This document discusses wage and salary administration. It explains that job evaluation is the cornerstone of a formal wage and salary program as it determines internal pay relationships and helps companies achieve their pay policies. Job evaluation also provides a foundation for incentive plans, personal moves, controlling costs, and setting pay scales relative to competitors. An effective wage and salary program requires identifying needs, objectives, developing programs, and executing programs. Responsibilities are divided between wage and salary staff, line managers, and top executives.

1. WAGES AND SALARY
ADMINISTRATION
Chapter 4 – Wage and Salary
Administration

2. Chapter 4
Job Evaluation
Job evaluation is the cornerstone of a formal wage
and salary administration. The key roles which job
evaluation process plays in wage and salary
administration are:
It is the most effective means of determining
internal pay relationships
It can be used as an instrument for effecting the
companies basic pay policies
Equitable base-pay relationships set by job
evaluation serve as a foundation for incentive
Cont…………

3. Chapter 4
Job evaluation provides a reasonable basis for
personal moves
Useful controls over wage and salary costs can be
greatly aided by job evaluation
Job evaluation provides a foundation for gearing
company pay scales to the wages paid by
competing companies
Job evaluation assists managers in meeting day-
to-day problems
It measures job worth in an administrative sense
rather than an economic or social one
Cont…………

4. Chapter 4
Basic areas of information, which are pertinent in
almost all job analysis are:
Fundamental purpose of the job
Work assigned or performed
General importance of each job element and its
relation to objectives of the operation
Approximate time spent on each duty or area of
responsibility
Scope of the job and its impact on the operation
Inherent authority and formal or informal audits on
work
Working relationships including supervision
Cont…………

5. Chapter 4
Specific methods, equipment, or techniques
which must be used
“Climate” of the job, including objectives and
working environment
Conditions under which work must be
performed

6. Chapter 4
Salary Structure
Design of a salary structure involves consideration
of three different questions:
At what level should the staff be paid by comparison
with each other with reference to internal relatives?
At what level should they be paid in comparison
with other employees with reference to external
relatives?
How will the motivation and commitment of staff be
affected by the salary system and how can that
system be designed to influence staff behaviour?

7. Chapter 4
Pay Determination
The Economist’s Approach
The Sociologist’s Approach
The Psychologist’s Approach

8. Chapter 4
Pay Problems of the Business
One problem which exists in every enterprise is the
question of pay relationships within the company
Employees are also sensitive about the pay received
for comparable work in other companies
Reward for outstanding work constitutes another
important pay problem for employees and managers
There is a wide range of pay problems that are
essentially administrative in nature

9. Chapter 4
Need for Formal Programme
In small organizations wages and salary matters are
usually handled by a person in the office of the chief
or head executive or the accountant, though the
owner or proprietor or a top official exercises close
supervision
The very complexity of pay matters usually requires a
reasonable formalised wage and salary programme,
except in the small operation
Formal programme is characterized by the
establishment of standards which serve to guide or
control individual pay decisions

10. Chapter 4
Management’s Approach to Pay Problems
A basic approach to pay problems involves:
Identifying Needs
Determining Objectives
Developing Programmes
Planning and Executing the Programmes

11. Chapter 4
Responsibility for Wage and Salary
Administration
Responsibilities should be fixed carefully so that each person
associated with the programme knows exactly what is expected
of him
The individual manager seldom has complete authority and
responsibility for wages and salary administration
Line managers have basic responsibility for making pay
decisions within the frame work of policies, practices, and
techniques which have been established by the company
Wage and salary staff specialist also have certain areas of
responsibility in carrying out the programme

12. Chapter 4
Salary Administration of Top Executives
There are some special factors affecting pay
decisions for executive management in addition to
the elements of formal salary administration
programmes
One of the most important concerns the income
tax consequences for the individual executive
Another is the fact that the salaries of such
executive managers set a ceiling on pay
Cont…………

13. Chapter 4
There are some factors which are considered in
establishing the compensation of executive
management
One is the size of the company
Another is the nature of the industry itself
Employee compensation represents a substantial
part of the total operating costs of any business
The success of each manager depends in part on
wage costs and employee productivity in his
department
Thus, the company wage and salary programme is
important alike to employees, managers, and owners

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