Wage and

Salary Administration
Angelyn B. Marzo
Lenie S. Tiwaken
 Wage and Salary Administration
- A group of activities involved in the development, implementation and
maintenance of the pay system.

- An ongoing process of managing a wage and salary structure.

Wages , Salaries and compensation Definition
Wages - paid to blue-collar employees
- paid daily, weekly or monthly
- paid for the jobs which can be measured in terms of
money`s with to some extent

Salary - paid to white-collar workers

- paid in monthly basis
- paid to employees whose contribution cannot be easily
measured

Compensation – a comparative term; includes wages and other allowances and benefits. (e.g.
allowances, leave facilities, housing, travel and non-cost such as recognition, privileges, and symbols
of status)
In the past, the terms used to describe the type of jobs are:
1. Blue Collar- Manual Laborers
2. White Collar- Office workers
3. Pink Collar- Associated with women(e.g. nursing, secretariat, etc.)

In the present time, it classified into 3 categorized:

1. Skilled Labor – workers who received specialized training to do their jobs; developed and
improved a special skill; may or may not need to be licensed or certified by the state.
- This may be blue/white collar workers

2. Unskilled Labor- workers who received no special training; have few specific skills

3. Professionals - The elite of the labor grades

- Workers who need to do an advanced degree to dotheir jobs
-These are the White collar workers
 Wage and Salary Administration Main objectives
 To have a scientific , rational, and balanced wage and salary structure.

 In salary administration, the employer should not feel employees are getting more money than
they deserve and employees should not feel they are getting lower money than they deserve.

Other Objectives
1. To establish fair and equal compensation .
2. To attract competent personnel
3. To retain the present employees
4. To control labor and administrative cost
5. To improve motivation and morale of employees
6. To project good image of the company.
 The Role of Human Resource in the Payment of Salaries
 The function of the payroll in a company is usually the wage and salary
administration and it is carried out by the Human Resources department.
 Principles of Wage and Salary Administration

1. It must be flexible.
2. Job evaluation must be scientific.
3. It must consistent with overall plan of the organization.
4. It must be according to the social and economic objective of
the organization
5. It must change according to the local and national conditions
6. It must simply and speed up the administrative process.
TYPES OF WAGES
1. Minimum Wage- wage which is sufficient to meet the worker`s bare
necessities

2. Fair Wage- Wage above minimum and below living wage.it is decided
based on productivity of labor, prevailing rates of wages, level of national
income and the capacity of employer to pay

3. Living Wage- it provides basic needs of life.It should meet medical,

education and retirement needs and it is paid according to the efficiency of
worker
 Methods of Wage Payment
Time Wage Piece Wage
Wage are paid on the basis of time spent on Remuneration is based on the amount
the job irrespective of the amount of work of work done or output of a worker.
done
Day wage system Payment by results
HxR=W NxU=W
H – Hours actually worked N – Number of units produced
R – Rate per hour in pesos U – Rate per unit in pesos
W – Total wage earned W – Wages earned per day or per week
Time Wage is best when:
1. Employees have little or no control over how much work they produce.

2. There is no clear –cut relationship between the effort made to produce the work
and the amount of work produced.

3. Work delays occur often and are beyond the employee`s control.

4. Quality of work is very important

5. Units of work produced cannot be distinguished and cannot be measured.

Piece Wage is best when:
1. When the unit of the completed work can be measured easily;

2. When there is a clear relationship between a worker`s effort and the results of
his effort;

3. When the quality of work is less important than quantity, or when quality
standards are uniform and measurable;

4. When the flow of work is regular, breakdowns are few, and jobs follow a
standard procedure, with few interruptions
Factors Influencing Wage and Salary
1. Labor Unions- The labor unions attempt to work and influence the wages primarily by
regulating or affecting the supply and demand

2. Personal perception of wage- whether the wage is adequate and equitable depends not only
upon the amount that is paid but upon the perception and the views of the recipients of the wage.

3. Ability to pay-Labor unions have often demanded an increase in wages on the basis that the
firm is prosperous and able to pay .If the firm is highly successful, there is little need to pay for more
than the competitive rates to obtain personnel.
4. Cost of living
Factors Influencing Wage and Salary
5. Government Legislation- Wages and salaries can`t be fixed below the
level prescribed by the government.

6. Supply and demand

7. Productivity- High wages and low costs are possible only when
productivity increases appreciably.
 Theories of Wages
1. Classical Wage Theory- labor is a commodity and we have to pay the price according to
supply and demand

2. The Just Wage Theory by St. Thomas Aquinas

- wage which permits the recipient worker to live in a manner in keeping with his position in
the society

3. Wage Fund Theory- based on the Malthusian Theory and the law of diminishing returns

4. Bargaining Theory of John Davidson – labor is a commodity like anything that could be
bought at a price by the user

5. Labor Theory of Value - labor is the source of all the products and that without this
component, there could be no goods for human consumption
 Theories of Wages
6. The Standard of Living Theory of Wages – wages should be based on the cost of living

7. The Marginal Productivity Theory- worker`s mobility affects the structure of wages in the
industry

8. The Purchasing Power Theory- Relationship between wages and the level of economic activity
How do we Determine the actual salary to be paid?

Procedure in Conducting Wage and Salary Surveys

1. Defining the labor market

2. List of key job positions

3. Detailed description of jobs

4. Collection of salary data

5. Compilation of salary data

6. Results of the survey

All employees required to work beyond eight hours in one workday is
entitled to overtime pay.(Article 87 of the Labor code)

Overtime Pay
– is the additional compensation payable to employee for services or work
rendered beyond the normal eight hours of work.

OT Pay = OT rate x No. of hr. excess of the regular 8 hr. of work

Overtime Work- any work performed beyond the normal 8 hours of work in
one work day

Workday- consecutive 24-hour period which commences from the time the
employee starts to work and ends at the same time the following day
 Overtime Pay Rate
-depend upon the day the work is performed, whether it is ordinary working day, special day, holiday or
rest day

Computation for Overtime Pay

1. For ordinary working day:

a. 25% of the hourly rate x the number of hours
b. 10 % more on 25%( based on the letter a above)if the OT is rendered
between 10 pm-6 am

2. For holidays, special day and rest day:

a. 100% additional if work is done on 10 legal regular holidays
b. 30% more if work is done on special holidays and Sundays
Legal Framework of Wages
 Payment of wages Act 1936- governs how wages are paid to employees ( direct or
indirect) intended to protect them from unlawful employer deductions and/or unjustifiable
salary delays.

 The Minimum Wage Act 1948

 The Companies Act 1956

 The payment of Bonus Act 1965

 The Equal Remuneration Act 1976

Thank you very much.