Practically how wages are determined and maintained or administered in an organization is very organization to organization. Ideally speaking it depends upon sole discretion that what procedure an organization follows for wage and salary administration. More or less an attempt is made by every organization to follow the principles suggested for sound compensation management. Organization tries to inculcate systematic procedure for wage determination and their revision at an appropriate time. Process of wage determination includes job analysis and job evaluation, survey of wages in the environment, determining wage structure, and deciding rules for wage administration.
Briefly these steps are discussed as under:
Job Analysis
1. Job Analysis and Job Evaluation: This may be the primary exercise that an organization needs to carefully carry out with an intention to create base for wage determination. Job analysis reveals information about tasks, duties, responsibilities and standards with proposed job is to be performed by the employees. It also guides in terms of job specification i.e. skills, ability. Qualification and experiences needed to perform the job with requisite performance standards. Job analysis gives enough information about the job and the profile of the performer in order to perform that job. Another important exercise that an organization needs to carry out is ‘Job Evaluation’. It is nothing but finding out relative worth of a job, in terms its contribution and significance to the overall organizational objectives.
2. Determining Performance Standard and Wage Surveys: Having understood the job in considerable detail an attempt is made to determine expected performance standard to be carried out by the performer. Then, an organization must survey wage rates prevails in the market for the same job or its similar type, so that attractive compensation package can be designed to induce good quality of candidature to apply for the job in an organization. Here care should be taken that wage structure should be in accordance with the complexity and efforts needed in the performance.
3. Deciding Wage Structure and Rules for Its Administration: Based on collection of relevant information and taking in to account some of the influencing factors, an organization should design wage structure which includes slab for basic or minimum wages, incentives, and/or increment over a period of time to gather with other financial and nonfinancial perquisites to be offered to an employee. Attempt should be made to follow principles of fairness, equity and justice to gather with transparency while designing wage structure and deciding rules for its administration. The rules should not provoke un justified discriminations and exploitation of workers otherwise it may prove counterproductive and may give rise to grievance, and industrial disputes.
