Wage and salary administration affect levels of employee commitment to the organisation. However, fascinating the individual’s job assignment is, the employee must be paid. Pay affects the way people work-how much and how well. A large part of the compensation that people receive from work is monetary. Although managers are expected to conserve money and distribute it wisely, many employees feel that they should get more of it for what they do. Wages, salaries and many employee benefits and services are form of compensation.
Administration of employee compensation is called wage and salary administration. According to D.S. Beach “Wage and Salary Administration refers to the establishment and implementation of sound policies and practices of employee compensation. It includes such areas as job evaluation, surveys of wage and salaries, analysis of relevant organizational problems, development and maintenance of wage structure, establishing rules for administrating wages, wage payment incentives, profit sharing, wage changes and adjustments, supplementary payments, control of compensation costs and other related items.”
The wage and salary administration aims to establish and maintain an equitable wage and salary structure and an equitable labor cost structure.
Objectives of Wage and Salary Administration :
A sound plan of wage and salary administration seeks to achieve the following objectives :
- To establish a fair and equitable compensation offering similar pay for similar work.
- To attract competent and qualified personnel.
- To retain the present employees by keeping wage levels in tune with competitive units.
- To keep labor and administrative costs in line with the ability of the organization 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 and salaries.
- To establish job sequences and lines of promotion wherever applicable.
- To minimize the chances of favoritism while assigning the wage rates.
Principles of Wage and Salary Administration :
The following principles should be followed for an effective wage and salary administration ;
- Wage policy should be developed keeping in view the interests of all concerned parties viz., employer, employees, the consumers and the society.
- Wage and salary plans should be sufficiently flexible or responsive to changes in internal and external conditions of the organization.
- Efforts should be made to ensure that differences in pay for jobs are based on variations in job requirements such as skill, responsibility, efforts and mental and physical requirements.
- Wage and salary administration plans must always be consistent with overall organizational plans and programmes.
- Wage and Salary administration plans must always be in conformity with the social and economic objectives of the country like attainment of equality in income distribution and controlling inflation, etc.
- These plans and programmes should be responsive to the changing local and national conditions.
- Wage and salary plans should expedite and simplify administrative process.
- Workers should be associated, as far as possible, in formulation and implementation of wage policy.
- An adequate data base and a proper organizational set up should be developed for compensation determination and administration.
- The general level of wages and salaries should be reasonably in line with that prevailing in the labor market.
- There should be a clearly established procedure for hearing and adjusting wage complaints. This may be integrated with the regular grievance procedure, if it exists.
- The workers should receive a guaranteed minimum wage to protect them against conditions beyond their control.
- Prompt and correct payments to the employees should be ensured and arrears of payment should not accumulate.
- The wage and salary payments must fulfill a wide variety of human needs including the need for self actualization.
- Wage policy and programme should be reviewed and revised periodically in conformity with changing needs. For revision of wages, a wage committee should also be preferred to the individual judgement however unbiased of a manager.