QS Study

Importance of Wage and Salary Administration in HR Management

The words wage and salary are sometimes considered synonymous strictly speaking however they have slightly different meaning. Wage refers to at an hourly rate of pay and is the pay basis used most frequently for production and maintenance employees. Salary refers to a weekly, monthly, or yearly rate of pay.

Wage and Salary Administration is important for the following reasons:

Attract and Retain the Employees: If an organization possesses good wage and salary structure, it will attract and retain suitable, qualified, and experienced personnel.

Builds High Morale: The wage rates established for various categories of jobs should be internally consistent; it will motivate the employees of the organization. It will build the high morale of employees and act as an incentive to greater employee productivity and efficiency.

Satisfied Employees: A good wage and salary structure will keep the employees satisfied. There will be lesser labor turnover, industrial disputes and employee grievances and exigencies.

Labor Cost Equitable: A good wage and salary structure will maintain two types of equitabilities viz., (a) labor cost equitable and, (b) equitable wage and salary structure. Pay according to the work performed by an employee. If an employee is performing hazardous work pay him more.

No Favoritism/Bias: If an organization has a definite wage and salary structure, favoritism bias can be avoided.

Clearly drawn the line of promotion: If a company has a good wage and salary structure, it can have a definite sequence of jobs and clearly drawn the line of promotion.

Image of Progressive Employer: A good and definite wage and salary structure would enable the company to project in the public. All image of a progressive employer.

Harmonious Industrial Relations: A good wage and salary structure will serve as a sound basis for collective bargaining and enable the maintenance of satisfactory union-management and employee-management relations.

Ensure Minimum Wages: A good wage and salary structure should also conform to the minimum wage laws.