Compensation Management Unit 8

Compensation According to Dictionary of Human Resource Management- compensation is payment for work which 'compensates' the employee for the 'disutility' of labour. The rather negative connotation associated with the term has led some personnel specialists to replace it with reward or reward management, more upbeat alternatives. 'Compensation' and 'compensation and benefits‘.

Compensation Management The term compensation management, or wage and salary administration includes: job evaluation development and maintenance of wage structures ,wage surveys, wage incentives, wage changes and adjustments supplementary payments, profit sharing, control of compensation costs, and other related pay items.

Wage and Salary Wage The term wage is commonly used for those employees whose pay is calculated according to the number of hours worked. Salary The word salary applies to compensation that is uniform from one period to the next and does not depend upon the number of hours worked.

Wage and Salary The term wage is commonly used for those employees whose pay is calculated according to the number of hours worked. Wage-earners are designated as hourly, non-supervisory, or blue-collar. The word salary applies to compensation that is uniform from one period to the next and does not depend upon the number of hours worked. Salaried often implies a status distinction, because those who are on salary are generally white-collar, administrative, professional, and executive employees.

Managing Compensation The basic purpose of wage and salary administration is to establish and maintain an equitable wage and salary structure. Its secondary objective is the establishment and maintenance of an equitable labour-cost .structure

Managing Compensation Theories Subsistence theory. Standard of living theory. Residual claimant theory. The wage fund theory. Demand and supply theory. Marginal productivity theory. Purchasing power theory. The bargaining theory of wages.

Important Factors for Fixation of Wages The degree of skill. The strain of work. The experience involved. The training involved. The responsibility undertaken. The mental and physical requirements. The disagreeableness of the task. The hazard attendant on the work, and The fatigue involved.

Classification of Wages According to The International Labour Organization (ILO): The amount necessary for mere subsistence; The amount necessary for health and decency; and The amount necessary to provide a standard of comfort.

Classification of Wages In India, wages are classified as: Minimum wage Fair wage Living wage

Minimum Wage A minimum wage has been defined by the Committee as : "the wage which must provide not only for the bare sustenance of life, but for the preservation of the efficiency of the worker. For this purpose, the minimum wage must provide for some measure of education, medical requirements and amenities". The principles are incorporated in the Minimum Wages Act, 1948.

Fair Wage According to the Committee on Fair Wages, "it is the wage which is above the minimum wage but below the living wage.” Considerable factors : The productivity of labour; The prevailing rates of wages in the same or neighbouring localities; The level of the national income and its distribution; and The place of industry in the economy.

Living Wage The Committee defined a Living Wage as: "one which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter but a measure of frugal comfort, including education for his children, protection against ill-health, requirements of essential social needs and a measure of insurance against the more important misfortunes including old age".

Designing and Administering Benefits Collective Bargaining Voluntary Arbitration Wage Legislation Conciliation Adjudication Wage Boards