Wage Structure

Once jobs have been evaluated and all the points have been summed up, the next step is placing of all evaluated jobs according to points in terms of money. This is the point when rated jobs are translated into monetary values. To conduct wage survey the existing rates are taken for comparison. The main purposes of wage survey, is to find out the fair for various jobs in order to establish the entire wage structure. Selection of key jobs whose duties are clearly defined, not unstable and mostly representing all level of jobs worth is the very first step in building a wage survey. For the wage survey two types of samples are needed. First sample of key jobs and second a sample of firms in the labor market. Jobs require different personnel, in terms of skill, ability etc and thus it varies from local to regional level. Selection of a sample of firms should be from those firms which operate under similar market conditions

The job content and available data are carefully analyzed and averaged out, and in this way the rupee values of jobs are prepared and plotted on the chart.

By plotting key jobs against their existing wages, we get a wage trend line lies close to all the jobs plotted on the graph. The wage trend line should be drawn in such a way that it covers most of the points. Those which lie below the line should be paid more to come on the line of best fit. But simultaneously the authority and responsibility should also be increased in line with the wage increase. And as all those which are above the best fit line cannot be paid lower than the existing wage rates all such rates should be freezed.

If we want to know what are the deviation slopes of X axis and Y axis are taken. To calculate accurately and to forecast, regression analysis can be applied in which one is dependent variable and another is independent. From this regression the expected value of Y can be obtained, when X is known.

Designing the Wage Structure:

In construction of wage structure similar jobs are grouped and treated as a job class. All the jobs, which come under that job class are paid the same wage. In the point system, suppose, 120 points to 150 points make a job class. In such case, all the jobs which fetch total between 120 and 150 would carry the same monetary compensation. The purpose of grouping of jobs is to facilitate wage administration.

Factors affecting the designing of the wage structure are:

1) Labor market condition: if supply of labor is higher than demand the wage would be relatively low.
2) Economic condition of the country: That is, if standard of living is high it calls for higher wage.
3) Wage structures of other firms in the same industry directly affect the company’s wage structure.
4) Sometimes, even though the competitors pay relatively higher wage, due to weak collective bargaining power of the trade union, management may settle wage at a relatively low rate.

Adjustment and Operation of Wage structure:

These factors lead to adjustment in the wage structure. All wages should be paid within limits which are given by the standard set through a wage structure. A cardinal principle of wage and salary administration is that wage rate shall not be cut, as a result of installation of job evaluation. So, red circle rates should be placed at project place by means of appropriate measurement. Adjustments in the total rate structure should also be akin to the percentage increment in order to maintain equitable relationship.

Factor Comparison System:

Improved method of ranking system is known as factor comparison system where job factors are compared rather than the whole jobs. It consists of the following steps:

1) Selection of job characteristics
2) Selection of key jobs
3) Determination of correct rates of key jobs
4) Ranking of key jobs under each job factor
5) Allocation of correct rate to each key job
6) Evaluation of all other jobs.
7) Designing, adjusting and operating the wage structure

  • rajiv.K

    its very useful for me