Module-2

OPENING CASE: In California there were three hospitals functioning individually.5 years ago these 3 hospitals merged & formed a health system. The job description &PM tools were not automated & the process itself was not consistent throughout the organisation. To set the standards & also to provide patients total care, health system has to make heavy investments in electronic medical equipments & other investments on infrastructural developments. Because of which the merged hospital couldnt compensate its employees as they were paying prior to its merger. This led to employees job dissatisfaction. Question: Suggest some compensation measures to regain employees

COMPENSATION
Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction.

COMPENSATION
Compensation is a tool used by management for a variety of purposes to further the existence of the company. Compensation may be adjusted according the business needs, goals, and available resources.

COMPENSATION
Compensation may be used to: Recruit and retain qualified employees. Increase or maintain morale/satisfaction. Reward and encourage peak performance. Achieve internal and external equity. Reduce turnover and encourage company loyalty. Retain competent employees in the organisation Modify (through negotiations) practices of unions.

COMPENSATION
Compensation should be:
1.
2. 3. 4. 5. 6. 7. Adequate- Minimum governmental, union & managerial levels should be met Equitable-each person is paid fairly, depending on her/his efforts, abilities, training & so on Balanced-pay, benefits, & other rewards provide a reasonable total reward package Cost-effective- pay should be made considering the enterprise ability to afford. Secure-employees security needs should match & be satisfied Incentive providing- pay motivates effective & productive work Acceptable to the employer

COMPENSATION
CONCEPT:
It emphasizes on fair days pay for far days work. Compensation contains all forms of financial incomes & tangible services & benefits.

Cash compensation: base pay, dearness allowness, short term incentives, long term incentives , allowances, income- tax protection, bonus , paid insurance &vacations.
Compensation refers to all forms of financial returns & tangible service & benefits employees receive as a part of an employment relationship.

COMPENSATION
DIRECT COMPENSATION:
Financial remuneration usually in cash like base pay, DA, overtime pay, shift, incentives, bonus, profit sharing & commission.

INDIRECT COMPENSATION:
FRIENGE BENEFITS- PF, pension scheme, medical & health insurance, sick leave, various other benefits & perks.

WAGE & SALARY

Wage salary administration is essentially the application of a systematic approach to a problem ensuring that employees are paid in a logical, equitable & fair manner. The ILO (Indian Labour Organisation) defines the term Wage as the remuneration paid by the employer for the service of hourly , daily, weekly, & fortnightly employees. Salary is defined as the remuneration paid to the clerical & managerial personnel employed on monthly or annul basis. Minimum wage is the amount of remuneration which could meet the normal needs of the average employee regard as a human being living in a civilized society.

OBJECTIVES OF SALARY & WAGE ADMINISTRATION:

To acquire qualified, competent personnel's To retain present employees To secure internal & external equity To ensure desired behaviour To keep labour & administrative costs in line with the ability of the organisation to pay To facilitate pay roll Tosimplify collective bargaining procedures & negotiations To promote organisation feasibility

FACTORS AFFECTING WAGE & SALARY LEVELS

Remuneration in comparable industries Firms ability to pay Relating to price index Productivity Cost of living Union pressure & Strategies Govt legislations

SOCIAL OBJECTIVES OF WAGE POLICY

Elimination of exceptionally low wages Establishment of fair labour standards Protection of wages earners form the effects of rising prices Incentive for workers to improve their productive performance

Key consideration in public policy in concern to wages/salary in India

1. To end exploitation & provide remuneration to labour. 2. To fix minimum wages in selected industries & promote fair wage agreements in selected industries. 3. To ensure equal pay for equal work. 4. To regulate wages & salary to eliminate or reduce undue disputes. 5. To link remuneration to productivity.

Key consideration in public policy in concern to wages/salary in India

6. To determine fair wages over & above minimum wages with due regard to-the productivity of labour, the prevailing levels of wages, the level of national income & distribution, the place of industry in the economy of industry. 7. To compensate for the rise in cost of living. 8. The capacity to pay. 9. The basic needs of labour. 10. To secure a living wage for workers .

WAGE CONCEPTS:

According to the Fair wage committee (1948) & Indian Labour Conference(1957) there are some wage concepts- minimum wage, living wage, fair wage, need-based minimum wage.

Minimum wage: Minimum wage should include not only the base sustenance of life but provide some measures of education, medical requirement & amenities.

Wage concept:
Need-based minimum wage: 1. It should include the standard working class families consumption- for earner, earning women, children & adolescents. 2. The minimum food requirements should be calculated on the basis of intake of 2,7000 calories as recommended for an average Indian adult. 3. Clothing requirement 4. Housing 5. Fuel, lighting & other miscellaneous items which should constitutes of 20% of total minimum wage.

Wage concept:
Fair wage: Fair wage lower limit is the minimum wage & higher limit is set by the capacity of the industry to pay. Between the two the actual wage depends on1. Productivity of labour 2. Prevailing rates of wages of similar occupation in same neighbouring localities 3. Place of industry in the economy 4. National income & its distruibution

Wage concept:
Living wage: 1. A living wage enable workers to meet their needs for nutritious food & clean water, shelter, clothes, education, health care & transport, as well as allowing for discretionary income. 2. It allows the workers & their families to participate fully in society & live with dignity. 3. It takes into account the cost of living, social security benefits & relative standard of other groups.

Wage concept:

Nominal/ money wage: Earnings in cash or equivalence. Real wage: Money wages discounted by the cost of living index to denote the purchasing power of the wage. National minimum wage: A uniform minimum wage for the country as a whole.

Types Wage
Time rate wage: Hourly wage is a fixed earning paid to an employee for services per hour. This hourly wage is agreed upon by you and your employer but is subject to certain minimum hourly wage requirements as per the laws of your state or federal government. Jobs that are paid per hour include painting, editing, babysitting and others.

Types Wage
Piece-Rate Wage: Piece wages are those that are paid according to output. For example, you might agree with someone to cut her lawn for $100. You will be paid this amount as long as you finish cutting the grass, whether you take one hour or 10 hours to do so. A good example of piece-rate pay is what is paid to a mechanic. For repairing your car, he is paid a certain amount regardless of the time he takes to finish the job.

Types Wage
Overtime Wages

Overtime wages are payment made to a worker for services rendered beyond normal working hours. If you are supposed to work for eight hours per day at a rate of $10 per hour, your contract might indicate that any hourly work done beyond the normal working hours is paid at a rate of $20 per hour.

Types Wage
Balance or debt method:
It is the combination of time & piece rate. If the earning of a worker calculated at piece rate exceeds the amount, which he could have earned if paid in time basis he is credited for balance where piece rate earning are less than time rate earnings, he is paid on the basis of time rate. But excess which he is paid is carried forward as debt against him to be recovered for any future balance of piece work earning over time earning.

WAGE DIFERENTIALS
Wage differ in different employments or occupations, industries and localities, and also between persons in the same employment or grade. Wage differentials have been classified into three categories: 1. The differentials that can be attributed to imperfections in the employment markets, such as the limited knowledge of workers in regard to alternative job opportunities available else where, obstacles to geographical, occupational or interfirm mobility of workers, or time lags in the adjustments of resource distribution and changes in the scope and structure of economic activities. Examples of such wage differentials are inter-industry, inter firm and geographical or inter-area wage differentials.

WAGE DIFERENTIALS
Second, the wage differentials which originate in social values and prejudices and which are deeper and more persistent than economic factors. Wage differentials by sex, age, status or ethnic origin belong to this category. Third, occupational wage differentials, which would exist even if employment markets were perfect and social prejudices were absent.

WAGE DIFERENTIALS
Wage differential arises because of the following factors:a. Difference in the efficiency of the labor, which may be due to inborn quality, education and conditions under which work may be done. b. The existence of non-competing group due to difficulties in the way of the mobility of labor from low paid to high paid employments. c. Difference in the agreeableness or social esteem of employment. d. Differences in the nature of employment and occupations.