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Human Resource Management

Wage, Salary and Reward Administration

Chapter Content:
We will cover the following:
Remuneration & its Components Compensation Administration Process Wage & salary Administration Different types of reward Different types of Incentives and Incentives Plan International Compensation.

Remuneration & Its Components

Definition: Remuneration' is a general term covering the monetary and related entitlements of employees - paid by employers in return for the work of employees. Components:
Fringe Benefits Incentives Individual Plans P.F, Gratuity, Medical Care, Accident Relief, Health and Group insurance

Non Financial Perquisites
Company Car, Club Membership, Paid Holidays, Furnished House, Stock option scheme, etc Indirect

Hourly and monthly Rated Wages and Salaries

Job Content
Challenging job, Responsibilities, Recognition, Growth prospects, Supervision, Working conditions, Job sharing, etc.

Group Plans


Developing Pay Surveys

Select Employers with Comparable Jobs

Determine Jobs to be Surveyed

Decide What Information Is Needed

Conduct Survey

Pay Structures
Common Pay Structures

Hourly and salaried Office, plant, technical, professional, managerial Clerical, information technology, professional, supervisory, management, and executive Factors that affect Remuneration/Pay Structure: External: Labor market Cost of Living Society The economy Geographic Location Internal Factor: Business Strategy Job Evaluation & Performance Appraisal The employee Kind of business

Establishing Pay Structures

Wage & Salary

Wages: Wages are compensation. This includes

basic wages, allowances, bonuses etc. On the employers points of view, wages form that part of cost of production which is attributed as compensation paid to labor. Wages are paid in the form of time rate or piece rate to the workers, who are directly involved in the production or commercial activities.
Salary: This is compensation paid to the indirect

labor in the form of cash. Indirect labor involves supervisors, managers and supporting staff like office assistants, clerks, etc. Salaries are paid in the form of time rate, mostly on monthly basis.

Wage & Salary

On the basis of the employee needs and ability of the

organization, there are various kinds of wages. Wages are generally four types: Subsistence wages Minimum Wages Fair Wages Living Wages Subsistence wages: This is level of wage bellows the minimum level which can lead inhuman life to the employees. Minimum Wages: This is a wage level fixed by government which is considered adequate, taking into account the cost of living. All the organizations are bound to follow this direction so that no employee is paid a wage less than the minimum wage fixed by government irrespective of grade, class or nature of work.

Wage & Salary

Fair Wages: This is fixed by employer. This level

of wage varies from industry to industry. The main criteria are the capacity of payment. Fair wage is a wage above the minimum wage but below the living wage.
Living Wages: Living wage is one which should

enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter, but a measure of frugal comfort, including education for his children, protection against ill health, requirement of essential social needs and a measure of insurance against the more important misfortune including old age.

People do what they do to satisfy some

need and they look for a payoff or reward. The most obvious reward is pay, but there are many others, including:
promotions desirable work assignments peer recognition work freedom


Types of Reward


Types of Reward
Intrinsic versus Extrinsic Rewards Intrinsic rewards (personal satisfactions) come from the job itself, such as:
pride in ones work feelings of accomplishment being part of a work team

Extrinsic rewards come from a source outside the

include rewards offered mainly by management Money Promotions Benefits

Types of Reward
Financial versus Non-financial Rewards Financial rewards include:
wages bonuses profit sharing pension plans paid leaves purchase discounts

Non-financial rewards emphasize making life on

the job more attractive; employees vary greatly on what types they find desirable.

Types of Reward
Performance-based versus Membership-Based Rewards Performance-based rewards are tied to specific job performance criteria.
commissions piecework pay plans incentive systems group bonuses merit pay

Membership-based rewards such as cost-of-living

increases, benefits, and salary increases are offered to all employees.


Incentive Compensation
Incentives can be added to the basic pay structure to provide rewards for performance. It may be 3 types:
1. 2. 3. Individual Incentives Group Incentives Plant-wide Incentives

Individual Incentives include merit pay plans (annual increase, based on performance) piecework plans (pay based on number of units produced typically in a specified time period.) time-savings bonuses and commissions Work best where clear objectives can be set and tasks are independent.

Incentive Compensation
Incentive Compensation Plans: Group Incentives
Incentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation.

Plant-wide Incentives: Direct employee efforts

toward organizational goals (such as cost reduction)

Scanlon Plan - supervisor and employee committees suggest labor-saving improvements IMPROSHARE - formula is used to determine bonuses based on labor cost savings

Executive Compensation Programs

Supplemental Non-financial Compensation: Perquisites

Perks may include the following:

Golden parachutes protect executives when a merger or hostile takeover occurs by providing severance pay or a guaranteed position


Factors influencing wage and salary structure and administration

The organizations ability to pay;
Supply and demand of labour; The prevailing market rate; The cost of living; Living wage; Productivity