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Chapter7WageandSalaryAdministration(HumanResourceManagement)

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Chapter7WageandSalary
Administration(HumanResource
Management)
ADRIANANTAZO TUESDAY,29SEPTEMBER2015

WageandSalaryAdministration
Objectives:
Afterthislesson,youshouldbeableto:
1.Enumeratethedifferenttheoriesofwages
2.Explainthesignificanceofwagetotheworkers,laborandlaborrelations,tothenational
economyandsociety
3.Discusstheproceduresofawageandsalarysurvey
4.Comparetheproceduresofawageandsalarysurveyand
5.Deducetheadvantageofwageandsalarystructure.
TheroleofHRinthePaymentofsalaries
OneofthemostimportantfunctionofHRisthepaymentofpropersalariesandwagestoall
employees.Thepaythattheemployeesreceivefromtheemployeristheveryreasonfortheir
beinginthejob.Thepayprovidesthemwithstrongincentivetodotheirjobswellandthe
rateofpayindicatestheirstatusinthecompany.
TheoriesofWages

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Thewagetheoriesdealwiththepaymentoflaboremployedincompetitiveenterprise.Wage
representsthepaymentofonefactorofproductionthatismanpower.
1.ClassicWagetheoryitisbaseduponthefundamentalconceptthatlaborisacommodity
andwehavetopaythepriceaccordingtosupplyanddemand.Thegreaterthesupply,the
lowertheprice.Andthegreaterthedemandthehighertheprice.
2.ThejustwagetheoryofSt.ThomasAquinasajustwageisdescribedasawagewhich
permitstherecipientworkertoliveinamannerinkeepingwithhispositiontosociety.This
doctrineisrelatedtosocialorganizationbasedonthestatusoftheindividualinthesocial
organization.
MinimumwagelawThejustwagetheoryofSt.ThomasAquinasisthebasisinthe
implementationofthislaw.Whileitcouldnotbeconsistentwiththeminimumrequirements
ofdecentlivinginthesocialorganization,itrespondstothebasicrequirementsfor
subsistenceliving.
3.TheWagefundtheorythistheoryholdstheideathattheworkingcapitalofthenation
providesafundfromwhichwagescanbepaid.Thefundistobedividedbyalltheworkers
proportionately.ThistheorywasexpoundedbyJohnStuartMillandhisfollowersisbasedon
theMalthusiantheoryofpopulationandthelawordiminishingmarginalreturns.
4.BargainingtheoryofJohnDavidsonitproposesthatlaborisacommoditylikeanything
thatcouldbeboughtatapricebytheuser.
5.Themarginalproductivitytheoryitoffersthebestexplanationofthewagesinmodern
industry.Thesupplylaborinanygiveneconomyonthewholedependsuponthetotal
numberofindividualswhowanttoworkandareavailableforwork.
6.Thepurchasingpowertheoryittriestoestablishtherelationshipbetweenwagesandthe
levelofeconomicactivities.Thelevelofeconomicgrowthisdependentuponthesavings
generatedbecausetheincreaseinwagecreatesasurplusthatpropelsgrowth.
7.LabortheoryofValueKarlMarxpropoundsthistheoryoflabor.Thisgivescredenceto
thevalueoflabor.Itemphasizesthatlaboristhesourceofallproductsandthatwithoutthis
importantcomponent,therecouldbenogoodsforhumanconsumption.Everygoodthatis
producedcouldbetrackbacktotheparticipationoftheworkerandtherefore,labormustget
greatershareoftheprofit.Thisisthephilosophyofsomeorganizedlaborgroupswhoare
moreactiveinthegreatershareoftheprofitsofcompanyoperations.Theselaborunions
havethenotionthatprofitsarethesurplusesoftheotherfactorsofproduction,andare
pocketedbycapitalistbusinessmanmakingthemamasswealth.
8.ThestandardoflivingTheoryofwagearecentdevelopmentinthelabormarketisthe
saidtheorythatmeansthatthewagesshouldbebasedonthecostofliving.Thecostofliving
isdependentupontheeconomicneedsofthefamilyforbasicnecessitiesoflifeforfood,
clothingandshelter.
WageandSalarySurvey
Oncetheworthofajobhasbeenestablished,usingoneofthejobratingsystems,theactual
salarytobepaidforeachjobmustbedetermined.Amajorfactorinmakingthe
determinationisthewagesurvey.Sincesalariespaidbytheothercompanieshaveaneffect
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onemployment,moraleandturnoverrate,closeattentionispaidtothesalarythatis
prevailinginthecommunityandindustryforspecificjobs.
TheDevelopmentofwagesalarystructure
WageandsalarystructureistheHierarchyofjobstowherethepayratesareattached.The
positionsareallocatedinpaygradesaccordingtothejobevaluationresultsanditsrelations
withthepaysystemderivedfromtheresultofthesalarysurvey.
Thefollowingaretheadvantageofthewagesalarystructure:
1.itaffectstheworkersearningandstandardofliving.
2.Iteasestherecruitmentandmaintenanceofaneffectivelaborforce.
3.Itdevelopsemployeemoraleandincreasesworkefficiency.
4.Itrepresentscostandcompetitiveadvantageintheindustry.
5.Ithelpsinpreparingbudgetaryallocationsandeasecomputationofsalaryadjustments
andasanaidinshorttermandlongrangeplans.
6.Iteliminatespaydistortionsandinequitiesinemployeecompensation.
7.Itestablishesanequitablesalaryrangeforvariousjobs.
MethodsofWagePayment
Themainpurposeofaformalwageandsalarymanagementplanistohaveasystematic
methodofpaymenttoensurethatemployeesreceiveafairwageandsalaryfortheworkthey
perform.
Therearetwomethodsofpayingsalaries:
1.Bythetimeworkedinthismethod,wagesarecomputedintermsofunitoftime,itis
commontopayworkersbythedayandthetermdayworkwasadopted.
HxR=W
Inwhich:H=HoursActuallyWorked
R=RateperhourinPesos
W=TotalWageearned
Paymentonthebasisoftimedworkedismoresatisfactoryunderthefollowingconditions:
1.Employeeshavelittleornocontroloverhowmuchworktheyproduce.
2.Thereisnoclearcutrelationshipbetweentheeffortmadetoproducetheworkandthe
amountofworkproduced.

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Chapter7WageandSalaryAdministration(HumanResourceManagement)

3.Workdelaysoccuroftenandarebeyondtheemployeescontrol.
4.Qualityofworkisveryimportant
5.Unitsofworkproducedcannotbedistinguishedandcannotbemeasured.
2.Bytheamountofworkproducedearningdependsonhowmuchworktheemployee
completesoronarelatedfactor,suchasthequalityofwork.Thismethodofpayingwagesis
calledanincentivewageplan.Themostcommonincentiveplaniscalledpiecework.
Pieceworksalariesaredeterminedbythenumberofpiecevaluethatiscalledpiecerate.
NxU=W
InwhichN=Numberofunitsproduced
U=RateperunitinPesos
W=Wagesearnedperdayorperweek
PaymentbyPieceworkissatisfactoryunderthefollowingconditions:
1.Whenaunitofcompletedworkcanbemeasuredeasily
2.Whenthereisaclearrelationshipbetweenaworkerseffortandtheresultofhiseffort
3.Whenthequalityofworkislessimportantthanquantity,orwhenqualitystandardsare
uniformandmeasurable
4.Whentheflowofworkisregular,breakdownsarefew,andjobsfollowastandard
procedurewithinterruptions.
OtherInformationRelatedtoWages
LaborandWages
BlueCollarManualLaborers
WhiteCollarOfficeWorkers
PinkCollarJobsassociatedwithwomenlikenursing,secretarial,etc.
LaborGrades
SkilledLabortheseareworkerswhohavereceivedspecializedtrainingtodotheirjobs.The
havedevelopedandhonedaspecialskillandmayormaynotneedlicensedorcertifiedbythe
state.
UnskilledLabortheseareworkerswhoreceivednospecialtrainingandhavefewspecific
skills.
Professionalsarguablytheeliteofthelaborgrades,thesearethoseworkerswhoneedan
advancedegreetodotheirjobs.
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Chapter7WageandSalaryAdministration(HumanResourceManagement)

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