Wage is the source of livelihood for the recipient employee while it is viewed as a production cost by the employer who pays it.
Wage Policy
Wage is the source of livelihood
for the recipient employee while it is viewed as a production cost by the
employer who pays it. Wage policies are principles acting as guidelines for
determining wage structure. They are expected to insure minimum standards of
comfort and decency to the wage-earners. A wage policy statement of a
for-profit organization, usually contains references to the starting rates for
all grades, instructions on when to hire below/above the starting rates, the
wage period by which wages are payable, provision for severance pay, the period
for which each wage revision would be applicable and whether increment is to be
fixed amount or as a percentage of present pay.
Other points that may be covered
in a wage policy may include the ratio of fixed wage versus variable pay, the
ratio of gross pay versus ‘take home’ pay, the lower and upper limits of wages
and perquisites, the wage differentials between the highest paid and the lowest
paid worker, possibilities of profit-sharing and such other matters, as may be
considered relevant. An organization establishes compensation policies that
determine whether it will be a pay leader, pay follower or strive for an
average position in the labour market.
Pay leaders are organizations
that pay higher wages and salaries than competing firms. Using this strategy,
an organization would aim to attract high-quality, talented and productive
employees with whom they could achieve lowering of per unit labor costs. Pay
followers are organizations that choose to pay below the going
rate in the market because of a poor financial condition or a belief that they
simply do not require highly qualified employees. Difficulties occur when this
policy is followed, as only less committed, desperate and poorly equipped
personnel tend to join a firm with such policies of remuneration. Those who
choose to pay an average rate, appear to believe that they could employ
requisite number of qualified people at the same time remaining competitive, as
they would not have to increase the selling price of goods and services on
account of salaries paid.
A policy on wages, salaries or
perks should cover the due date of subsequent review, the method of review,
rules for hiring below the minimum, at minimum and above minimum rates, and the
authority and control for making changes in wage patterns. The policies might
also cover the percentage of raises permissible during promotions, the cost of
living allowance (COLA) or the Cost of Living Indices and related adjustments
to wages, rules for special raises, criteria for fixing annual increments based
on merit and seniority and schemes of flexible payment and benefits.
Compensation and Benefits
A system of wage and salary
administration should be carried out in such a manner that employees are
attracted, retained, motivated, recognized, appreciated, treated fairly and
equitably. Some organizations choose to pay high salaries and confine
themselves with the statutory benefits. Some organizations try to offer unique
and elaborate schemes of benefits while restricting their pay scales to the
minimum levels permitted by market conditions. The system should also ensure
accurate calculation of earnings owed to each of the employees for purposes
like overtime, performance rewards, incentives payments and allowances, by the
employer and make sure that pay is distributed in time and with proper records.
The system should control costs, comply with the statutes and be easy to
administer.
Tags : Human Resources Management - Compensation And Productivity
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