Salary and wage management


In this article we are discussing the ways and means of fixing the compensations levels taking into consideration various factors like experience, identical industry knowledge, qualifications and proven skills. This in short we have comprehended as ‘Salary and Wage Management’.

Acquire Qualified Personnel:

Compensation needs to be high enough to attract applicants. Pay levels must respond to supply and demand of workers in the labor market since employers complete for workers. Premium wages are sometimes needed to attract applicants who are already working for others.

Retain Present Employees:

Employees may quit when compensation levels are not competitive resulting in higher turnover of manpower.
Ensure Equity:

Compensation management strives for internal and external equity. Internal equity requires that pay be related to the relative worth of jobs, so that similar jobs get similar pay. External equity means paying workers what comparable workers at other firms in the labor market pay.

Reward Desired Behavior:

Pay should reinforce desired behaviors and act as an incentive for those behaviors to occur in the future. Effective compensation plans reward performance, loyalty experience, responsibilities, and other behaviors.

Control Costs:

A rational compensation system helps the organization obtain and retain workers at a reasonable cost. Without effective compensation management, workers could be over or under paid.

Comply with Legal Regulations:

A sound wage and salary system considers the legal challengers imposed by government and ensures the employer’s compliance.

Facilitate Understanding:

System should be easily understood by human resource specialists, operating managers, and employees.
Wage and salary programs should be designed to be managed efficiently, making optimal use of the human resources information system, although this objective should be a secondary consideration compared with other objectives

Systems to Achieve the Objectives

The above mentioned objectives are achieved by the use of the following systems.

1. Job Evaluation:
All jobs will be analyzed and graded to establish the pattern of internal relationships. It is the process of determining relative worth of jobs. It includes selecting suitable job evaluation techniques, classifying jobs into various categories and determining relative value of jobs in various categories.

2. Wage and Salary Ranges:
Overall salary range for all the jobs in an organization is arranged. Each job grade will be assigned a salary range. These individual salary ranges will be fitted into an overall range.

3. Wage and Salary Adjustments:
Overall salary grades of the organization may be adjusted based on the data and information collected about the salary levels of similar organizations. Individual salary level may also be adjusted based on the performance of the individual employees.

Principles of Wage and Salary Administration

There are several principles of wage and salary plans, policies and practices. The important among them are:

(a) Wage and salary plans and policies should be sufficiently flexible.

(b) Job evaluation must be done scientifically.

(c) Wage and salary administration plans must always be consistent with overall organizational plans and programs.

(d) Wage and salary administration plans and programs should be in conformity with the social and economic objectives of the country like attainment of equality in income distribution and controlling inflationary trends.

(e) Wage and salary administration plans and programs should be responsive to the changing local and national conditions.

(f) These plans should simplify and expedite other administrative processes.

The Elements of Wage and Salary System

Wage and salary system should have relationship with the performance, satisfaction and attainment of goals of an individual. The following elements of wage and salary system are identified by experts in HR,

a) Identifying the available salary opportunities, their costs, estimating the worth of its members of these salary opportunities and communicating them to employees.
b) Relating salary to needs and goals.
c) Developing quality, quantity and time standards relating to work and goals.
d) Determining the effort necessary to achieve standards.
e) Measuring the actual performance.
f) Comparing the performance with the salary received.
g) Measuring the job satisfaction gained by the employees.
h) Evaluating the unsatisfied wants and unreached goals of the employees.
i) Finding out the dissatisfaction arising from unfulfilled needs and unattained goals.
j) Adjusting the salary levels accordingly with a view to enabling the employees to reach goals not attained and fulfills the unfulfilled needs.

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