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Module IV Chapter 2 Compensation Management

This document discusses compensation management and wage administration. It defines compensation as monetary and non-monetary benefits provided to employees, such as wages, salaries, insurance, and retirement benefits. Direct compensation refers to monetary wages and salaries, while indirect compensation includes non-monetary fringe benefits. Wages are paid to manual workers based on time worked or units produced, while salaries are paid to other employees on a monthly basis. The document outlines factors that influence wage policy, such as ability to pay, job requirements, management strategy, employees, demand and supply, cost of living, unions, government legislation, and prevailing market rates.

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Sonia Dann Kuruvilla
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101 views9 pages

Module IV Chapter 2 Compensation Management

This document discusses compensation management and wage administration. It defines compensation as monetary and non-monetary benefits provided to employees, such as wages, salaries, insurance, and retirement benefits. Direct compensation refers to monetary wages and salaries, while indirect compensation includes non-monetary fringe benefits. Wages are paid to manual workers based on time worked or units produced, while salaries are paid to other employees on a monthly basis. The document outlines factors that influence wage policy, such as ability to pay, job requirements, management strategy, employees, demand and supply, cost of living, unions, government legislation, and prevailing market rates.

Uploaded by

Sonia Dann Kuruvilla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Module IV :Chapter 2

Compensation management/wage and salary administration

 Compensation is given to employees and workers in the


organization.
 It is paid in the form of wages , salaries , insurance , maternity
leave , retirement benefits etc.
Types of compensation
a) Direct compensation (monetary benefits/basic pay)
b) Indirect compensation (non-monetary benefits , fringe benefits)
a) Direct compensation
 Direct compensation is also known as monetary benefits or
base compensation.
 It is the monetary benefit given to employees and workers in

the form of wage and salary . Direct compensation is mainly


classified in to 2 categories
a) Wage : wage is paid to workers , it is paid on daily , weekly,
hourly basis.
b) Salary : salary is paid to employees, it is paid on monthly basis
b) Indirect compensation is also known as fringe benefits or non-
monetary benefits.
The non monetary benefits provided to employees and workers
over and above the normal wage and salary.
Introduction to wage
 The term wage is used to denote remuneration to workers doing
manual or physical work . Thus, wages are given to compensate the
unskilled workers for their services rendered to the organization .
wages may be based on the number of units produced or the time
spend on the job.
Concepts of wage
1. Minimum wage
2. Fair wage
3. Living wage
a) Minimum wage is that wage which must be paid whether the
company earns any profit or not . Minimum wage may be fixed
by an agreement between the management and the workers, but it
is usually determined through legislation.
b) Fair wage : it is that wage which is above the minimum wage but
below the living wage . It can be fixed by comparison with an
accepted standard wage.
c) Living wage : according to committee on fair wages ,the living
wage is highest among the three. It must provide basic
requirements of life ,satisfy social needs of workers such as
medical ,educational facilities to their children etc.
The factors influencing wage & salary
administration/wage policy
 The factors influencing wage policies are mainly classified in to 2;
1) Internal factors
2) External factors
Internal factors are factors which influence the wage structure with in the
organization. Internal factors are mainly classified in to 4 categories ;
a. Ability to pay
The ability to pay of an organization will influence wage rates to be paid .
If the concern is running into losses . Then it may not be able to pay
higher wage rate. A profitable concern may pay more to attract good
workers.
b) Job requirement
Basic wages depend largely on the difficulty level ,physical and
mental effort required in a particular job . The relative worth
of job can be estimated through job evaluation.
c) Managerial strategy
The overall strategy which a company pursue should determine
the remuneration to its employees . The strategy of the
organization is to achieve rapid growth, remuneration , these
are performance .
d) The employee
Several employee related factors interact to determine his
remuneration . These are performance , seniority , experience
and potential.
II) External factors

a) Demand and supply


The labour market conditions or demand and supply forces
operate at the national and local levels and determine
organizational wage structure . When the demand for a
particular type of labour is more and supply is less than the
wages will be more .
b) Cost of living
The wage rates are directly influenced by cost of living of a
place . The workers will accept a wage which may ensure
them a minimum standard of living.
c) Trade union’s bargaining power
The wage rates are also influenced by the bargaining power of
trade unions, stronger the trade union higher will be the wage
rates.
d) Government legislation
To improve the working conditions of workers Govt. may pass a
legislation for fixing minimum wages of workers .This may
ensure them a minimum level of living.
e) Psychological & social factors
The management should take into consideration the physiological
needs of the employees or workers while fixing the wage rates.
f) Economy
Economy also has its impact on wage and salary fixation. During
the recession period the wage rate will be less & during boom
and recovery period the wage rate will be high.
g) Technological development
With the rapid growth of industries there is a shortage of skilled
resources . The technological developments have been affecting
skill levels at faster rates.
h) Prevailing market rates
No enterprise can ignore prevailing or comparative wage rates.
The wage rates paid in the industry or other concerns at the
same place will form a base for fixing wage rates.

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