The key factors affecting wages are: - Minimum wages which are set by the government and must provide for basic sustenance and worker efficiency. - Fair wages set by employers based on productivity, prevailing rates, income levels, and the employer's capacity to pay. - Living wages which must provide for basic amenities and social needs in addition to minimum wages. Internal factors include productivity, performance, company budgets and strategies, while external factors include cost of living, market standards, and legislation. An ideal wage system is rational, equitable, economical, guarantees minimum wages, provides incentives, is stable, simple, links to productivity, and rewards workers and initiative.

1. FACTORS AFFECTING WAGESFACTORS AFFECTING WAGES
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2. WAGES
Rule 22 (2) of the Minimum Wages (central) Rules defines "wages" as
under
Wages shall mean all remuneration payable to an employed person on
the fulfillment of the contract employment and includes HRA. It
excludes
(i) The value of rent free accommodation, supply of light, water,
medical .....
(ii) Contributions paid by the employer towards the PF or any scheme
of social insurance
(iii) Traveling allowance / Traveling concession
(iv) Gratuity
The wages may consists of
(i) a basic rate of wages and special allowance called the cost of living
allowance
(ii) a basic rate with or without cost of living allowance plus any
concession on the supply of essential commodities.

3. SALARY vs. WAGES
• Salary was given to people with white collar jobs and wages to
blue collar one
• The total salary is: Basic Wages + D.A + other allowances
• What a "Salary" looks like: $45,000 per year
• What a "Wage" looks like: $16.50 per hour
• Wages are paid to the direct labour, either in the form of time
rate or piece rate (hourly or weekly basis)
• Salaries are paid to indirect labour, mostly in the form of time
rate (monthly basis)

4. • MINIMUM WAGES:
 FIXED BY GOVERNMENT
 TAKES INTO CONSIDERATION THE COST OF LIVING
 THIS IS THE WAGE WHICH MUST PROVIDE NOT ONLY FOR
BARE SUSTENANCE OF LIFE BUT FOR THE PRESERVATION
OF EFFICIENCY OF THE WORKER- GOVERNMENT
COMMITTEE ON WAGES(1948)
• FAIR WAGES:
 FIXED BY EMPLOYER
 DETERMINED ON THE BASIS OF :
 PRODUCTIVITY OF LABOUR
 PREVAILING WAGE RATES IN SIMILAR JOBS
 LEVEL OF NATIONAL INCOME AND ITS DISTRIBUTION
 PLACE OF INDUSTRY IN THE ECONOMY
 THE EMPLOYER’S CAPACITY TO PAY

5. • LIVING WAGE:
HIGHEST AMONG THE THREE
MUST PROVIDE BASIC AMENITIES OF
LIFE AND SOCIAL NEEDS LIKE
MEDICAL, EDUCATION, ETC.

6. Compensation management is about
a range of interconnected processes
that aim through both financial and
non-financial means to address what
employees value in the employment
relationship .
The various factors affecting the
compensation and Wages are:
COMPENSATION FACTORS

7. • Productivity, Growth and Contribution
• Performance/ Work Related
• Company’s Affordability & Budgets –
Ability to Pay
• Corporate Strategies – Business & HRM
• Organizational Values
• Flexibility – Responding to Changes
INTERNAL FACTORS

8. • Motivation Oriented
• Competence Based – Performance Appraisal
• Organization Grade Structure
• Job Evaluation – Relative size of Jobs
• Non Financial Benefits – Employee benefits
• Trade Unions

9. EXTERNAL FACTORS:
• Cost of Living & General needs of people
employed
• Demand & Supply of Human Talent
• Market Standards
• Industry Trends
• State Legislations

10. In the Innovative employee reward system
the features varies from industry to industry.
But the common features are
1. Performance Appraisal System :
Performance appraisal system is not only a direct projector of
performance by an individual during the year but accounts for
so many other parameters

11. 2. Company commitment :
If management commitment is not there , then
innovative systems will never come into existence.
Business simulations if available may be tried to
work out the nearest possible results.
3. Minimizing the Bias factor :
Bias factor is a stigma on innovative practices.
You can not eliminate this but by minimizing the
bias factor , one can achieve the objective of
innovative system.
4. Availability of resources :
For implementation of any system one has to
have resources for the same.. If resources are not
available the morale which you want to improve
will not be as much possible as you desire to be.

12. ESSENTIAL CHARACTERISTICS
OF IDEAL WAGE SYSTEM
1. Rational & Equitable
2. Economical
3. Guarantees minimum wages
4. Provision for incentives
5. Stable
6. Simple
7. Linked with Productivity
8. Workers Share in Excess profits

13. 9. Encourage cooperation between workers
and employers
10.Initiative to be rewarded