This document discusses wage and salary administration. It covers key concepts like wages, salaries, earnings, statutory minimum wage, living wage, and job analysis. It also describes common job evaluation methods like ranking, classification, point and factor comparison. Additionally, it discusses wage structure, wage determination process, and factors considered when fixing wages like ability to pay, market rates, productivity and more.

1. Module 4
Wage and Salary
Administration

2. Learning Agenda
• Wage Concepts
• Job Evaluation – Methods & Techniques
• Wage Structure, Policy & Differentials
• Wage Payment Methods
• Incentives & Fringe Benefits
• Performance Appraisal:
Scope & Significance
Methods of Appraisal
 Limitations of Appraisal.

3. Wages and salaries
• Wages in the widest sense mean any
economic compensation paid by the employer
under some contract to his workers for the
services rendered by them.
• But, in the narrower sense wages are the price
paid for the services of a labour in the process
of production.

4. Basic Definitions and Concepts:
• Wage:
According to Payment of Wages
Act, 1936, “Wages” means all remuneration
(Whether by the way of salary, allowances or
otherwise) expressed in terms of money or
capable of being expressed , would be payable
to a person employed in respect of his
employment or of work done in such
employment.

5. It includes:
• Any remuneration payable under any award or
settlement between the parties or order of a
court
• Any remuneration to which the person
employed is entitled in respect of overtime
work or holidays or any leave period.
• Any sum towards termination of employment
of the person under any law
• Any sum to which the person employed is
entitled under any scheme framed under any
law for the time being in force.

6. it does not include:
• Any bonus which does not form part of the
remuneration payable under the terms of
employment.
• Any contribution paid by the employer to any
pension or P.F and the interest accrued
thereon
• Any travelling concession
• Any gratuity payable
• Any sum paid to the employed person to
settle special expenses entailed by the nature
of his employment.

7. Salary:
• defined as the remuneration paid to the
clerical and managerial personnel employed
on monthly or annual basis.
• distinction between wage and salary doesn’t
seem to be valid on these days of human
resources approach where all employees are
treaded as human resources .
• Hence, these two terms can be used
interchangeably.

8. Earnings:
• Earnings are the total amount of
remuneration received by an employee during
a given period.
• These include salary, dearness allowance;
house rent allowance, city compensatory
allowances, other allowances, overtime
payments etc.

9. Statutory minimum wage:
• It is the wage determined and fixed according
to the procedure prescribed by the relevant
provisions of the Minimum Wages Act, 1948.
• It is the obligation of the employer to pay
them regardless of his ability to pay.

10. Living Wage:
• defined as wage to enable the earner to
provide for himself and his family the bare
essentials of food, clothing and shelter
comfort.
• It is provided for a standard of living to ensure
good health for the worker, and his family .
• Such a wage is determined by keeping in view
the national income and capacity to pay of an
industry.

11. Job analysis
• A job analysis is the process used to collect
information about the
duties, responsibilities, necessary
skills, outcomes, and work environment of a
particular job.
• Job analysis is a systematic description of the
activities within a job.

12. Definition
 It is a scientific method to define the
duties, responsibilities and accountabilities of
a job.
 It involves the identification and description of
what is happening on the job and also the
skills and quality of personnel needed for the
job.
 Thus, the analysis produces information on
job requirements, which is then used for
developing job descriptions (what the job
entails) and job specifications (what kind of

13. Methods of Job evaluation
• Ranking method
• Classification method
• Point method
• Factor comparison

14. Job Evaluation Methods
Ranking method:
• The job ranking method arranges jobs in
numerical order on the basis of the
importance of the job's duties and
responsibilities to the organization.
• This method, though easy to understand, is
highly subjective in nature.

15. Classification method:
• The job classification method slots jobs into pre
established grades.
• Higher-rated grades demand more
responsibilities, tougher working conditions and
varied job duties.
• This method is easy to understand and takes
care of all relevant factors affecting the
performance of a job.
• However, it is not easy to write broad
descriptions of a grade.
• Further, the method oversimplifies differences
between different jobs and different grades.

16. Point method
• The point system of job evaluation uses a
point scheme based on the compensable job
factors of skill, effort, responsibility and
working conditions.
• The more compensable factors a job
possesses, the more points are assigned to it.
• Jobs with higher accumulated points are
considered more valuable to the organization.

17. Highlights in HRM 2
Point Values for Job Factors of the American Association of Industrial
Management
1ST 2ND 3RD 4TH 5TH
FACTORS DEGREE DEGREE DEGREE DEGREE DEGREE
Skill
1. Education 14 28 42 56 70
2. Experience 22 44 66 88 110
3. Initiative and ingenuity 14 28 42 56 70
Effort
4. Physical demand 10 20 30 40 50
5. Mental or visual demand 5 10 15 20 25
Responsibility
6. Equipment or process 5 10 15 20 25
7. Material or product 5 10 15 20 25
8. Safety of others 5 10 15 20 25
9. Work of others 5 10 15 20 25
Job Conditions
10. Working conditions 10 20 30 40 50
11. Hazards 5 10 15 20 25

18. Factor comparison method:
In this method, jobs are ranked according to a
series of factors such as
• mental effort,
• physical effort,
• skill needed,
• responsibility,
• supervisory
• working conditions, etc.
Pay will be assigned in this method by comparing
the weights of the factors required for each job.

19. Job Evaluation Advantages
 Provides a systematic and rational procedure for
valuing each job
 Ensures a degree of equity and objectiveness in
remuneration
 Job descriptions generated are useful for other
activities
 Helps motivation and morale
 Both employee and employer needs are addressed
 Scope for union/employee involvement

20. Job Evaluation Disadvantages
 Lack of allowance for differences in performance
 Assessment can be costly & time-consuming
especially at the start
 Assessment can be inaccurate or approximate
 It’s still subjective!

21. Wage curve
• A wage curve is a graph of the relation
between the local rate of unemployment, on
the horizontal axis, and the local wage rate, on
the vertical axis.
• It shows the pay rates currently paid for jobs
in each pay grade, relative to the points or
rankings assigned to each job or grade by the
job evaluation.
• Curve in a scatter gram representing the
relationship between relative worth of jobs
and wage rates.

22. Plotting a Wage Curve

23. Wage Structure comprises of
• Wage Curve :
A curve in a scatter gram representing the relationship
between relative worth of jobs and wage rates.
• Pay Grades:
Groups of jobs within a particular class that are paid the
same rate.
• Rate Ranges:
A range of rates for each pay grade that may be the
same for each grade or proportionately greater for
each successive grade.
• Red Circle Rates:
Payment rates above the maximum of the pay range.

24. Wage determination process
• Job analysis
• Wage survey
• Relevant organizational problems
• Preparation of wage structure
• Wage payments

25. Wage structure
• It depends on:
1. organization's wishes
2. Wage range for merits or common rates
3. Pay grades
4. Money value for each grades

26. Determining Individual wage rate
• Management wage philosophy
• Wage theory
• Industry wise wage rate
• Job wage rate for grades
• Performance appraisal

27. Criteria for wage fixation
• Organization’s ability to pay
• Supply & demand of labour
• Prevailing market rate
• Cost of living
• Productivity
• Trade union
• Job requirements
• Psychological & social factors

28. Wage differentials
• Wages differ in different
employments., industries, locations &
persons.
• It has been classified as
1. Differences in market imperfections
2. Differences in social values
3. Any other