Wage Determination

Wage determination

Wages mean any economic compensation paid by the employer under some contract to his workers for the services rendered by them. Wages, therefore, include family allowance, relief pay, financial support and other benefits. But, in the narrower sense wages are the price paid for the services of labour in the process of production and include only the performance wages or wages proper. They are composed of two parts- the basic wage and other allowances. The basic wage is the remuneration, by way of basic salary and allowances, which is paid or payable to an employee in terms of his contract of employment of the work done by him. Allowances, on the other hand, are paid in addition to the basic wage to maintain the value of basic wages over a period of time. Such allowances include holiday pay, overtime pay, bonus and social security benefits. These are usually not included in the definition of wages.

Wages and salary administration refers to the establishment and implementation of sound policies and practices of employer compensation. It includes such areas as job evaluation, surveys of wage and salaries, analysis or relevant organizational problems, development and maintenance of wage structure, establishing rules for administering wages, wage payment, incentives, profit sharing, wage changes and adjustments, supplementary payment, control of compensation costs and other related items. The alignment of wages and salaries should be similar in comparison to the other firms in that region.

The following decisions have to be taken to determine the wage structure:

1.Whether the organization wishes, or is able to pay amounts above, below or equal to the average rates in the industry.

2. Whether wage ranges should provide for merit increases.

3. The number of and width of pay grades and the extent of overlaps.

4. Which jobs are to be placed in each of the pay grades?

5. The actual amount in rupees to be assigned to various job grades.

6. What to do with wages and salaries that are out of line once these decisions have been made?

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