Salary administration
It comprehends systems and procedures designed for purposes of efficiently managing the compensation of organizational members.
Control or Administration of wages and salaries
Wage and salary administration should be controlled by some proper agency. This responsibility may be entrusted to the personnel department or to some job executive. Since the problem of wages and salary is very delicate and complicated, it is usual entrusted to a Committee composed of high-ranking executives representing major line organizations.
The major functions of such Committee are:
· Approval and /or recommendation to management on job evaluation methods and findings;
· Review and recommendation of basic wage and salary structure;
· Help in the formulation of wage policies from time to time;
· Co-ordination and review of relative departmental rates to ensure conformity; and
· Review of budget estimates for wage and salary adjustments and increases.
This Committee should be supported by the advice of the technical staff. Such staff committees may be for job evaluation, job description, merit rating, wage and salary survey an industry, and for a review of present wage rates, procedure and policies.
Alternatively, the over-all plan is first prepared by the Personnel Manager in consensus and discussions with senior members of other departments. It is then submitted for final approval of the top executive.
Once he has given his approval, for the wage and salary structure and the rules for administration, its implementation becomes a joint effort of all heads of the departments. The various managers, who in turn submit their recommendations to higher authority and the latter, in turn, to the personnel department, carry out the actual appraisal of the performance of subordinates. The personnel department ordinarily reviews recommendations to ensure compliance with established rules of administration. In unusual cases of serious disagreement, the president makes the final decision.
Principles of Salary Formulation
The main factors affecting salary levels within an organization are:
Although the value of a job is relative to other jobs inside and outside the organization, the value of a person in the job is something very specific to that individual. Hence, his salary should be influenced by his performance. The salary system should, as far as possible, enable the individuals to be rewarded according to the contribution and not restricted by the artificial barriers contained in a rigid salary structure.
Principles of Salary Administration
The generally accepted principles governing the fixation of salary are:
The plan should carefully distinguish between jobs and employees.
A job carries a certain wage rate, and a person is assigned to fill it at that rate. Exceptions sometimes occur in very high-level jobs in which the job holder may make the job large or small, depending upon his ability and contributions.
Equal pay for equal work i.e., if two jobs have equal difficulty requirements, the pay should be the same, regardless of who fills them.
An equitable practice should be adopted for the reorganization of individual differences in ability and contribution.
Aims of Salary Administration
The aim of salary administration is to develop and maintain a salary system of policies and procedures. A well-developed salary system will enable your organization to attract, retain and motivate people of the required caliber and qualifications.
Such a system should also be able to control your payroll costs. These aims and objectives have to be seen in greater depth from the point of view of the organization, its individual staff, and collectively.
Organizational Aims
The salary system should be tailored to meet the organization’s special needs and should be easily capable of modification in response to change.
In particular the aim of the system should be:
(1)Ensure that the organization can recruit the quantity and quality of staff it requires;
(2) Encourage suitable staff to remain with the organization;
(3) Provide rewards for good performance and incentives for further improvements in Performance;
(4) Achieve equity in pay for similar jobs;
(5) Create appropriate differentials between different levels of jobs in accordance with their relative value;
(6) Operate flexibly enough to accommodate organizational changes and relations in the relative market rates for different skills
(7) Be simple to explain, understand, operate and control
(8) Be cost-effective in the sense that the benefits of the system are obtained without undue expense
Individual Aims
The individual wants to feel that he is being treated fairly, and he expects to be paid according to his own evolution of his worth. His assessment will be based on comparisons with market rates for similar jobs elsewhere and with the pay received by other staff in the organization.
Control or Administration of wages and salaries
Wage and salary administration should be controlled by some proper agency. This responsibility may be entrusted to the personnel department or to some job executive. Since the problem of wages and salary is very delicate and complicated, it is usual entrusted to a Committee composed of high-ranking executives representing major line organizations.
The major functions of such Committee are:
· Approval and /or recommendation to management on job evaluation methods and findings;
· Review and recommendation of basic wage and salary structure;
· Help in the formulation of wage policies from time to time;
· Co-ordination and review of relative departmental rates to ensure conformity; and
· Review of budget estimates for wage and salary adjustments and increases.
This Committee should be supported by the advice of the technical staff. Such staff committees may be for job evaluation, job description, merit rating, wage and salary survey an industry, and for a review of present wage rates, procedure and policies.
Alternatively, the over-all plan is first prepared by the Personnel Manager in consensus and discussions with senior members of other departments. It is then submitted for final approval of the top executive.
Once he has given his approval, for the wage and salary structure and the rules for administration, its implementation becomes a joint effort of all heads of the departments. The various managers, who in turn submit their recommendations to higher authority and the latter, in turn, to the personnel department, carry out the actual appraisal of the performance of subordinates. The personnel department ordinarily reviews recommendations to ensure compliance with established rules of administration. In unusual cases of serious disagreement, the president makes the final decision.
Principles of Salary Formulation
The main factors affecting salary levels within an organization are:
- External relativities: market rates as affected by supply and demand and general movements in pay levels. A salary is a price indicating, like any other price, the value of the service to the buyer and seller; the employer and the employed. The going rate ‘for a job is its market rate, and many will claim that a job is worth what the market says it is worth. External equity is a fundamental aim of any salary system. If insufficient attention is given to market rates your organization may not be able to attract and retain good quality personnel. Although internal salary structure is not directly and instantaneously responsive to market forces at all points, the general structure must reflect the changing pressures of the market.
- Internal relativities: salary relativities between jobs within the organization depending on the values attached to different jobs.
- Individual worth: the value of the individual’s performance to the organization.
Although the value of a job is relative to other jobs inside and outside the organization, the value of a person in the job is something very specific to that individual. Hence, his salary should be influenced by his performance. The salary system should, as far as possible, enable the individuals to be rewarded according to the contribution and not restricted by the artificial barriers contained in a rigid salary structure.
Principles of Salary Administration
The generally accepted principles governing the fixation of salary are:
- There should be definite plan to ensure that differences in pay for jobs are based upon variations in job requirements, such as skill effort, responsibility or job or working conditions, and mental and physical requirements.
- The general level of wages and salaries should be reasonably in line with that prevailing in the labor market. The labor market criterion is most commonly used.
The plan should carefully distinguish between jobs and employees.
A job carries a certain wage rate, and a person is assigned to fill it at that rate. Exceptions sometimes occur in very high-level jobs in which the job holder may make the job large or small, depending upon his ability and contributions.
Equal pay for equal work i.e., if two jobs have equal difficulty requirements, the pay should be the same, regardless of who fills them.
An equitable practice should be adopted for the reorganization of individual differences in ability and contribution.
Aims of Salary Administration
The aim of salary administration is to develop and maintain a salary system of policies and procedures. A well-developed salary system will enable your organization to attract, retain and motivate people of the required caliber and qualifications.
Such a system should also be able to control your payroll costs. These aims and objectives have to be seen in greater depth from the point of view of the organization, its individual staff, and collectively.
Organizational Aims
The salary system should be tailored to meet the organization’s special needs and should be easily capable of modification in response to change.
In particular the aim of the system should be:
(1)Ensure that the organization can recruit the quantity and quality of staff it requires;
(2) Encourage suitable staff to remain with the organization;
(3) Provide rewards for good performance and incentives for further improvements in Performance;
(4) Achieve equity in pay for similar jobs;
(5) Create appropriate differentials between different levels of jobs in accordance with their relative value;
(6) Operate flexibly enough to accommodate organizational changes and relations in the relative market rates for different skills
(7) Be simple to explain, understand, operate and control
(8) Be cost-effective in the sense that the benefits of the system are obtained without undue expense
Individual Aims
The individual wants to feel that he is being treated fairly, and he expects to be paid according to his own evolution of his worth. His assessment will be based on comparisons with market rates for similar jobs elsewhere and with the pay received by other staff in the organization.