theories of wages and wage legislations

7/28/2019 Theories of Wages and Wage Legislations

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Theories of Wages & Legislations


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Contents

Introduction

Maslows Hierarchy of needs

Hertzberg two factor theory of motivation Just Wage Theory

Subsistence Theory

Wage fund Theory

Standard of Living theory

Residual claimant theory

Marginal productive theory

Bargaining theory & Behavioral theories

Expectancy theories

Equities theory


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Maslows Need Hierarchy Theory

Maslow's need hierarchy divides human needs intofive levels

Each level represents a group of needs-not oneneed for each level

Maslows expresses the view that Man is a WantingAnimal and also that Wants are unlimited

He also suggests that people can travel down as

well as up the hierarchy Loss of existing satisfaction of needs for example,

can re-activate that level and increase its relativeimportance


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Hierarchy of Needs


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Critical Evaluation of Maslows Theory

This theory has been highly appreciated as has it

helps the managers think about motivating their

employees.

It accounts for interpersonal variations in human

behavior

Need hierarchy model is dynamic as it presents

motivation as a constantly changing force.

Here human behavior makes a total departure from

earlier approaches


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Herzberg Two Factor Theory

The first basic part of this model is a formally statedtheory of work behavior

The second aspect of Herzberg's work has focusedupon the behavioral consequences of job-enrichment and job-realization programmes

This model is variously termed as the two-factortheory, the dual factor theory, and the motivation-

hygiene theory. This model has been highly accepted by the

managers concerned with the problem of humanbehavior at work


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Continued..

Herzberg used critical incident method in his survey

for obtaining data for analysis

The respondents were asked two questions:

When did you feel particularly good about your job and

When did you feel exceptionally bad about your job

The responses obtained revealed factors that the

they were two extremes, which is related to job

satisfaction or which is related to job-dissatisfaction


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Hygiene factors and Motivators

Achievement

Recognition

Work itself

Responsibility

Growth

Advancement

Company Policy

& Administration

Security

Status

Salary

Working

Conditions

Hygiene

Factors

Motivators


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Evaluation of the theory

Intrinsic factors are variously known as motivators,

satisfiers or job-content factors.

Extrinsic factors also known as dissatisfiers, hygiene

factors, maintenance factors or job-context factors.

To achieve motivation, managers should cope with

both satisfiers and dissatisfiers, that improve hygiene

factors.

The major pitfall of this theory is that contrasting

views of satisfaction and dissatisfaction


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Just Wage Theory

This was the first theory on wages advocatedduring medieval period

The essence of this theory is that the worker

should be paid on the level of maintaining

himself and his family


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Subsistence Theory

According to Ricardo the laborers are paid

to enable them to subsist and perpetuate the

race without increase or diminution


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Wage Fund Theory

According to J.S.Mill, the wages are

determined of the relationship between theamount of fund allocated for the purpose of

wage payment and number of workers in a

country

Wage = Amount of fund allocated for wagepayments

Number of workers


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Standard of Living Theory

Karl Marx pointed out that the Wage of laboris determined by a traditional standard of

living, which, in turn, is determined by the

mode of production of the country

concerned


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Residual Claimant Theory

According to Walker, the wages are

determined on the basis of the amount leftafter the payment of rent, profits and interest

to land, entrepreneur and capital respectively

out of the productive value.

Amount of wages = Production Value(Rent+ Profits+ Interest)


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Marginal Productive theory

According to the J.B.Clark, the wages are

determined on the basis of marginal contributions of

the worker to the production

The employer stops employing further workers

where the contributions of the most recently

employed worker are equal to his wages.


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Bargaining Theories and Behavioral

Theories

According to this theory the wages and otherterms of employment are determined on thebasis of the relative bargaining strength ofthe two parties, the employer and theemployees.

Webbs stated that, the higgling of themarket which under a system of freecompetition and individual bargainingdetermines the conditions of employment.


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Expectancy theories

According to behavioral scientists, wages are determined onthe basis of several factors: Size

Nature Prestige of the organization

Strength of the union

Social norms

Traditions

Customs

Prestige of certain jobs

Level of job satisfaction

Morale

Level of performance


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Equities Theory

This theory emphasis on equity in pay structure of

employee remuneration. Equity theory states that an employee who perceives

inequity in his or her rewards seeks to restore equity.

The remuneration system needs to meet three typesof equity: Internal

External

Individual


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Dimensions of Equity

Internal Equity

Perceptions of

Fairness

Individual Equity Performance

Commitment

Motivation

External Equity


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WAGE LEGISLATION


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Contents of the Chapter

Introduction

Wage survey Wage Legislations

Payment of wages Act

Minimum Wages Act Payment of Bonus Act


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Introduction

We have various labor laws at the central and the

state levels.

Some of the central laws which have a bearing on

employee remuneration are:

The Payment of Wages Act, 1936.

The Minimum Wages Act, 1948.

The Payment of Bonus Act, 1976.

Payment of Gratuity act, 1972.


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Contd..

In addition to legal enactments, there are wageboards, tribunals, and fair wage committees which

aim at providing a decent standard of living toworkers.

India is the only democratic country in the worldwhich has attempted wage regulation on the largeregulation on so large scale through state sponsoredagencies.

With regard to managerial remuneration, the

Companies Act 1956 puts a cap on salary and


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Wage Survey

Survey is an investigation of current position.

Salary Survey is one of the techniques useful in salaryadministration.

The purpose of this salary is to collect competitive salarydata regarding various jobs in the labor market and providethe same for salary administration.

An salary survey enables an organization to find out whatother organizations pay for specific jobs and the basis forpayment of the existing salary level.

Most of the organizations are forced to pay the wageequivalent to the going rate or the market rate.


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Factors Affecting Wage/Salary

Levels

Remuneration in the Comparable Industries.

Firms Ability to pay Cost of Living

Productivity

Union Pressure and Strategies Government Legislations


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Government Legislations

Government legislations influence wage

determination.

The important legislations which affect wage fixation

are:

The Payment of Wages Act.

The Minimum Wages Act.

The Payment of Bonus Act.

Payment of Gratuity Act.


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WORKMENS COMPENSATION ACT,

1923 (As Amended Upto Act 46 of 200)

The workmens compensation Act is a

welfare legislation and its object is that the

compensation for injuries or death sustained

by the workmen be paid to him or his family

members without any delay.

The Act provides cheaper and quickerdisposal of disputes relating to compensation

through special tribunals than possible under

civil law.


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The Payment of Wages Act, 1936.

The important provisions of this Act are:

Ensure proper payment of wages

Avoiding all malpractices like non-payment

Underpayment

Delayed and irregular payment Payment in kind and undermeasurement of work

The Act covers all employees drawing the wage up

to Rs 1000 per month.


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Contd..

The Act stipulates that the organization with less

than hundred workers should pay by seventh and

the organization with more than 100 employeesshould pay by the tenth of next month.

The Act also stipulates time for payment of dues to

the discharged employees.


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The Minimum Wages Act, 1948

The Act seeks to protect the workers from

underpayment of wages for their efforts.

It presents the guidelines for the fixation of minimum

wages which is just sufficient to meet the basic

needs of workers and to keep a mans body and

soul together.

Statutory minimum wage is determined according to

the procedure prescribed by the relevant provisions

of the Act.


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Contd..

The Act provides for fixing of:

Minimum wage in certain employments

Minimum time rate

Minimum piece rate

Guaranteed time rate

Overtime rate

Basic pay and D.A

The Act also provides for revision of minimum wage

at fixed intervals


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The Payment of Bonus Act, 1965.

The Government Enacted the Payment of BonusAct in September, 1965.

The important provisions of the Act are: 60% of the surplus should be allocated for the

payment of Bonus.

Salary for the purpose of bonus means Pay + DA.

Minimum Bonus payable is 4% of the salary or Rs 40,whichever is higher.

If an employee is below 15 Years of age, the bonuspayable is 4% of the salary or Rs 25 whichever ishigher

If the available surplus is more than 20% of the bonus,it can be set on u to a maximum eriod of 4 Years


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Contd..

The Government amended the Act again in 1977. The

important provisions of this amended are:

The Industrial undertaking covered by the Act to pay

the Minimum bonus of 8.33%, irrespective of profit or

loss from the year 1976.

Investment Allowance should be taken as prior charge.

Banking Companies and Industrial Reconstruction

Bank of India are covered by this Act.


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OTHER MAJOR REGULATIONS

maternity Industrial Employment Act 1946

Factories Act 1948 Employees state insurance Act, 1948

Employees provident fund & miscellaneous

provision Act 1952

Payment of bonus Act 1965

Payment of gratuity Act, 1972

Equal Remuneration Act 1975


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Motor transport workers Act 1961

Plantations labour Act 1951 Sales promotion employees Act, 1976

Trade unions Act , 1926 ( Amended by Acts

upto of 2001)

theories of wages and wage legislations

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