The Term Wage – ‘Wage and salary’ are often discussed and used interchangeably. But ILO defined the term wage as – “the remuneration paid by the employer for the services of hourly, daily, weekly and fortnightly employees”. It also means the remuneration paid to production and maintenance or blue collar employees.
Wages and salary administration should be controlled by some proper agency. This responsibility may be entrusted to the personnel department or the general company organisation, or to some job executive.
The objectives of wage and salary administration are under the following heads:-1. Organisational Objectives 2. Individual Objectives 3. Collective Objectives.
Some of the of objectives of wage and salary administration are:-
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1. To Attract Competent Personnel 2. To Improve Productivity 3. To Retain the Present Employees 4. To Establish a Fair and Equitable Remuneration 5. To Improve Union-Management Relation
6. To Control Cost 7. To Improve Public Image of the Organisation. 8.To Meet the Needs of Employees with Emphasis on Security and Esteem Needs 9. To Establish the Job Sequences and Lines of Promotion wherever Applicable 10. To Motivate Workers to Achieve Desired Levels of Performance.
Learn about the Objectives of Wage and Salary Administration
Objective of Wage and Salary Administration – For Employees and Employers
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, i.e., an optimal balancing of conflicting personnel interests so that the satisfaction of employees and employers is maximised and conflicts minimised.
The wage and salary administration is concerned with the financial aspects of needs, motivation and rewards. Managers, therefore, analyse and interpret the needs of their employees so that reward can be individually designed to satisfy these needs. For it has been rightly said that “people do what they do to satisfy some need. Before they do anything, they look for a reward or pay-off.”
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Steven Kerr observes- “Whether dealing with monkeys, rats, or human beings, it is hardly controversial to state that most organisms seek information concerning what activities are rewarded, and then seek to do those things, often to the virtual exclusion of activities not rewarded. The extent to which this occurs of course will depend on the perceived attractiveness of the reward offered….”. The reward may be money or promotion, but more likely it will be some pay-off-a smile, acceptance by a peer, receipt of information, a kind word of recognition etc.
A sound wage and salary administration tries to achieve these objectives:
1. For Employees:
(i) Employees are paid according to requirements of their jobs, i.e., highly skilled jobs are paid more compensation them low skilled jobs. This eliminates inequalities.
(ii) The chances of favouritism (which creep in when wage rates are assigned) are greatly minimised.
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(iii) Job sequences and lines of promotion are established wherever they are applicable.
(iv) Employees’ morale and motivation are increased because a wage programme can be explained and is based upon facts.
2. To Employers:
(i) They can systematically plan for and control their labour costs.
(ii) In dealing with a trade union, they can explain the basis of their wage programme because it is based upon a systematic analysis of job and wage facts.
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(iii) A wage and salary administration reduces the likelihood of friction and grievances over wage inequities.
(iv) It enhances an employee’s morale and motivation because adequate and fairly administered wages are basic to his wants and needs.
(v) It attracts qualified employees by ensuring and adequate payment for all the jobs.
According to Beach, wage and salary programmes have four major purposes:
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(i) To recruit persons for a firm;
(ii) To control payroll costs;
(iii) To satisfy people, to reduce the incidence of quitting, grievances, and fractions over pay; and
(iv) To motivate people to perform better.
Objective of Wage and Salary Administrations – 8 Important Objectives: Fair and Equitable Remuneration, Attract Competent Persons, Retain Employees and a Few Others
What is wage and salary administration? Wage and salary administration is essentially the application of a systematic approach to the problem of ensuring that employees are paid in a logical, equitable and fair manner.
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The Term Wage – ‘Wage and salary’ are often discussed and used interchangeably. But ILO defined the term wage as – “the remuneration paid by the employer for the services of hourly, daily, weekly and fortnightly employees”. It also means the remuneration paid to production and maintenance or blue collar employees.
Salary – The term salary is defined as the remuneration paid to the clerical and managerial personnel employed on monthly or annual basis.
This distinction between wage and salary does not seem to be valid in these days of human resources approach where all employees are treated as human resource and are viewed at par. Hence, these two terms can be used interchangeably. As such the term wage and salary can be defined as the direct remuneration paid to an employee compensating for his services to an organisation. Salary is also known as basic pay.
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The most important objectives of any wage and salary administration are:
1. Fair and Equitable remuneration – The remuneration paid to the employees should be fair and equity should be maintained.
(i) Internal equity means similar pay for similar work.
(ii) External equity means pay for a job should be equal to pay for a similar job in other organizations.
2. Attract competent persons – A sound wage and salary administration helps to attract qualified and hard-working people by ensuring on adequate payment for all jobs.
3. Retain Employees – The compensation level should meet the expectations of its employees so that they remain committed and loyal and do not quit.
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4. Improve Productivity – Fair and equitable compensation plans improves the motivation commitment and moral of employees which leads to higher productivity.
5. Control costs – Effective compensation management ensures that workers are neither overpaid nor underpaid. It also keeps in view the fact, the company’s ability to pay.
6. Comply with legal rules – Compensation management must invariably satisfy government rules regarding minimum wages, bonus, allowances, benefits etc.
7. Improves Union-Management Relation – Wages and salaries based on systematic analysis of jobs and prevailing pay levels are more acceptable to trade unions. It helps in collective bargaining, negotiations and reducing grievances.
8. Improve Public Image of the Company – A company paying equitable and fair wages and Salaries, complies with legal requirements of compensation enhances its public image as a good paymaster.
Objectives of Wage and Salary Administration – 3 Major Objectives: Organisational, Individual and Collective
In order to establish and maintain a fair and equitable wage structure and its proper implementation in an organisation, its W&S administration should aim at –
Objective # 1. Organisational:
a. To attract and retain competent manpower
b. To determine salary levels
c. To make provisions for incentives
d. To boost morale of the employees
e. To get the productivity increased
f. To ensure equity in pay for similar jobs
g. To be cost effective
h. To be flexible to accommodate any organisational change, if need be
i. To have wage differentials
j. To ensure meeting legal obligations
k. To maintain a satisfactory public-related image.
Objective # 2. Individual:
a. To treat every individual fairly and equitably
b. To pay every individual according to his/her worth and convince him/her of the same
c. To match or exceed the reward with the market rates (external equity)
d. To maintain internal equity.
Objective # 3. Collective:
a. To keep the workers’ unions satisfied to the extent possible
b. To ensure that consumers’ interests are duly protected
c. To abide by legal obligation and government policies.
Objectives of Sound Wage and Salary – 10 Objectives: To Attract Competent Personnel, To Improve Productivity, To Retain the Present Employees and a Few Others
An important objectives of a sound wage and salary structure are:
1. To Attract Competent Personnel:
To attract qualified and hardworking personnel to the organisation is an important object of the sound wage and salary administration. Each and every organisation provided an adequate payment for all jobs to attract competent personnel.
2. To Improve Productivity:
If qualified and hardworking personnel are engaged in the organisation, obviously, production of an organisation will increase. Thus, improvement in productivity is an important object of salary system.
3. To Retain the Present Employees:
By providing adequate payment for all jobs, organisation can main its personnel.
4. To Establish a Fair and Equitable Remuneration:
There should be internal and external equity in remuneration paid to employees. Internal equity means similar pay for similar work. External equity implies pay for a job should be equal to pay for a similar job in other organisation. Payments based on jobs requirement employee performance and industry levels minimize favoritism and inequities in pay.
5. To Improve Union-Management Relation:
A sound wage and salary administration simplifies collective bargaining and negotiation oval pay. It also reduces grievances arising out of wage inequities and improve union-management relationship.
6. To Control Cost:
Through good salary system labour and administrative cost can be kept in line with the ability of the company to pay. The company can systematically plan and control labour costs.
7. To Improve Public Image of the Organisation:
A sound wage and salary programme protect public image of the organisation by compelling with wage and salary provisions in the labour contract and with federal and state laws and regulation.
8. To meet the needs of employees with emphasis on security and esteem needs.
9. To establish the job sequences and lines of promotion wherever applicable.
10. To motivate workers to achieve desired levels of performance.
Objectives of Sound Wage and Salary – With Policies and Functions
Wages and salary administration should be controlled by some proper agency. This responsibility may be entrusted to the personnel department or the general company organisation, or to some job executive. Since the problem of wages and salary is very delicate and complicated, it is usually entrusted to a committee composed of high ranking executives representing major line organisation.
Management has to formulate and administer the salary policies on sound lines as:
(a) Employee comparisons of pay are uninfluenced by levels of aspirations and pay history.
(b) Employees compare the pay of different employees with their skill, knowledge, performance, etc.
(c) Employees act only to gross internal inequalities.
(d) Employees compare their pay with that of others in the same industry.
(e) Most of the employees satisfaction and work performance are based on pay.
(f) Internal inequalities in pay are more serious to certain employees.
The major function is:
(a) Review and recommendation of basic wage and salary structure.
(b) Approach and/or recommendation to management on job evaluation methods and findings.
(c) Review of budget estimates for wage and salary adjustment and increases.
(d) Help in the formulation of wages policies.
(e) Coordination and review of relative departmental rates to ensure conformity.
This committee should be supported by the advice of the technical staff. Such staff committees may be for job evaluation; job description, and merit rating, wage and salary surveys in an industry and for a review of present wage rates procedure and policies.
Objectives of Wage and Salary Administration – With Benefits
Compensation may be defined as money received in the performance of work, plus the many kinds of benefits and services that organisations provide their employees. ‘Money’ is included under direct compensation (popularly known as wages, i.e., gross pay); while benefits come under indirect compensation, and may consist of life, accident and health insurance, the employer’s contribution to retirement, pay for vacation or illness, and employer’s required payments for employee welfare as social security.
A ‘wage’ (or pay) is the remuneration paid, for the service of labour in production, periodically to an employee/worker. “Wages” usually refer to the hourly rate or daily rate paid to such groups as production and maintenance employees (“blue-collar workers”).
On the other hand, ‘Salary’ normally refers to the weekly or monthly rates paid to clerical, administrative and professional employees (“white-collar workers’). The ‘wage levels’ represent the money an average worker makes in a geographic area or in his organisation.
It is only an average; specific markets or firms and individual wages can vary widely from the average. The term wage structure is used to describe wage/salary relationships within a particular grouping. The grouping can be according to occupation, or organisation, such as wage structure of craftsman (carpenters, mechanics, bricklayers, etc.)
A sound wage and salary administration tries to achieve these objectives:
(i) To Acquire Qualified Competent Personnel – Candidates decide upon their career in a particular organization mostly on the basis of the remuneration the organization offers. Qualified and competent people join the best paid organizations. As such, the organizations should aim at payment of salaries at that level, where they can attract competent and qualified people.
(ii) To Retain the Present Employees – If salary level does not compare favourably with that of similar other organizations. Employees quit the present one and join the other organizations. The organisation must keep the wage level at the competitive level, in order to prevent such occurrence.
(iii) To secure internal and external equity- Internal equity means payment of similar wages for similar jobs within the organization. External equity means payment of similar wages to similar jobs in comparable organizations.
(iv) To Ensure Desired Behaviour- Good rewards reinforce desired behaviour like performance, royalty, accepting new responsibilities and challenges, etc.
(v) Control Costs- To keep labour and administrative costs in line with the ability of organization to pay.
(vi) Comply with Legal Regulations- A sound wage and salary considers the legal challenges imposed by the government.
(vii) To Protect the Company Image in the eyes of the public.
(viii) To Pay According to the Content and Difficulty of the Job and in tune with the efforts and merits of the employee.
(ix) To Facilitate Payroll Administration: To facilitate payroll administration of budgeting and wage and salary control.
(x) To Simplify Collective Bargaining procedures and negotiations.
(xi) To Promote Organizational Feasibility.
Benefits of a good compensation package to the employees:
(i) Employees are paid according to requirements of their jobs, i.e., highly skilled jobs are paid more compensation than low skilled jobs. This eliminates inequalities.
(ii) The chances of favouritism (which creep in when wage rates are assigned) are greatly minimised.
(iii) Job sequences and lines of promotion are established wherever they are applicable.
(iv) Employees’ morale and motivation are increased because a wage programme can be explained and is based upon facts.
Benefits of a good compensation package to the employers:
(i) They can systematically plan and control their labour costs.
(ii) In dealing with a trade union, they can explain the basis of their wage programme because it is based upon a systematic analysis of job and wage facts.
(iii) A wage and salary administration reduces the likelihood of friction and grievances over wage inequities.
(iv) It enhances an employee’s morale and motivation because adequate and fairly administered wages are basic to his wants and needs.
(v) It attracts qualified employees by ensuring an adequate payment for all the jobs.
Objectives of a Wage and Salary Administration – 8 Main Objectives
The important objectives of wage and salary administration are as follows:
1. To attract qualified and highly competent candidates – Candidates generally prefer to join the organisation which pay attractive remuneration. Well qualified and highly competent candidates join the best paid organisations.
2. To retain the present employees – If the salary level does not compare favourably when compared with that of other similar organisations, employees quit the present organisation and join other organisations. Therefore, every organisation must keep the wages and salaries of its employees at competitive levels in order to retain them and prevent such quits.
3. To ensure internal and external equity – Internal equity means payment of similar wages for similar jobs within the organisation, while external equity means payment of similar wages when compared to similar jobs in other competitive organisations.
4. To ensure favourable behaviour and increase loyalty of labour – Attractive wage structure reinforces favourable behaviour among the employees. It also raises their loyalty, morale, job performance, readiness to accept higher responsibilities etc.
5. To control costs – Sound wage and salary system enables the management to keep labour administration cost in line with its ability to pay. It facilitates administration and control of pay roll.
6. To improve public image of the organisation – A good wage and salary system seeks to project the image of a progressive employer and to comply with legal requirements relating to wages and salaries.
7. To establish job sequences and lines of promotion – A good wage and salary administration establishes job sequences and lines of promotion wherever applicable.
8. To improve union-management relation – Wages and salaries based on systematic analysis of jobs and prevailing wage levels are more acceptable to trade unions. Therefore, sound wage and salary administration simplifies collective bargaining and negotiations over pay, reduces labour-grievances and thereby improves union-management relations.
The functions of wage and salary committee or any other person connected with wage and salary administration are:
(i) To approve, in a broad policy determining manner, the system of job descriptions and job evaluation.
(ii) To check all activities of the salary administration group against the company policies.
(iii) To recommend the wage policies for the administration of the wage programme.
(iv) To recommend changes in the wage policies and in the salary or wage level.
(v) To review wage and salary schemes department-wise.
(vi) To recommend specific raises for executives at various levels.
Objectives of Wage and Salary Administration – General Objectives
Wage and Salary Administration refers to the establishment and implementation of sound policies and practices of employee compensation. They affect levels of employee commitment to the organization. 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.
Wages have at least two connotations from the viewpoint of employers and employees in organizational settings.
The employer perceives wages as a cost of their business efforts and is keen to reduce labour cost per unit of output. Also they realize that it would not be possible for them to attract and maintain an effective work force without compensating it adequately. The employees consider wages as a means for satisfying their needs in terms of an expected standard. They desire to receive at least as much remuneration as other individuals equipped with similar skills get for performing same nature of task.
According to S.P. Robbins – The term wage and salary administration denotes the process of managing a company’s compensation program. The goals of compensation administration are to design a cost-effective pay structure that will attract, motivate and retain competent employees.
According to Beach, wage and salary programmes have four major purposes:
(i) To recruit persons for a firm.
(ii) To control payroll costs.
(iii) To satisfy people, to reduce the incidence of quitting, grievances and frictions over pay.
(iv) To motivate people to perform better.
The objectives of wage and salary administration are numerous and sometimes conflict with each other.
Wage and salary administration to be managed by responsible officials of the organisation. The ideal way is to have an Accounts officer under the personnel department with qualified Account executive and trained personnel to maintain the records of fiscal transactions.
Following are general objectives of wage and salary administration:
i) Cost control
ii) Fair and equitable remuneration
iii) Wages and salaries as an important incentive vis-a-vis productivity.
iv) Satisfactory public relation is very essential for creating public image.
Objective of Wage and Salary Administration – To Acquire Qualified Competent Personnel, To Retain the Present Employees and a Few Others
The important among them are:
(i) To acquire qualified competent personnel – Candidates decide upon their career in a particular organisation mostly on the basis of the amount of remuneration the organisation offers. Qualified and competent people join the best-paid organisations. As such, the organisations should aim at payment of salaries at that level, where they can attract competent and qualified people.
(ii) To retain the present employees – If the salary level does not compare favourably with that of other similar organisations, employees quit the present one and join other organisations. The organisation must keep the wage levels at the competitive level, in order to prevent such quits.
(iii) To secure internal and external equity – Internal equity does mean payment of similar wages for similar jobs within the organisation. External equity implies payment of similar wages to similar jobs in comparable organisations.
(iv) To ensure desired behaviour – Good rewards reinforce desired behaviour like performance, loyalty, accepting new responsibilities and changes etc.
(v) To keep labour and administrative costs in line with the ability of the organisation to pay.
(vi) To protect the public as progressive employers and to comply with the wage legislations.
(vii) To pay according to the content and difficulty of the job and in tune with the effort and merit of the employees.
(viii) To facilitate pay roll administration of budgeting and wage and salary control.
(ix) To simplify collective bargaining procedures and negotiations.
(x) To promote organisation feasibility.