After completing this session, you will be able to:
- describe the concept of Wage.
- identify the elements of good wage plan.
Wage is a reward for the services rendered or remuneration for the work done and it is as old as the society itself. In the primitive days, wages were paid in kind, most common of them was grains and the food. But with the advent of industrialization wages form a complex problem and in almost all industrialized countries it became a sensitive area of public policy. Very soon the quantum of wages assumed a common cause of friction between the employers and the wage-earners. Frequent disputes between employer and wage-earners resulted in strikes over the demand for wage-increase. The determination of adequate wages that should be justifiably payable to die workmen by the employer, was not merely an economic problem but a multidimensional phenomena, necessarily involving relevant factors like place ot industry, prices of the product, living standards, basic needs of die wage-earner and the governmental policy in a given society. The natural instinct of the employer to keep the wage-bill to a minimum and workers struggle to secure a wage-increase to meet both ends, created a chaotic situation which demanded an immediate State’s intervention to protect the weaker section of the society, namely, workers, in view of its low bargaining capacity.
Fair wage, according to the committee on Fair Wage, is the wage which is above the minimum wage but below the living wage. The lower limit of the fair wage is obviously the minimum wage; the upper limit is set by the capacity of the industry to pay.
Minimum Wage: – Justice Higgin propounded the concept of minimum wage as the irreducible level of wage paid to an unskilled worker, considering him a human being living in a civilised society. In this single sentence, he indicated three important considerations, namely, (i) that minimum wage is an irreducible level which cannot be further reduced; (2) secondly, it is paid to an unskilled worker who has not undergone any expensive training to acquire skill, (3) thirdly, the worker is to be considered a “human being living in a civilised society and therefore he is entitled to same basic needs of food, clothing and shelter which any other human being requires. Thus according to Justice Higgins a minimum wage is that irreducible wage, which should enable the worker to get three basic necessities of life, namely, food, clothing an shelter.
Fair Wage: – Fair wages is an adjustable step that moves up according to the capacity of the industry to pay, and the prevailing rates of wages in the area of industry.
Living Wage:- Having described the minimum wage to provide for food, clothing and shelter as a basic and irreducible level of wage, Justice Higgins developed his concept of living wage as one which should not only provide for food, clothing and shelter but for some frugal comfort of life, good education to children, some amusement and provision for sickness and old-age including some measure of social security. Again die frugal comfort should be such as measured at the changing values at a given time.
ELEMENTS OF GOOD WAGE PLAN
A good wage system has the following features:
- The system should be fair both to the employer and the employee. It should be based upon scientific time and motion study to ensure a standard output to the employer and a fair amount of wages to the workers.
- The worker should be assured of a guaranteed minimum wage at satisfactory level irrespective of the work done by him.
- Workers should be paid according to their merits. Efficient workers should be able to earn more wages as compared to the inefficient workers.
- Skilled workers should be paid more as compared to the unskilled workers. Skilled workers are to be compensated for the efforts put in by them to acquire the skill.
- The system should ensure equal pay for equal work.
The system should be flexible to allow necessary changes which may arise.
REWARD & INCENTIVE
Put in simple terms, a reward is something which is actually given to an employee, whereas an incentive is a motivating factor. For example, if you give one of your employees a gift for their hard work, that is a reward.
SHORT TERM AND LONG-TERM INCENTIVES
Short Term incentive schemes measure performance for up to one year, whilst Long Term Incentive schemes measure performance for over a year.Jul 17, 2017
Short–term incentives, also often referred to as annual incentives, are intended to compensate executives for achieving the company’s short–term business strategy based on achievement of goals by the board compensation committee.
Examples of common short–term plans include: Annual incentive plan. A pay plan that rewards the accomplishment of specific results. Rewards usually are tied to expected results identified at the beginning of the performance cycle.
A company benefit of stock options for employees who have been with the company for five years provides a long–term incentive, while at the same time making it achievable. … For example, the company can structure it so the employee forfeits all gifted stock if he resigns within two years of receipt.
MONETARY AND NON MONETARY INCENTIVES
Monetary incentives may offer short-term benefits but involve significant downsides. Non–monetary incentives, on the other hand, can shift your company culture, especially if the benefits package is constructed with your employees in mind. Monetary incentives can help you recruit and reward employees, to an extent.
EXAMPLES OF MONETARY & NON MONETARY INCENTIVES
Examples of non–monetary compensation include benefits, flex-time, time off, free or discounted parking, gym membership discounts, retirement matching, programs, tuition assistance, and childcare. A benefits plan is designed to address a specific need and is often provided in a non-cash form.
LONG TERM INCENTIVE PLAN
Examples of non–monetary compensation include benefits, flex-time, time off, free or discounted parking, gym membership discounts, retirement matching, mentoring programs, tuition assistance, and childcare. A benefits plan is designed to address a specific need and is often provided in a non-cash form.
A solid retirement plan within the company provides a long-term incentive. If you match employees’ contributions up to a percentage of their paycheck, they are encouraged to remain in your company until retirement. Companies often use a vested plan as a long-term incentive. For each year of service over the first five years, if the employee resigns, he takes 100 percent of his retirement fund contributions with him. The percentage of the matching contributions you as the company owner put in that he can take increases with each year from year one to year five. The first year you would typically retain 75 percent of your matching funds if the employee resigned, the second year, you would retain 50 percent, the third year 25 percent and the fifth year, the employee becomes “fully vested” meaning he owns 100 percent of your match funds from that year forward.
A 10-year sabbatical benefit keeps employees loyal. Offer a six-month paid sabbatical to each member of your organization that works for you throughout a 10-year period and achieves pre-determined milestones such as moving into management within that time frame. Sabbatical incentives are common in the world of academia but are also sometimes used in the corporate world.
A company benefit of stock options for employees who have been with the company for five years provides a long-term incentive, while at the same time making it achievable. Increase the amount of stock the employee can access at a discount for every five years he is with your company. The employee pays a percentage of each share’s value, with you paying the balance. The percentage of each share that you buy increases with employee seniority with the company.
Another option is restricted stock. The company gifts stock shares to the employee with restrictions. For example, the company can structure it so the employee forfeits all gifted stock if he resigns within two years of receipt. For each subsequent year of employment, he retains the rights to an additional 25 percent of the gifted stock. During the fifth year of employment following the stock gifting, the employee is fully vested and owns it all, even if he resigns.
Adding a week’s additional vacation time for every five years the employee works cements company loyalty for the long haul. Give one week per year for the first four years and two weeks starting with the fifth year. On the 10th year, increase the annual vacation by another week for every five years thereafter.
Cash awards that are given every three to five years of employment on the achievement of certain performance goals work well as long-term employee incentives. Performance is typically measured against projected growth, sales expectations and peer group evaluations in the industry. The award amount is based on multiple base-salary calculations.
The Payment of Bonus Act, 1965 provides for a minimum bonus of 8.33 percent of wages. … 3,500 per month and the payment is subject to the stipulation that the bonus payable to employees drawing wages or salary not exceeded to Rs. 10000 per month would be calculated as if their salary or wages is Rs. 3,500 per month.
Payment of Gratuity Act, 1972. Long Title: An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
GUIDELINES FOR EFFECTIVE INCENTIVE PLAN
- Understand the Need for Incentives. …
- Involve the Employees. …
- Simple Is Best. …
- Include All Employees. …
- Use Work Methods and Labor Standards. …
- Reward Direct Work. …
- Consider Other Factors. …
- Communicate the Program.
Additional pay for attaining a specific goal.
A form of on-the-job training in which a senior manager or other experienced employee provides job- and career-related information to a mentee.