Mod 4 - Job_Compensation

8/8/2019 Mod 4 - Job_Compensation

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Compensation Planning

Definition: Compensation is what employees receive in

exchange for their contribution to the organization. It is

comprehensive term which includes pay,incentives and benefits

offered by the employer

Objectives

± Internal Equity: It ensures that more difficult jobs are paid

more

± External Equity: It ensures that jobs are fairly compensated

to similar jobs in the labor market ± Individual Equity: It ensures equal pay for equal work i.e.

each individual¶s pay is fair in comparison to others doing

same/similar jobs



BASIC WAGES

Basic wage is based on recommendations by Fair

Wage Committee(1948)and 15th Indian Labor

Conference(1957), awards by wage tribunals, wage

boards, pay commission and job evaluations.Criteria

be considered for basic wage:

± Skill needs of the job

± Experience needed

± Difficulty of work;mental as well as physical

± Training needed

± Responsibilities involved

± Hazardous nature of the job



Remunerations,if paid,not amounting to wages under anyof theActs:

1. Bonus or other payments under a profit-sharing schemewhich do not form a part of contract of employment.

2. Value of any house accommodation, supply of light,water, medical attendance, traveling allowances, or

payment in lieu thereof or any other concession.3. Any sum paid to defray special expenses entailed by the

nature of the employment of a workman.

4. Any contribution to pension, provident fund, or ascheme of social security and social insurance benefits.

5. Any other amenity or service excluded from thecomputation of wages by general or special order of an

appropriate govt. authority.



WAGE BOAR D

Wage board: Important institutions set up bygovernment of India for fixation and revision of wages.Each board consists of one neutral Chairman,twoindependent members and two or three representativesof workers and management each.Considers following

Job evaluation, wages rates for similar jobs incomparable industry, Employee¶s productivity, firm¶sability to pay, various wage legislations, Governmentobjectives, Place if industry, need for incentives

Wage board fix revise various components of wageslike basic pay,DA,Incentive earnings, overtime HR A



Equity & Pay R ates

1. Find the worth of each job through job

evaluation.

2. Conduct a salary survey to find what other employers are paying for comparable jobs.

3. Group similar jobs into pay grades.

4. Price each pay grade by using wage curves.

5. Fine tune pay rates.



Formal & Informal Surveys

The published survey sources in India include:

Reports published by the Ministry of Labour.

Pay commission reports.

Reports of Wage Boards appointed by Govt.

Reports of employees and employers¶ organization.

Trade journals of specific industry groups etc.



SURVEYS METHODS

Key job matching

Key class matching

Occupational method

Job evaluation method

Broad classification method



Dearness Allowance

Definition It is allowance paid to employees to enable

them to face the increasing dearness of essential

commodities.It serves as a cushion, sort of insurance

against increase in price levels of commodities.DA is

linked to:

All India Consumer Price Index(AICPI): The labor

bureau,Shimla,Computes AICPI(Base1960=100

points) from time to time

Time Factor: In this case DA is linked to rise in All

India Consumer Price Index in a related period ,instead

of linking it to fortnightly or monthly fluctuations



PAY COMMISSIONS

Wages and allowances of Central and stategovernments employees are determined through

pay commissions appointed by appropriategovernments.So for Central government hasappointed five such commissions. The disputesarising out of pay commissions awards and their implementation are decided by Commissions of inquiry, adjudication machinery and jointconsultative machinery



Objectives of Wage and SalaryAdministration

1. To establish a fair and equitable remuneration offering similar pay for similar work.

2. To attract qualified and competent personnel.

3. To retain the present employees by keeping wage levels in tune

with competing units.

4. To control labour and administrative costs in line with the ability

of the organisation to pay.

5. To improve motivation and morale of employees and to improve

union-management relations.

6. To project good image of company & to comply with legal

needs relating to wages & salaries.



Some common allowances in the organisedSection in India are:

Attendance Books Car

Credit Card Education Medical

City Compensatory ESIS Night Shift

Club Membership Family Overtime

Computer Insurance Paternity

Deputation Lease Travel Pension

Driver Lunch PF

Relocation Servant Tiffin

Transport Telephone Uniform



The elements of Wage and SalaryAdministration

1.Identifying the available salary opportunities, their costs, estimating the worth of its members, of their

salary opportunities and communicating them to

employees.

2.Relating salary to needs and goals.

3.Developing quality, quantity and time standards

related to work and goals.

4.Determining the effort necessary to achieve

standards.

5.Measuring the actual performance.



Elements of Wage and SalaryAdministration contd.

6.Comparing the performance with the salaryreceived.

7.Measuring the job satisfaction of the employees.

8.Evaluating the unsatisfied wants and unrealised

goals of the employees.

9.Finding out the dissatisfaction arising from

unfulfilled needs and unattained goals.

10.Adjusting the salary levels accordingly with a

view to enabling the employees to reach unreached

goals and fulfill the unfulfilled needs.



Wage Policy in India

Minimum Wage Fair Wage

Living Wage

MinimumW

ageThe 15th Indian Labour Conference (1957) formally

quantified the term µminimum wage¶ thus:

In calculating the minimum wage, the standard

working class family should be taken to comprisethree consumption units for one earner, the earningsof women, children and adolescents beingdisregarded;



MinimumWage (contd.)

Minimum food requirements be calculated on basis of setintake of calories as recommended by Dr Aykroyd for an average

Indian adult of moderate activity;

Clothing requirements be estimated on the basis of per

capita consumption of 18 yards per annum which would give for

the average worker¶s family of four a total of 72 yards;

In respect of housing, the rent corresponding to the minimum

area provided for under Govt. Industrial Housing Scheme

should be taken into consideration in fixing the minimum wage;

Fuel,lighting and other miscellaneous items of expenditure should constitute 20% of the total minimum

wage.



FairWage

Fair Wage should be determined taking the following

factors into account:

The productivity of labour;

The prevailing rates of wages in same or similar

occupations in same region or neighboring regions;

The level of national income and its distributions;

The place of industry in the economy of the country;

The employer¶s capacity to pay.



LivingWage

According to the Committee on Fair Wages, the living

wage is the highest among the three. It must provide (i)

basic amnesties of life, (ii) efficiency of worker and (iii)

satisfy social needs of workers such as medical,

education, retirement, etc. µLiving Wage¶ is a dynamic

concept, which grows in line with the growth of the

national economy.



STATE R EGULATION OFWAGESACTS

Minimum WagesAct, 1948

The Payment of WagesAct, 1936

Adjudication of Wage Disputes

Wage Boards

Pay Commissions

The Payment of BonusAct, 1965



Bonus Calculation in India

1. Bonus is calculated on salary of Rs 2,500 /month.

2. Bonus is to be paid at a minimum of 8.33% of thesalary of an employee.

3. Bonus be paid within 8 months from the close of accounting year.

4. Available surplus exceeds the amount of minimum bonus payable to an employee, employer pays a higher bonus subject to a minimum of 20% of salary or wage.

5. Bonus is paid out of available surplus of anaccounting year after deducting the sums referred to in

Sec.6. If there is no surplus, even then bonus has to be paidtreating it as µdeferred wage¶.

6. To claim bonus, the employee must have worked for 30days in that year.



Some common allowances in the organisedSection in India are:

Attendance Books Car

Credit Card Education Medical

City Compensatory ESIS Night Shift

Club Membership Family Overtime

Computer Insurance Paternity

Deputation Lease Travel Pension

Driver Lunch PF Servant Tiffin

Transport Telephone Uniform



Objectives of Wage and SalaryAdministration

To establish a fair and equitable remunerationoffering similar pay for similar work.

To attract qualified and competent personnel.

To retain the present employees by keeping wage

levels in tune with competing units. To control labour and administrative costs in line

with the ability of the organisation to pay.

To improve motivation and morale of employees

and to improve union-management relations. To project a good image of the company and to

comply with legal needs relating to wages andsalaries.



Factors influencing compensation levels

Job needs

A bility to pay

Cost of living

Prevailing wage rates

Unions

Productivity

State regulation

Demand and supply of labour



R EASONS FORWAGE DIFFER ENTIALSThe following are the reasons for Wage Differentials:

Wage Differentials R easons

Interpersonaldifferentials

Differentials in sex, skills, age,knowledge, experience

Inter-occupationaldifferentials

Varying requirements of skill,knowledge, demand-supply situation

Inter-areadifferentials

Cost of living, ability of employers¶to pay, demand and supply situation,extent of unionisation

Inter-firmdifferentials

A bility to employer to pay,employees¶ bargaining power, degreeof unionisation, skill needs, etc.

Mod 4 - Job_Compensation

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