16 Pricing Managerial Jobs

Learning Objectives

After completing this session, you will be able to:

  • Explain the various types of benefits that can be offered to employees.

There are four main elements of compensating for a company’s managers.

  1. Base pay: fixed salary, guaranteed bonuses.
  2. Short-term incentives: cash or stock bonuses
  3. Long-term incentives: stock options
  4. Executive benefits and perks: retirement plans, life insurance, and health insurance without a deductible or coinsurance.

A) Compensating Executives and Managers

  1. What Determines Executive Pay? – Basic compensation elements for top executives include: base pay, short-term incentives, long-term incentives, and executive benefits and perks. Shareholder activism has tightened the restrictions on what companies pay top executives.
  2. Elements of Executive Pay – Executive Compensation emphasizes performance incentives more than do other employees’ pay plans, since organizational results are likely to reflect executives’ contributions more directly.
  3. Managerial Job Evaluation – The approach used by most large companies is to classify all executive and management positions into a series of grades, with salary ranges attached, to ensure some degree of equity among various divisions and departments.

B) Compensating Professional Employees

  1. Most employers use a market-pricing approach instead of job evaluation, since it’s not easy to identify factors and degrees of factors which meaningfully differentiate among the values of professional work.

C) Other Compensation Trends

How employers pay employees has been evolving. Overall, there has been more emphasis on the employee’s contribution, performance, and value to the organization, and how that fits with strategic objectives.

A) Broad banding – means collapsing salary grades and ranges into just a few wide levels or bands.

      1. Pros and Cons – Broad banding injects greater flexibility into employee assignments, and allows an employee to move up or down along the pay scale without changing pay ranges. Broad banding can, however, eliminate a sense of permanence in a set of job responsibilities. This is particularly difficult for new employees.

B) Comparable Worth – refers to the requirement to pay equal wages for jobs of comparable value to the employer rather than strictly equal value.

      1. The Pay Gap – Although the gap is narrowing a bit, women still earn only about 77% as much as men. Education may reduce the wage gap.

C) Board Oversight of Executive Pay – Boards are clamping down on executive pay. Since 2005, the Financial Accounting Standards Board (FASB) has required that companies recognize as an expense the fair value of the stock options they grant. The Sarbanes Oxley Act makes executives personally liable for lapses in corporate financial oversight.

Minimum Wages Act ,1948

Minimum wages can be set by statute, decision of a competent authority, a wage board, a wage council, or by industrial or labour courts or tribunals. Minimum wages can also be set by giving the force of law to provisions of collective agreements.

A. Applicability of the Minimum Wages Act 1948

(a) The Act applies to persons engaged in scheduled employments or in specified class of work in respect of which minimum wages have been fixed.

(b) No employee can give up by contract or agreement his rights in so far as it purports to reduce the minimum rates of wages fixed under the Act. Hence, any contract or agreement made less than the minimum rates of wages fixed shall be null and void.

a) What is Minimum Wage ?

Wages fixed or revised by the Government in respect of scheduled employments from time to time which consists of Basic wage + variable dearness allowance.

Under Section 5 of Minimum Wages Act, 1948 there are basically two method of fixation/revision of Minimum Wages

  1. Committee Method
  2. Notification Method:  Revision of Minimum Wages should not exceed an interval of 5 years. Section 3 empowers appropriate Government to fix the minimum rates of wages in the scheduled employments.

b. Minimum Rate of The Wages Fixed or Revised Consists of The Following:

  1. A basic rate of wages and a special allowance, viz., cost of living allowance;
  2. A basic rate of wages with or without cost of living allowance and cash value of concessions for supplies of essential commodities
  3. An all-inclusive rate, i.e. basic rate, cost of living allowance and cash value of concessions.
  4. The Minimum Wage rate may be fixed at a) time rate, b) piece rate, c) guaranteed time rate and d) overtime rate.
  5. The Act provides that different Minimum Wage rate may be fixed for a) different scheduled employments, b) different works in the same employment, c) adult, adolescent and children, d) different locations or e) male and female.
  6. Also, Government may fix such Minimum Wage by a) an hour, b) day, c) month, or d) any other period as may be prescribed by the notified authority.

c. Norms for fixing Minimum Wage:

• Three consumption units per earner,
• Minimum food requirement of 2700 calories per average Indian adult,
• Cloth requirement of 72 yards per annum per family,
• Rent corresponding to the minimum area provided under the Government’s Industrial Housing Scheme and
• Fuel, lighting and other miscellaneous items of expenditure to constitute 20 % of the total Minimum Wages
• Children education, medical requirement, minimum recreation including festivals/ceremonies and provision for old age, marriage etc. should further constitute 25% of the total Minimum Wage.

d. Code on Wages , 2019

The Code on Wages, 2019 is a code passed by the Parliament of India in July 23, 2019 which replaces the four existing labour laws. They are (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) the Payment of Bonus Act, 1965, (iv) the Equal Remuneration Act, 1976.

What are minimum wages under the Code?

According to Section 9 of the code, the central government will fix a national floor rate for wages by considering the living standard of workers and set different floor wages based on different geographical areas.

  • Fixing : Thus, the minimum wages fixed by the State or Central government’s must be higher than this floor wages and if the minimum wages fixed by the government are much higher than this, they cannot reduce the existing wages.
  • Overtime : Under Section 10 of the code, if an employee works for overtime than the normal working time he will be entitled to get overtime wages which is twice the rate of normal wages unless, if any kind of failure occurs in work due to his unwillingness to work and not by the omission of the employer to provide him with work or any other such circumstances which may be prescribed.


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