Wage and Salary Administration

 

Introduction

Wages constitute the major factor in the economic and social life of any community in an economic sense; wages represent payment of compensation in return for work done. In a sociological sense, wages characterize stratification of occupational categories. In a psychological sense, wages satisfy need directly and indirectly in response to changing employee aspiration.

A brief description of these obligations is as follows:

1. Salary Structure:

Salary structure of an organisation comprises its salary grades (or ranges) and its salary levels for a single job or group of jobs. It is the job evaluation that plays an important role in designing a salary structure into which all the jobs of an organisation can be appropriately graded based on their relative worth.

While designing a salary structure, it is essential to provide for internal equity as well as maintaining competitive rates of pay. A salary structure can be either of the following or even a combination of both.

2. Salary Progression Systems:

These refer to increases in salary in relation to merit or performance. In it, salary ranges are divided into defined zones through which an employee passes while he/she progresses. There are incremental systems which differ in their rigidity and flexibility. While the former indicates the rates at which employees can progress as per merit or experiences, in the latter (flexible), management exercises its full discretion over the award as well as the size of increments with practically no guidelines.

In between the rigid systems and flexible systems, there are middle-ranged, semi-flexi systems. It is highly desirable and in the interest of employees as also of organisation to ensure that employees are correctly placed in their range accord­ing to their performance and potential.

3. Administration and Control of Salary Reviews:

While salary policies are executed, it is also necessary that salary costs against budgets are properly con­trolled because control is a vital element of salary administration. In salary budgets, it has to be estimated that how many people will be working at different levels of activities during the budgeted period and how much financial resources will be made available.

Another important thing in salary administration is salary reviews which can be either individual salary review or one annual review for all the staff, to decide on the merit increments. Then finally comes the fixing of salaries on appointment or promotion.

While control on starting salaries is an important issue, salary fixation on promotion also demands adequate attention. The increase in salary on promotion should be adequate, and it should leave enough scope to reward good performance in the new job.

4. Designing and Operating Other Allowances:

There are various forms of additional cash payments employers give to their employees over and above the basic salary in order to seek their commitment and active participation in the success of the enter­prise, besides motivating them. This may be to compensate them for additional burden assigned to them or the like in the interest of the organisation. The reward may be in the form of bonus, medical facilities, holidays, sick pay, pensions and so on.