Compensation Management Unit 8 Confidential Compensation According to

Compensation Management Unit 8 Confidential

Compensation • According to Dictionary of Human Resource Managementcompensation is payment for work which 'compensates' the employee for the 'disutility' of labour. • The rather negative connotation associated with the term has led some personnel specialists to replace it with reward or reward management, more upbeat alternatives. 'Compensation' and 'compensation and benefits‘. Confidential

Compensation Management • The term compensation management, or wage and salary administration includes: • job evaluation • development and maintenance of wage structures , wage surveys, wage incentives, wage changes and adjustments • supplementary payments, profit sharing, control of compensation costs, and other related pay items. Confidential

Wage and Salary • Wage • The term wage is commonly used for those employees whose pay is calculated according to the number of hours worked. • Salary • The word salary applies to compensation that is uniform from one period to the next and does not depend upon the number of hours worked. Confidential

Wage and Salary • The term wage is commonly used for those employees whose pay is calculated according to the number of hours worked. Wage-earners are designated as hourly, non-supervisory, or bluecollar. • The word salary applies to compensation that is uniform from one period to the next and does not depend upon the number of hours worked. • Salaried often implies a status distinction, because those who are on salary are generally white-collar, administrative, professional, and executive employees. Confidential

Managing Compensation • The basic purpose of wage and salary administration is to establish and maintain an equitable wage and salary structure. • Its secondary objective is the establishment and maintenance of an equitable labour-cost. structure Confidential

Managing Compensation • Theories • • Subsistence theory. Standard of living theory. Residual claimant theory. The wage fund theory. Demand supply theory. Marginal productivity theory. Purchasing power theory. The bargaining theory of wages. Confidential

Important Factors for Fixation of Wages • • • The The The degree of skill. strain of work. experience involved. training involved. responsibility undertaken. mental and physical requirements. disagreeableness of the task. hazard attendant on the work, and fatigue involved. Confidential

Classification of Wages • According to The International Labour Organization (ILO): • The amount necessary for mere subsistence; • The amount necessary for health and decency; and • The amount necessary to provide a standard of comfort. Confidential

Classification of Wages • In India, wages are classified as: • Minimum wage • Fair wage • Living wage Confidential

Minimum Wage • A minimum wage has been defined by the Committee as : "the wage which must provide not only for the bare sustenance of life, but for the preservation of the efficiency of the worker. For this purpose, the minimum wage must provide for some measure of education, medical requirements and amenities". • The principles are incorporated in the Minimum Wages Act, 1948. Confidential

Fair Wage • According to the Committee on Fair Wages, "it is the wage which is above the minimum wage but below the living wage. ” • Considerable factors : • The productivity of labour; • The prevailing rates of wages in the same or neighbouring localities; • The level of the national income and its distribution; and • The place of industry in the economy. Confidential

Living Wage • The Committee defined a Living Wage as: "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, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age". Confidential

Designing and Administering Benefits • • • Collective Bargaining Voluntary Arbitration Wage Legislation Conciliation Adjudication Wage Boards Confidential