Compensation pay structure in India
Pay structure in a company depends upon several factors. E.g… wage
settlements. Labour market situation. Company’s nature and size. etc. Pay
structure consists of certain grades. Scale and range of pay in each scale. Each
scale has aminimun and a maximum limit. Jobs places within a particular grade
carry the same value though the actual pay in a grade depends upon length of
service and or performance of the employee.
Pay structure in India generally consists of the following components.
1- Basic wage/salary
2-Dearness allowance (D.A.) and other allowances.
3- Bonus and other incentives.
4- fringe benefits or perquisites.
Hard variables
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Salary
Augmented pay- overtime, extra pay, one time stuff
Indirect pay –things needed for work, uniform allowance, etc.
Parks pay – discount on company’s products, etc.
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Soft variables
Opportunity for advancement
Opportunity for growth
Psychic income – doing personally meaningful work
Quality of life – workplace flexibility, work-life balance
1. Basic Wage
The basic wage provides the foundation of pay pocket. It is a price for
services renderd. It varies according to mental and physical requirements of
the job as measured through job evaluation. In India, basic wage has been
influences by statutory minimum wage, wage settlements, and awards of
wage boards tribunals pay commissions, etc.
(a) Minimum wageMinimum wage is that wage which is sufficient to cover the bare
physical needs of a worker and his family. But the committee felt that the
minimum wage should provide not merely for the base subsistence or
sustenance of life but for the preservation of the health, efficiency and
well- being of the worker by providing some measure of education,
medical facilities and other amenities. Statutory minimum wage is fixed
from this point of view. Minimum wage has got to b paid to every worker
irrespective of the capacity of the industry to pay. If and enterprise is
unable to pay its workers atleast a bare minimum , it has no right to exist.
(b) Fair wage
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A fair wage is something more than the minimum wage providing the bare
necessities of life. While the lower limit of the fair wage is sety by the
minimum wage, the upper limit shou7ld be the capacity of the industy to
pay. Between these two limits, fair wage should depend on several factors
likeThe productivity of labour.
The prevailing rates of wages in the same or similar occupations in the
same region or neighbouring regions,
Level of national income and its distribution,
The place of the industry in the economy of the country, and
The employer’s capacity to pay.
Thus , the fair wage should be determined on industry cum region basis.
Fair wage is a step toward the ideal of living wage. The objective should be
not merely to determine wages which are fair in abstract but also to ensure
that employment and efficiency of the industry is maintained and if
possible increased.
(C) Living Wage
illhealth, requirements of essentioal social needs and m It is the wage that
provides, in addition to the necessities of life certain amenities considered
necessary for the well-bing of the worker in a particular society. It should
ensure a normal standard of life to the average employee regarded as
human beings living in a civilized community. According to the fair wages
committee, “the living wage should enable the male earner to provide for
himself and his family not merely the bare essentials of food, clothing and
shelter but also a measure of frugal comfort including education for
children, protection against easure of insurance against the more important
misfortunes including old age.”
The concept of living wage is dynamic related with the level of
economic development in a country. There should be progressive
improvement in the wage with improvements in the economic life of the
nation. In and underdeveloped country like India living wage is the ideal or
target that is to achieved through higher productivity.
State regulation of wages:
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The minimum wages act, 1948
The payment of wages act,1936
The equal remuneration act,1976
The industrial dispute act, 1947
Wage boards
Pay commissions
(2)DEARNESS ALLOWANCE AND OTHER ALLOWANCE
This allowance is given to protect the real wages
Of workers during inflation .Under section 3 of the minimum wages act is as
cost of living allowance.Dearness allowance has now become an integral part of
the wage system in india.The following methods are used to calculate dearness
allowance:
FLATE RATE:According to this method, D.A. is paid at a flat to all workers irrespective
of their wage levels and regardless of change in the consumer price index. This
method was used in jute, cotton and engineering industries in West Bengal in
the early days of adjudication.
GRADUATED SCALE:Under this method,D.A. increases with each slab of salary.Therefore,D.A. as
a percentage of basic pay decreases steadily as shown in table:
Pay scale
Amount
(Rs.)
(Rs.)
0-500
500-1000
1000-1500
1500-2000
100
150
200
250
of
D.A. D.A. as percentage of
maximum of the pay
scale
20
15
13
12.5
INDEX BASED D.A.:In this method a flat rate per point of index is prescribed so that all workers
determine the same amount of D.A. irrespective of their scale.For example, if
Rs. 1.50 is the rate Rs.15 will be paid as D.A. whenever all India Consumer
Price Index (AICPP) increases by 10 points. This method is in force in tt cotton
mills of Mumbai and Chennai and in many central GOV. undertakings.
D.A. Linked to Index pay scale.
Under this method, a higher rate of D.A. is prescribed for lower pay scales
and and a lower rate fore higher pay scale.This method is used to pay D.A. to
employees in Gov. offices and in many central public sector undertaking.
In addition to D.A. several types of allowances are in use.these
are followings:Acting
City Compensatory Allowance
Bank Allowance
Education Allowance
House Rent Allowance
Conveyance/ Car Allowance
Medical Allowance
Tiffin Allowance
3. Bonus
Bonus began to be paid as an ex-gratia to workers of textile mills in
Mumbai and ahemadabad after the first world war. Someexperts argue that
bonus is a defferd wage aimed at briding the gap between actual wage and need
based wages .It is also argue that bonus is a share of the workers in the
prosperity of an enterprises. Bonus may also regarded as an incentive to higher
productivity. According to the bonus commission(1961), bonus is sharing by
worker in the prosperty of the concern in which they are employed. In the case
of low paid workers such sharing in the prosperty argument earnings and help
to bridge the gap between the actual wages and need based wage.It has litile
direct incentive effect because it is usually paid to all workers at the same rate
irrespective of their individual efficiency and long after the close of the
financial years.
4. Fringe benefit
A brod range of benefit and services are provided by an employer to his employ
in addition to wage and salary. These are based on critical job factors and
performance. These represent indirect compentation. These are no longer fring
as these constitute a significant part of total comensation package and
substantial labour cost for employer.
Criteria
(i) It should be computable in terms of money.
(ii)The amount of benefit is not generally predetermined.
(iii) There is no control as to when are benefits available.
Need and Importance-
(a) incentives motivation
(b) Improve employee’s standard of living.
(c) Attract better talent.
(d) Reduce labour turnover,
(e) Reduce overtime costs
(f) Discourage labour cost
(g) Help labour in rising cost of living
(h) Labour legislation had made some of them compulsory e.g..PF/Pension
(i) Power of unions.
(j) Part of social responsibility and human relations,
(k) Sense of security and welfare – health safety, etc.