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Chapter 7

HRM2

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13 views19 pages

Chapter 7

HRM2

Uploaded by

Hannah Lagua
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
a& ee Fe eee Chapter 7 WAGE AND SALARY ADMINISTRATION OBJECTIVES: After this lesson, you should be able to: + Enumerate the different theories of wages + Explain the significance of wages to the worker, labor and labor relations, to the national economy, and to society; + Discuss the procedures of a wages and salary survey; + Compare the procedures of a wage and salary survey; and + Deduce the advantages of the wages and salary structures \aecoesssereeontesoonnnsesonnaoosennneonnnesoonnneenoneeesennseessennseeeoonenoseonmanecood 101 ies The Role of Human Resources in the Payment of Salaries iene sources 1S i : most important functions of the Human RE pay that the employees aries and wages to all company employees: I" PO The pay provides heir employer is very reason for their being rate of pay indicates their ith strong incentive to do their jobs ell and the f living and their positions Status in the company, The pay determines the standard ted with their efforts ang in the community that they live. It must be commensura' rermination of the proper contributions to the companys’ profitability index. ‘The dete! Jloyer relationship as q level of pay is the foundation effective employee and cee working team that Satisfied worker will stay longer in the company and develop loyees and kee could be beneficial to both parties, One way to retain one inet be in relation {eit morale high isto plan salary levels so as to establish uniformity © PS community. to the job in the company and those in other business establishm da The function of the payroll in a company is usually the Wage Ane paeld administration and it is carried out by the Human Resource Depa ies Hiehlensiah important duty of the Human Resource Department isto set wage scales f all mea to attract beter employees and contribute tothe level of profitability that will susta continuous profitable operations, The level of pay must not impair profits, : One of the the proper sal receive from t them w Theories of Wages Wage theories deal with the payment of labor employed in competitive enterprises. Wages represent the payment of one factor of production that is manpower. Profits and capital could not be attained without the manpower that has to be paid according to their contribution for the acquisition of enough capital to attain the desired profits. Wages are the contributions or are the shares paid for the value of land, capital and profits. 1. Classical Wage Theory This theory is based upon the fundamental concept that labor is a commodity and we have to pay the price according to supply and demand. When the labor supply is greater than the demand, the lower is the Price and when there is greater demand the higher is the price. The price of labor which is called wages, is necessary to keep the laborers to subsist and perpetuate their race. Wages should not fall below subsistence level. When the supply of labor reaches below the industrial requirement, there will be + competitive bidding among employers and therefore there will be a consequent rise in wages. When the price of the labor is below the natural price, the condition of laborers is most wretched. When this happens the laborers ilid Ge usseieed of those comforts which customs render as absolute neve " 2. The Just Wage Theory of St. Thomas Aquinas A just wage is described as wage which permits the recipient worker to live ina manner in keeping with his position in society: Thy aaa iL s doctrine is relate to social organization based The is doctrine is related I org, According to this theory, the workers’ cost of living should be considered first in the cost of production. Wages are responsible for allocating labor to various occupations, This theory is the basis in the implementation of minimum wage laws. While it could not be consistent with the minimum, requirements for a decent living in the social organization, it responds to the basic requirements for subsistence living, The creation of the Tri-partite Board composed of Labor, Management and the Department of Labor is the answer to the study of the implementation of just wages. The Wage Fund Theory ___ The wage fund theory expounded by John Stuart Mill and his followers is based on the Malthusian theory of population and the law of diminishing returns. This theory holds the idea that the working capital of the nation Provides a fund from which wages can be paid. The fund is to be divided by all the workers proportionately. When a certain group gets a greater share of the total fund, the rest in the group will have less to share. An increase in the wages of some through collective bargaining or any other pressures will adversely affect the wages of others. Under this theory it would appear that it is futile to attempt to increase wages. It would appear that when you increase the wages of other workers in the company, it would redound to decrease the wages of the other sectors, because the portion of the corporate wage fund goes to the selected sectors in the organization. A comment under this theory is that the fund should be elastic for all the other factors of production such as capital, maintenance, materials and labor. It should be elastic enough to meet the economic conditions Prevailing conditions prevailing at the time and the conditions of the corporate economy. Bargaining Theory of John Davidson The bargaining theory proposes that labor is a commodity like anything that could be bought at a price by the user. As a commodity, it carries with it a price that is determined by the bargaining process between the buyer and seller. The sellers of labor are the workers and the buyers are the users or the industries that utilize their services. The labor sets the limit of the value of their services as conditioned by the utility of reward. Such reward is conditioned by what their money can buy with the wages in the light of their actual standard of living. ‘The bargaining theory brings about the organization of labor unions. These unions bargain with management for their services. The management then sets the discounted value of labor based on the value of output in question; while labor demands the living wages that they think is enough to sustain a decent living condition. When management sets a rigid limit on the funds available for labor as it affects operating cost and profitability; on the other hand, labor insists on living wages for their effort. The resultant condition is either a strike or a lockout. r 8 — az —=—_—_” The Marginal Productivity Theory he mar explanation of the wage Binal productivity theory afters the best ep Wty Pye Supply of labor in any Bive A ard availaty hon the total number al individuals who want lo wor say eiity {Or Work Workers Mobility, which ie the transter from OMe COMPany ye another due ty, SPPOFTUNITION in the othe wages in the industry, tt is not only the difference Ceplovee transter to another company ett Share benetite, better working environment, o that affect mobility, Inv this junet Hdged by the amount of movement but the degree to which ©xisting job differences call for worker mo The hiting of added Jabor force, or the transfer of one employer tear hAnY at @ particular wage is based on the assumption of the company that the added labor will contribute to the increase in production eutput or the increase in the quality of the Product, While such assumptions may have bearing to a certain extent, any increase in manpower tends to decrease the Nalue of the marginal product as the number of workers increases. In oer developing economy where Manpower is in great supply against demand Sompetition in the labor market is seldom felt by the industry, except in some eniucal positions where specialization is in great demand m) the wi y « Mike depends ip impany, affects the structure of nn wages that 1 yven the conpor ¢, it may be surmised that ment © The Purchasing Power Theory The purchasing power theory tries to establish the relationship between wages and the level of economic activity. The level of economic growth is dependent upon the savings generated because the increase s» Wages creates 4 surplus that propels growth. The more income the worker kets, the bigger the purchasing power of the workers; goods and services. Increased consumpt opportunities then this increases consumption of on of goods generates employment 7. Labor Theory of Value 104 Karl Marx propounds this theory of labor. This of labor. It emphasizes that labor is the sours Bives credence to the value Of all proxtuct and that without this important component, there could be rw goods lor human aon pron Every good thal is produced could be traced back wo the partuaee ee worker and, therefore, labor must get the greater share ot the philosophy of some organized labor groups Whe ate moun. of the profits of the company operations Trew | notion that profits are the surpluses of the other tactors ¢ poc d by the capitatiat businewnnan making the PRONE This is the {Ve in the greater labor unions have the M production, and are @Mas9 wealth ite stroll be sharect with lab as they create the these surplus incomes. Lcanomic activity bs created by ca ofits that create investments. When empl Rouds that generate Pal by the suryshun ers contentions nun counter ty the activists’ gre i 8roup of labor unions, this can create labor unrest detrimental to oth la both labor and management and even to economic growth. The Standard of Living Theory of Wages eee rea development in labor market is the theory of living wages that pe wages should be based on the cost of living. The cost of living is era upon the economic needs of the family for the basicnecessities of life for food clothing and shelter. While the philosophy is economically sound for the improvement of the living conditions of the labor force, it is counterproductive lue to the forces of global economic activity. Our productivity index has to cope with increased competition in the global market and our products must be paired in quality and price. Any increase in economic growth would redound to increased wages. Nevertheless an increase in income would mean more consumption. More consumption increases the prices of goods and thus living wages also need to be increased proportionately. There could be no end to this argument. It is the government, labor and management that must sit together to determine the level of living wages if possible by industry and by region. Wage and Salary Surveys Once the worth of a job has been established using one of the job rating systems, the actual salary to be paid for each job must be determined. A major factor in making the determination is the wage survey. Since salaries paid by other companies have an effect on employment, morale and turnover rate, close attention is paid to the salary that is prevailing in the community and industry for specific jobs. Most companies participate in wage and salary surveys or they conduct their own surveys. Informal surveys may be conducted through telephones and informal interviews, Formal salary and wage surveys are questionnaires based on benchmark jobs that are also present in other companies and industries. In the formal survey Inethod, the Human Resource Department prepares a set of questionnaires incorporating common jobs present in the company and is comparable with other jobs in other industries. Procedure in Conducting Wage and Salary Surveys Before embarking on a wage and salary survey, the Human Resources Department should study the wage and salary data that are already available. In any request for be recognized that job title alone is not good enough for matching 1uld be accompanied with one paragraph job description so that ely compare jobs. In addition to the base salary, the information survey data, it could jobs. Each job title sho itis possible to accurat should include data on shift premiums, overtime payment practices and methods ion ys also include questions on paid holiday of wage payment. Some surve} ry -es and additional leave Policies, pension benefits, group health cards and life inst rances and, cand its relation Pays. These data are needed for more analysis of the total pay st" to other company benefits, Defining the Labor Market List of Key Job Positions Detailed Description of Jobs Collection of Salary Data Compilation of Salary Data Results of Survey The following are the steps in conducting the survey: 1, Defining the labor market. Establishing the boundaries of the pertinent labor market is the most critical step in the survey procedure. It involves the selection of the industry, the region or area or the firm to be included in the survey. 2. List of key jobs and positions common to most firms in the survey. This will ensure a representative sampling of the jobs that will be selected as universal for a particular wage or salary survey. 3. A detailed description of the key jobs and positions that are to be included in the survey and that is common to most firm or industries, Key jobs are labor grades that are comparatively stable in duties and tesponsibilities. These are occupations that are common in most industries and Scattered through the ladder of labor classification and commonly familiar to most people in the industry. 4, Collection of accurate wage and salary data. This m, set of questionnaires and supplemented by intervie information. The information must be able to Pinpoit has to be addressed by the compensation level, co, the terms of payment plan. ‘ay be done through a ‘WS to get the accurate int the problem area that ™Mpensation structure and 5. A compila Will provichen ot the wage and salary data for each job, The data gathered average, the wanagement with the opportunity of arriving at the arithmetical setae {he median and the range or rate paid and the supplementary wage 6. Presentation of sults and HRD pee the results of the survey. The results are properly evaluated the most Pares the corresponding recommendations to the management of appropriate action to take relative to the revision of the current wage st P: i i : ann Participating companies are also provided with the summary of the ndings to foster continuous cooperation. After aia Organization completes the salary survey and finds out what he prevailing salaries are in the community for comparable jobs, it must then make several decisions: 1. Whether the company should pay salaries above, below or at the same level, as the others in the same industry in the community are paying for the same jobs. 2. Whether the company should pay a single rate for each job, or slot the jobs into ranges or grades which would provide room for merit increases. 3. How many pay grades or salary ranges to use, and how wide each pay grade should be (from the minimum of the grade to the maximum). 4. Whatis the range of the amount in terms of money value that should be allotted for each salary grade levels? Although there are no set rules for making these decisions, one tool that is often used to simplify the process is the use of two-dimensional graphs, also known as data trend graph. When the graph is used with the point system, the values of the points for key jobs in the industry are plotted with the lowest pay at the bottom. The survey data for any job is then plotted according to the evaluation points and grades. Eventually all the pay survey data should be plotted. ‘An examination of the graph will indicate the trend of the data plotted. A line is drawn to indicate this trend, using one of the following techniques: 1. Eye Inspection - The line is drawn freehand so that about the same number of data points fall above the line. It follows the general trend of the data. This technique is the least scientific and reliable as this does not require scientific computations. It is more of a judgmental analysis that is used only by experts in the field of job evaluation. 2, The Least Squares - This uses the statistical formula; the trend line will normally follow a straight path. It presents more accurately the relationships between the peso or money value and the points for the key jobs. 3. The Second Degree Curve - Using another statistical formula; the trend line will pormally take the form of a curve and may more accurately indicate the trend of the data The tren tin competitive Method is y honzontal dot the data collected 80 thay the structure. If the ranking stituted for points on thy Ne Should oorretly reflect the tren: BAY rates and ranges will hakd throughout NE the rank number or grade can be st dt the graph 8 onship between interna) established and drawn, trend line. In this way Ninn SNE graph should then be drawn to reflect the relat Me Fates andl job rating points. A trend line should be rae Hine Shouts be caunpsaret with the outsite-strvey » the company. Then Ranasement can see how salaries coxnpare with those outside the company, The i SCISTON Will have ty be mate whether to pay below the survey trend or BYY above it In Seviting whether to match a survey trend line, A ne warvey eet between personnel andl econamic forsee Inthe company pays above her thet {ine is ability to compete may be endangers asthe labor cost Wil Rosana © Name industry, thereby added cust of production will be added to the cost 7 the PIAINE Lethe company paystbetow the trend line. its ability tohire capable employees May be attected or this will cau: e personnel tumover, To reconcile these two conflicting forces, management may decide its own slope line that should be about the same as the result of the survey, Another important decision is whether hourly paid occupations should be assigned a single rate or a range of rates, For production or maintenance workers, most ‘organization pays one standard rate for all jobs in the same grade. That is especially Sue when an operation is so standardized that itis difficult to determine accurately the contribution of workers, A single rate for each job has the advantage of eliminating favoritism. The Development of Wage and Salary Structure The design and operation of wage and salary structure is the concer of management and employees. Wage and salary structure is the hierarchy of jobs to where the pay rate is attached. The positions are allocated in pay grades according to the job evaluation results and its relations with the Pay system derived from the results of the salary survey. The jobs are ranked in ascending to descending order according to their importance and based on the points or ranked eamed in the job evaluation Program conducted by the HRD and the committee created for the development of a more responsive pay system. The following are the advantages of the wage and salary structure: 1. It affects the workers’ eaming and standard of living, 2. It eases the recruitment and maintenance of an effective labor force 3. It develops employee morale and increases work etficieney 4. It represents cost and competitive advantage in the industry 5, It helps in preparing budgetary allocations and eases computation of salam adjustments and as an aid in short term andl long range plane 108 6. Iteli es eliminates pay distortions and inequities in employee compensation It establishes an equitable salary range for various jobs. Wage Structure Design The design of the wage and salary structure is the establishment of the job classes and rate ranges. All jobs within a class are treated in the same way for purpose of economical administration, Pay structure ranges should be used in developing a schedule for both rank-and-file employees, technical and managerial positions. In some companies, they have a separate structure for hourly and daily paid employees and separate salary structure for regular monthly paid jobs. The managerial pay systems are separated, based on rank depending on their assignments and contributions to the companys’ profitability index. The number of pay ranges in pay structure depends on the company and on the number such structures in the company. If a company has a single salary structure then, there should be many pay grades. If the organization has one wage structure for hourly workers, another for office regular workers and still another for supervisors and managerial employees, then there should be a moderate number of pay grades in each structure. There is no standard number of pay grades per structure for any industry or company. This depends on the number of job classes and the number of employees in the company. The greater the differences in job classes the greater the number of pay grades in the salary structure to give credence to differences in duties, responsibilities and other factors of variances as determined by the job evaluation program. The same could be said for the width of the salary grade. There is no standard guide as to the spread of pay grades. For hourly jobs, the spread from the minimum to maximum may vary from ten percent (10%) to twenty (20%), while for salaried jobs the spread may vary from 15% to 75%. The typical spread of salaried jobs is 3% from the minimum to the next to step. (See Sample computation) Once the pay structure has been determined, the next step is to assign employees to their proper job classifications. If the jobs are properly evaluated and were developed before the implementation of any structure, most existing salaries should fall within the salary range established for their jobs. When employees’ salaries fall below the minimum of the pay grade for the job, then it is called green circle rate. When that occurs, the decision to bring salaries to the minimum of the grade should be based on the employees’ performance. If the employees are on training stage, their salaries should perhaps be below the minimum of the grade until they can fully meet the requirements then they are brought up to at least the minimum of the pay grade SALARY RANGE It is the range of the salary that is paid to an employee doing similar functions that has a minimum and maximum pay and @ series of step adjustments. It is to provide adjustment in pay for performance evaluation without distorting the salary pay plan It Provides adjustme determined by the; en 1% between each stey ts within the pay grade of about 3% between € P. Iti Board and 4 timents by the Triparti Ndustry rate and the prevailing wages adjustment ed he Department of Labor and Employment ‘An example is provided below, Sample of Wage Plan for Small and Medium Enterprises - WAGE RATE FOR DAILY PAID EMPLOYEES ho —_ | ay | & | First | Second | Third Poetics le | | e] ms —Step_| Step _| _ Step i -—_ 0) | 34600 | 39700 | ys | 421.00 | | peo ee mee 3 500.00. | na 550.00 | 566.00 _| 4 | 56600 1618.00 636.00 t 0 695.00 | 715.00 THE NATIONAL GOVERNMENT WAGE PLAN t “yn \ Annex “A a Fourth Tranche Monthly Salary Schedule for Civilian Personnel 7 of the National Government ‘ Effective June 1, 2012 (In Pesos) Grade | Step 1 | Step2 | Step 3] Step 4 | Step 5] Step 6 | Step7 | Steps 1 9,000 cs soe] 9a8i[ 9273| _9365| 9450] —ossal oom 2 9675 9.72] 9869] 9.968 10,068] 10,169] 10,2701 “10.373 10401] 10505] 10610] 10,716] 10823] 10,931 [11,040 11,151 11181] 11,292] 11405 11,519] 11,635] 11,751 11,869 11,987 3 4 5 12,019] 12.139] 12,261] 12,383] 12507] 12,632| 12,750] 12,886 6 050] 13,180 2] 13445] 13,580[ 13,716] 13,853] 029 | 14169] 14311] 14,454] 14598[ 14,744] 14892 8 14931] 15,081] 15232] 15,384] 15,538] 15,693 15,850 16,000 9 16051] 16212] 16374] 16538] 16,703] 16,870] 17,039 17,209 10 17,255} 17428] 17,602] 17,778] 17,956] 18,135 18.317] 18,500, L i issi9| 18,735] 18922[ 19.111 19,302| 19.495 19.600] 1o,a87 2 19,940] 20,140] 20,341] 20,545] 20,750| 20,958 21,167] 21,379, B 21,436| 21,650] _21,867| _22,086| 22,306| _22,529| 22.755] 22,982 4 zosa[ 23,274] 23507[ 23,782| 23,979] 24,219] 24-461] 20.706 110 36,970 37,788 40,811 25,438 25,718 26,000 26,286 26,576 26, 868 1] 27,473] 27,775] 28,080] 28,389 28] 29.348] 29.071) 29,997] 30,327] 30,661 MASI] 31,096] 32,044] 32,397] 32,753] 33,113 y aaaso[ 34201 [ 34,608] 34,008] 95,373] 35,702) 36,156 47,601 | 48,125 49.750] 50,297] 50,850] 51,410] 51,975] 52.547 38,203 54,321 55,522 56,133] 56,750 109,988] 111,198 Annex “B” Fourth Tranche Monthly Base Pay Schedule for Military and Uniformed Personnel Effective June 1, 2012 (in Pesos) DILG Monthly PCG and NAMRL ByMPand BFP) Phrand an A | Base Pay 11,268 Fire/Jal : ‘Apprentice Seamard Police Officer I Seaman Third Class 148s Seaman Second Class 18,982 a " Seaman First Class 16934 Petty Officer II a = a J ) 20,159 | Fechnical Ser Petty Officer | ee Beant Ee pe Laas Mi Se e/jail Senior Police | Cpieg Petty Officer as Officer | Officer | re 3513 cnior Chief Petty 23; enior Master Senior Fire/jail | Senior Police Pavia aad [Xeon Officer tt Officer 11 of vor Chiel Petty 25,394 Chief Master [Senior Fin Jail | Senior Police eee mal Sergeant Officer HIT Officer III Office First Chiet ister Chief 27425 pled Senior Fireflail | Senior Police | First Master Master : ae Petty Officer Nene; Officer IV Officer [ieraas Cadet Cadet “| Probationary DAB Second Lieutenant Second ; 29,945 Lieutenant Ensign First Lieutenant Junior 32,341 | Liev tenant Inspector Inspector Grade ‘Senior ; Lieutenant Senior 35312 Captain Hessen Senior Inspector |

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