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Wage and Salary Administration Goals

The document discusses the objectives and principles of wage and salary administration. The main objectives are to establish an equitable compensation system to attract, retain, and motivate qualified employees, while maintaining flexibility to accommodate organizational changes. Compensation should also be fair, reflect individual worth, and enhance employee morale. The key principles governing wage determination are external equity based on market rates, internal equity where more difficult jobs are paid more, and rewarding individual performance.

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Kumar Mani
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38 views2 pages

Wage and Salary Administration Goals

The document discusses the objectives and principles of wage and salary administration. The main objectives are to establish an equitable compensation system to attract, retain, and motivate qualified employees, while maintaining flexibility to accommodate organizational changes. Compensation should also be fair, reflect individual worth, and enhance employee morale. The key principles governing wage determination are external equity based on market rates, internal equity where more difficult jobs are paid more, and rewarding individual performance.

Uploaded by

Kumar Mani
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Objectives and Principles of Wage and Salary Administration

The main objective of wage and salary administration is to establish and maintain an equitable
wage and salary system. This is so because only a properly developed compensation system
enables an employer to attract, obtain, retain and motivate people of required calibre and
qualification in his/her organisation

Organisational Objectives:

The compensation system should be duly aligned with the organisational need and should also
be flexible enough to modification in response to change. From the organisation’s point of view,
the compensation system should have the following objectives:

Accordingly, the objectives of system should be to:

1. Enable an organisation to have the quantity and quality of staff it requires.

2. Retain the employees in the organisation.

3. Motivate employees for good performance for further improvement in performance.

4. Maintain equity and fairness in compensation for similar jobs.

5. Achieve flexibility in the system to accommodate organisational changes as and when these
take place.

6. Make the system cost-effective.

Individual Objectives:

From individual employee’s point of view, the compensation system should have the following
objectives:

1. Ensures a fair compensation.

2. Provides compensation according to employee’s worth.

3. Avoids the chances of favouritism from creeping in when wage rates are assigned.

4. Enhances employee morale and motivation.


Collective Objectives:

These objectives include:

1. Compensation in ahead of inflation.

2. Matching with market rates.

3. Increase in compensation reflecting increase in the prosperity of the company.

4. Compensation system free from management discretion.

Principles of wage and salary administration:


The main principles that govern wage and salary fixation are three:

(i) External Equity


(ii) Internal Equity
(iii) Individual Worth.

(i)External Equity:

This principle acknowledges that factors/variables external to organisation influence levels of


compensation in an organisation. These variables are such as demand and supply of labour, the
market rate, etc. If these variables are not kept into consideration while fixing wage and salary
levels, these may be insufficient to attract and retain employees in the organisation. The
principles of external equity ensure that jobs are fairly compensated in comparison to similar
jobs in the labour market.

(ii) Internal Equity:

Organisations have various jobs which are relative in value term. In other words, the values of
various jobs in an organisation are comparative. Within your own Department, pay levels of the
teachers (Professor, Reader, and Lecturer) are different as per the perceived or real differences
between the values of jobs they perform.

This relative worth of jobs is ascertained by job evaluation. Thus, an ideal compensation system
should establish and maintain appropriate differentials based on relative values of jobs. In other
words, the compensation system should ensure that more difficult jobs should be paid more.

3. Individual Worth:According to this principle, an individual should be paid as per his/her


performance. Thus, the compensation system, as far as possible, enables the individual to be
rewarded according to his contribution to organisation.

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