20 25

Job Conditions10. Working conditions 10 20 30 40 5011. Hazards 5 10 15 20 25

index


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Factor Comparison System

Factor Comparison System

A job evaluation system that permits theevaluation process to be accomplished

on a factor-by-factor basis by developinga factor comparison scale.

The compensable factors of ajob

evaluated are compared against thecompensable factors ofkey jobs withinthe organization that serve as the jobevaluation scale.


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Characteristics of Key Jobs Key Jobs

Jobs that are important for wage-setting purposes and are widely knownin the labor market.

Characteristics of Key Jobs

They are important to employees and theorganization.

They vary in terms ofjobrequirements.

They have relatively stable job content.

The are used in salar surve s for wa e

index


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Job Evaluation forManagement Positions

Hay Profile Method

Job evaluation technique using threefactorsknowledge, mental activity, and

accountabilityto evaluate executiveand managerial positions.

E it d It I t


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Equity and Its Impact onPay Rates

ExternalEquity

ProceduralEquity

InternalEquity

IndividualEquity

Forms of Equity


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3/18/13 Manoj Mathew, RCBSManoj Mathew, RSOM

Relationship between PayEquity and Motivation

The greater the perceived disparity between myinput/output ratio andthe comparison persons input/output ratio, the greater mymotivation to reduce the inequity.

Th K S i C i


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The Key Steps in CreatingCompensation Plans

1998 by Prentice

1. JobAnalysis

Job Evaluation forInternal Equity

2. JobDescriptions

Identify

CompensableFactors

3. JobSpecifications

4. Rate Worth of All

JobsUsing aPredeterminedSystem5. Job

Hierarchy

7. Establish FinalPayPolicy

IndividualPay

6. Classify Jobs

byGrade Levels

1. Check Market

Value UsingBenchmark or KeyJobs

Market SurveysforExternal Equity

Within-Pay-RangePositioning

Criteria forIndividual E uit

Criteria for PayPositioning WithinRange for Each Job Experience Seniority Performance


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Pay for Performance Systems /Incentive Systems

Pay-for-performance systems, also calledincentive systems, reward employeeperformance on the basis of three

assumptions: Individual employees and work teams differ in

how much they contribute to the firmnotonly in what they do, but also in how well theydo it.

The firms overall performance depends to alarge degree on the performance of individualsand groups within the firm.

To attract, retain, and motivate highperformers and to be fair to all employees, a


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Pay-for-Performance Programs

Microlevel

Meritpay

Bonuse

s

Awards

Piece

rate

Individual Team

Macrolevel

Business Unit/Plant Organization

Bonuses

Awards

Gainsharing

Bonuses

Awards

Profitsharing

Stock

plans

Unit of Analysis


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Gainsharing is aplant wide incentive plan

in which a portion of the companys costsavings is returned to workers, usually in theform of a lump-sum bonus.

Profit sharingis a corporate wide incentiveplan that uses a formula to allocate a portion

of declared profits to employees.


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Key Strategic Pay Policy Questions in theDesign of Executive Long-Term Income

Programs1. How long should the time horizon be for

dispensing rewards?2. Should length of service be considered in

determining the amount of the awards?

3. Should the executive be asked to share part ofthe costs and, therefore, increase his or herpersonal risk?

4. What criteria should be used to trigger theaward?

5. Should there be a limit on how much executives

can earn or a formula to prevent large unexpectedgains?

6. How often should the awards be provided?7. How easy should it be for the executive to

convert the award into cash?


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Advantages of Individual-BasedPay-for-Performance Plans

Performance that is rewarded islikely to be repeated.

Individuals are goal-oriented and

financial incentives can shape anindividuals goals over time.

Assessing the performance of eachemployee individually helps the

firm achieve individual equity. Individual-based plans fit in with an

individualistic culture.


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Disadvantages

Tying pay to goals may promotesinge-mindedness.

Many employees do not believe that

pay and performance are linked. Individual pay plans may work

against achieving quality goals.

Individual-based programs promoteinflexibility in some organizations.


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Conditions Under Which Individual-

Based Plans Are Most Likely to Succeed

When the contributions of individualemployees can be accurately isolated.

When the job demands autonomy. When cooperation is less critical to

successful performance or whencompetition is to be encouraged.

They foster group cohesiveness.

They aid performance measurement.


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Advantages of Team-Based

Pay-for-Performance Plans

They foster groupcohesiveness.

They aid performance

measurement.


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3/18/13 M j M th RCBSM j M th RSOM

Disadvantages of Team-BasedPay-for-Performance Plans

Possible lack of fit withindividualistic cultural values.

The free-riding effect. Social pressures to limit

performance.

Difficulties in identifyingmeaningful groups.

Intergroup competition leading to a

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