Payroll Manager Tutorial | Meaning Of Wage/ Compensation Payment

 

Meaning Of Wage/ Compensation Payment

Wage is a monetary payment made by the employer to his employee for the work done or services rendered.  It is monetary compensation for the services rendered. A worker may be paid Rs. 100 per day or Rs. 4500 per month. This is wage payment. The worker gives his services and takes payment called wage payment. Industrial workers are paid remuneration for their services in terms of money called wage payment. Wages are usually paid in cash at the end of one day, one month or one week.  Money wage is the monetary compensation or price paid by the employer to his employee for the services rendered. Such compensation is also called wage or salary or reward given by an organization to a person in return to a work done.

Generally, compensation payable to an employee includes the following three components:

• Basic compensation for the job
• Incentive compensation for the employee on job
• Supplementary compensation paid to employees (fringe benefit and employee services)

Definition

According to Milkovinch and Boudreau, “Compensation refers to all forms of financial returns, tangible services, and benefits employee received as part of their employment relationship.

Objective/goals of wage & salary:

• Internal & external Equity: A very important objective in administering salary is to achieve internal and external equity. Internal equity means similar pay for similar work. Differences in wages between jobs should be in proportion to the differences in the worth of the jobs.
• Fair wages: It is something more that the minimum wage providing the bare necessities of life. It depends on several factor- productivity of labor, prevailing rates of wages in the same or similar occupations in the same or neighboring region, place of industry in the country‘s economy, employer‘s capacity to pay and so on.
• Attract competent talent: Through proper wage salary administration, the organization seeks to attract talented, well qualified and hardworking people.
• Retain good employees: Through fair and competitive wages and salaries, the organization aims at retaining competent employees who are doing a good job. The purpose is to reduce employee turnover.
• Satisfy employee needs: A key objective of adequate wages and salaries is to help employees fulfill their various needs. It creates a sense of security and enhances the self-worth of the employees.
• Motivate employees to higher productivity: A well planned salary system motivates employees to work hard, resulting in higher levels of productivity.

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