Objectives and Principles of Wage and Salary Administration

Objectives and Principles of Wage and Salary Administration

The main goal of wage control is to develop and maintain a fair system of wages. This is because an employer can only attract, hire, retain and empower workers of appropriate performance and skills within his / her company through a properly developed compensation system. The priorities of the company, its individual employees and collectively can be presented in a more orderly manner. The following is outlined and discussed:

Organizational Objectives:

With response to changes, the compensation system should also be properly aligned with the corporate need and versatile enough.

Accordingly, the objectives of the system should be to:

1. Enable a company to have the necessary quantity and quality of personnel.

2. Retain the organization's employees.

3. Motivate workers to improve their performance more.

4. Keep the compensation for like jobs equitable and fair.

5. Make the system versatile to handle organizational changes as and when they happen.

6. Make the system rentable.

Individual Objectives:

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

1. Ensures fair compensation.

2. Provides compensation according to employee’s worth.

3. Avoids the chances of favoritism 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 an increase in the prosperity of the company.

4. Compensation system free from management discretion.

Beach has listed the five objectives of wage and salary administration:

1. To recruit persons for a firm

2. To control pay-rolls

3. To satisfy people, reduce the incidence of turnover, grievances, and frictions.

4. To motivate people to perform better

5. To maintain a good public image.

Principles of wage and salary administration:

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

1. External Equity

2. Internal Equity

3. Individual Worth.

1. External Equity:

This theory acknowledges the factors/variable affects the pay rate in a corporation outside the organization. Such considerations include demand and supply of labor, the market rate, etc. Unless the changes in the rates of pay and wages take these factors into account, they may not be enough to attract and retain company employees. External equity principles offer a fair reimbursement for similar jobs for employees in the labor market.

2. Internal Equity:

Organizations have various relatively long-term jobs. It ensures that the ideals of different jobs are equivalent to an organization. The salary levels for teachers (professor, reader, and lecturer) within your own department are different depending on perceived or real discrepancies between the qualities of the jobs you do.

The relative value of employment is calculated by work assessment. An ideal reimbursement system should, therefore, establish and maintain suitable differentials based on relative employment values. The compensation system must, in other words, provide for more difficult jobs.

3. Individual Worth:

This principle applies to pay a person following his / her results. The compensation system, therefore, makes it possible, following his contribution to the company, to be paid to the employee.