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Principles of wage and salary administration
• Formation of a sound wage and salary policy an important
function of personnel department. A sound and salary policy is
essential to procure, maintain and develop employees and to
get effective results from them. A well structured salary and
wage system provide many advantages to the employees ,
employers, consumer and at the same time society also. So
while designing a wage and salary structure proper care should
be taken. Some of the important principles are described as
under:-
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Principles of wage and salary administration
• Wage policy should be carefully drafted keeping in view the
interests of employees, employers, consumers and the
community.
• There should be definite plan to ensure that differences in
wages for different jobs are justified on solid grounds. This
can also be said like that the wage plans should be flexible.
• The most acceptable wage and salary ploicy is one which
relates wages and salary levels in an organization to those of
its competitors.
• The organization’s goal should be directly studied and
analyzed, while structuring wage and salary plan.
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Principles of wage and salary administration
• Wage and salary policy should recognize the changes in cost
of living and productivity and other changes in the society. So
wage and salary policies should be related to the changing
local and national conditions.
• Wage policy should be clearly expressed in writing so as to
ensure uniformity and stability. At the same time government
rules, regulations, relations to labour should be considered
seriously while framing the wage policy.
• The wage plan should be in simplest from, thus avoiding
unnecessary confusions.
• Wage policy should be evaluated from time to time so as to
meet the latest changes and trends in industries and societies.
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Principles of wage and salary administration
• While structuring the wage and salary policy economy should
not be ignored. The main objective of economy is attainment
of equitable distribution of income, price stability, increase in
standard of living etc.
• The feeling and expectation of employees must be considered
while designing wage and salary policy. The employees and
union must be taken in to confidence while deciding wage and
salary policy.
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Wage Theories
• The standard of living theory wage:- This theory has been
propounded by Dr. Marshall. According to this theory wages
of the laborers should be equal to their standard of living. The
laborers must get so much wages as to maintain their standard
of living. The term standard of living includes along with food,
clothing and shelter all those items of comforts and luxuries to
the consumption of which he has been accustomed. Difference
in wage rate is natural as the standard of living of different
laborers is different.
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The wage Fund Theory
• The Wage Fund Theory:- This theory is propounded by John
Mill. According to this theory, wages depend upon two
quantities:
• Wage fund or the circulating capital set aside for the purchase
of services of laborers
• The number of laborers seeking employment.
Rate of wage, as per this theory, is determined by the following
formula:
Wage-Rate= Wage Fund/ No of workers
According to this theory, wages cannot rose unless either the
wage fund increases or the number of workers decreases.
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Residual Claimant Theory of Wages
• This theory has been propounded by American economist
Walker. According to him, wages are the residue left over, after
all other factor of production have been paid. It means after
deducting from total production, rent, interest and profit, what
remains is paid to laborers in the form of wages.
• Wages= Total production-Rent-Interest-Profit
• The main feature of the theory is that it lays special emphasis
on the relation between the efficiency of the laborers and
productivity. Greater the efficiency of the laborers more is the
production. As a result, there is the possibility of increase in
wages.