This document discusses compensation management and provides information on wage-related acts and institutions in India. It covers objectives of acts like the Payment of Wages Act and the Minimum Wages Act, which regulate wages, deductions from wages, and aim to eliminate malpractices. It also describes wage boards, which determine fair wages by industry and region, and pay commissions, which make recommendations on pay structures for public sector employees in India.

1. COMPENSATION MANAGEMENT
Prepared by:
Swadeep Shukla
Swati Gautam
Shruti Chaturvedi
Roli Tiwari
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

2. HR Department, Institute of Business Management CSJMU,
KANPUR,UP

3. HR Department, Institute of Business Management CSJMU,
KANPUR,UP

4. OBJECTIVES
(i) Regulating payment of wages, Imposing of fines
& deduction from wages
(ii) eliminating all malpractices by laying down
wage periods and time and mode of payment of
wages
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

5. This acts applies to those persons employed directly or
indirectly in
1. Factory
2. Railway
3. Air Transport Services
4. Mines or oil field
5. Workshop in which articles are manufactured or
produced
6. Or any other establishment notified by the Central or
State Government.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

6.  Applies to employees drawing wages up to
Rs.1600 .This limit will be suitably increased by
central Government after every 5 years.
 “Wages means all remuneration expressed in
terms of money and includes remuneration payable
under any award or settlement, overtime wages
,wages for holiday and any sum payable on
termination of employment (bonus is not
included).”
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

7.  Responsibility for payment of wages
 Fixation of wage period- Daily, Weekly, Fortnightly,
Monthly
 Time of payment- 7th day after wage period [working
day] ,10th day [employees more than 1,000]
 Mode of payment-Coins and currency notes
 Payment in Case of Death of Employee – Nominee
or prescribed authority
 Returns/Registers and Records-To file annual
return by the 15th Feb. of following year.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

8. The employer should not make any deduction from
wages other than the following :
 Fines in respect of an act or omission which has been approved
by the Government and notified at the factory or establishment.
No fine should be imposed on an employee, unless he has been
given an opportunity of showing cause against the fine.
 Deduction for absence from duties for unauthorized
absence -
Absence for whole or any part of the day. If ten or more persons
absent without reasonable cause, deduction of wages upto 8 days.
 Deduction for damage or loss –
For default or negligence of an employee resulting into loss.
Show cause notice has to be given to the employee.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

9.  Deductions for service rendered- When accommodation
amenity or service has been accepted by the employee.
 Deductions for recovery of Advance (including those for
travelling and conveyance allowance).
 Deduction for recovery of loans made from any labour welfare
fund, and housing loans
 Deduction for income tax payable by the employee.
 Deductions for payment to co-operative societies and
Insurance schemes.
 Limit of Deductions
The total amount of permissible deductions in any wage period
should not exceed :
a) In case where deductions are wholly or partly made for payment to
co-operative societies, 75% of the wages; and
b) In any other case, 50% of the wages.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

10. OBJECTIVES
• To provide for Minimum wages for certain employees
• To stop exploitation of labour
• The acts also provides for maximum daily hours, weekly
rest day and overtime
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

11. By The Government-
 The no. of working hours in day with one or more
intervals.
 Provide for a paid rest day in every period of 7
days
 The minimum wages rates will be different for
different classes of employees- skilled, semi
skilled, unskilled .
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

12.  Payment of minimum wages- The employer is bound to pay to
every employees minimum wages.
 Wages in cash- wages should be paid in cash.
 Overtime Wages-Twice the normal wages.
 Payment of Undisbursed amount- On account of death of
employee then same shall be deposited to prescribed authority.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

13. Payment of Wages less than fixed minimum
wages –
 Imprisonment upto 6 months or fine upto Rs. 5oo
or both.
Contravention of any Rule or order –
 Fine upto Rs. 500
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

14. Wage Board structure, scope,function
&
Pay commission

15. Institutions Related to
Compensation
Wage Board
(Private sector)
Pay Commissions
(Public sector)
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

16. A committee who determines the fair wages.
Based on industry cum region.
To provide better climate for industrial
relation.
To standardize wage structure in the
industry.
In accordance with the social & economic policy
of the government.
Tripartite in nature.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

17.  Improve conditions for better industrial relations in the
country.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

18.  Standardize wage structure uniformly across a
given industry.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

19.  Pave the way for wage settlement in consonance of
social & economic policies.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

20.  To determine the wages payable
to employees.
 The appropriate government or
the organizations of employers
and employees by mutual
agreement.
 Determination of other matters
regarding disputes between two
parties
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

21.  It is an administrative system/mechanism.
 Set up by the Government of India to determine the salaries of
government employees.
 Till now six pay commissions have been set up-
• First pay commission - 1947
• Second pay commission- 1959(2nd FYP)
• Third pay commission – 1973(4th FYP)
• Fourth pay commission – 1984(6th FYP)
• Fifth pay commission – 1996(8th FYP)
• Sixth pay commission – 2008(11th FYP)
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

22.  Salary proposed should balance the interests of the –
 Employee
 Employer
 Public
 Employee must be paid a “living wage” i.e. minimum wage.
 Dearness Allowances to be paid to prevent economic hardships.
FIRST PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

23.  Concept of ‘living wage’ was extended to the matter of social policy.
 Minimum wages should deal not only economic considerations but
also offer social justice.
 Lowest rate of remuneration should not be lower than a ‘living wage’
& the highest salary should be consistent enough to attract employees
and maintain efficiency.
SECOND PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

24.  Criteria of a sound pay system:
 Inclusiveness
 Comprehensibility
 Adequacy
 No consideration that the Government should be a ‘model employer’.
 Dearness allowances to be treated as part & parcel of the compensation
structure.
THIRD PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

25.  Focus on criteria for fixing pay levels and structures .
 Concluded that market comparison cannot be relied upon .
 The government should pay ‘fair wages’ (EQUAL PAY FOR EQUAL
WORK) to the public servants.
 Dearness allowances to be treated as part & parcel of the
compensation structure.
FOURTH PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

26.  Full neutralization of rise in cost of living should be paid @
- 80% to employees drawing basic pay up to Rs. 3,500/month,
- 75% of employees drawing basic pay between Rs. 3,500 & Rs.
6000/month,
- 65% to employees drawing basic pay above Rs. 6,000/month.
FOURTH PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

27.  Pay revision based on work organization & manpower planning.
 40% increase in pay with 30% reduction in manpower over a three
year period.
 Emphasized on new means of recruitment.
 Focused on bringing about innovation in training, performance
appraisal, etc. of the government employees.
FIFTH PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

28.  To govern the structure of pay etc. for the following:
 Central govt. employees
 Personnel belonging to All India Services
 Personnel belonging to Armed Forces
 Personnel to the Union Territories
 Officers & employees of the Indian Audit & Accounts Department
 Members of regulatory bodies set up under Acts of Parliament.
 To transform the Central Government organizations to modern,
professional entities.
SIXTH PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

29.  To work out a comprehensive pay package for all the
categories of employees.
 To harmonize the functioning of the Central Govt.
organizations.
 To examine the principles which should govern the structure
of pension, death-cum-retirement gratuity etc.
 To make recommendations as to which principles should be
used to govern the bonuses etc.
 To examine the desirability & the need to sanction any interim
relief.
SIXTH PAY COMMISSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

30. HR Department, Institute of Business Management CSJMU,
KANPUR,UP

31.  Favorability of Wages.
 Wages, Profits , terms and Conditions ,
Norms and Standards.
 Scientific Assessment.
 50 % of the D.A. should be merged with the
basic wages.
 Full & Effective implementation of Minimum
Wages Act 1948.
 Permanent Wage Board with tripartite
composition in each state & at the Centre.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

32.  Workers right to fair wages has been recognized
 Industrial tribunal has not given full support to
the parties concerned
 Methods of Resolving the above problems:
 Tripartite wage board
 Equal representation of employers and workers
 Independent Chairman
 Comprehensive Wage Census followed by the
appointment of a wage commission
 Link between pay and productivity, improvement
of wages through improved productivity &
different perspective of productivity.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

33.  Recognized disparities in wages.
 Resolving measures:
 Fixing a fair wage for different classes for
workers was advocated.
 Setting up of Wage Boards as the most
suitable method of settling disputes.
 Incentives for skills and quality.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

34.  Integrated income policy for both public and
private sector.
 Protection of Standard of Living of Workers
 Linking dearness allowance with cost of living
 Total wage should have three components
 Basic or minimum wage
 Element related to cost of living
 Element related to increase in productivity
 Payments by results
 Common broad approach for employers and
workers
 Simple incentive Schemes
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

35.  Eliminate malpractices in regard to wage
rates and wage payment
 Fixation and revision of minimum wages
 Incentives for increase in productivity
 Allowances for occupational hazards
 Wage differentials for skills
 Fringe benefits, bonus and ex-gratia
payments
 Social security arrangements
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

36.  Increase in productivity should result in
increase in level of real income, productive
employment, improvement in skills.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

37.  Unrealistic high level wages should be
checked
 Implementation of wages once fixed should
be ensured
 Role of workers’ organizations, voluntary
organizations and trade unions were
recognized
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

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HR Department, Institute of Business Management CSJMU,
KANPUR,UP

39. HR Department, Institute of Business Management CSJMU,
KANPUR,UP

40.  Policy should be consistent with the
overall strategy.
 Attract and retain staff.
 Transfer of international employee
 Equity and ease determination.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

41.  Financial protection
 Opportunities of financial advancement
 Housing, education of children and
recreation.
 Repatriation and career advancement.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

42.  BASE SALARY
 FOREIGN SERVICE INDUCEMENT/HARDSHIP
PREMIUM
 ALLOWANCES
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

43. INTERNATIONAL
COMPENSATION
INCENTIVES
ALLOWANCES
SALARY
FOREIGN
SERVICE /
HARDSHIP
PREMIUM
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

44. Base salary is
the amount
of money that
an expatriate
normally
receives in
the home
country.
Benefits:
Alternatively known as indirect compensation,
Benefits constitute a substantial portion of
international compensation ( approx. one third of
compensation for regular employees is benefits).
 Benefits include a suit of programmes such as:
Entertainment, Festival celebrations, Gifts, Use
of club facilities, provision of hospitality including
food and beverage, employee welfare, use of
health club, Conveyance tour and travel, Hotel
Board and Lodging, vehicles, telephone and other
telecommunication facilities, Sponsorship of
children.
 Basically an employee tends to join and stay with
an org. which guarantees an attractive benefits
programme.
 Vacation along with holidays and rest breaks help
employees mitigate fatigue and enhance
productivity during the hours employees actually
work.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

45. It is an inevitable feature of International compensation.
The most common allowance relates to the cost of living –
an adjustment for different in the cost of living between
the home country and foreign country assignment. This
allowance is designed to provide the expatriate with the
same standard of living that he or she enjoyed in the home
country.
Spouse assistance, housing allowance, home leave
allowance, relocation allowance and educational
allowance are the popular in expats. Compensation.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

46. This is often perceived as an inducement in the form of a
salary premium to accept an overseas assignment.
Generally, salary premiums vary from 5—40% of the base
salary. Actual salaries depend upon the assignment, actual
hardship, tax consequences and length of assignment. In
addition, if the work – week in the host country is longer
than in the home country , the assignee will be paid for
the extra hours worked.
Certain countries are highly hostile to foreigners staying
and working. Indians engaged in road construction work in
Afghanistan, for example, face constant threat lives. In
fact, ten such emigrants got killed in recent times (2006-
2007). Expatriates in such environments are paid 2-3 times
more than their domestic salaries.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

47. The final component of the expatriate’s remuneration
relates to taxes. MNCs generally select one of the
following approaches to handle international taxes:
1. Tax equalization: Firms withhold an amount equal to the
home country tax obligation of the expatriate, and pay all
taxes in the host country.
2. Tax protection: The employee pays up to the amount of
taxes he or she would pay on remuneration in the home
country. In such a situation, the employee is entitled to
any windfall received if total taxes are less in the foreign
country than in the home country.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

48. An additional payment (or other remuneration) to employees as a
means of increasing output. Increasingly, MNCs these days are
designing special incentive programmes for keeping expatriates
motivated. In the process, a growing number of firms have
dropped the ongoing premium for overseas assignments and
replaced it with a one – time, lump-sum premium.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

49.  GOING RATE APPROACH( OR MARKET RATE
APPROACH)
 BALANCE SHEET APPROACH( OR BUILD-UP
APPROACH)
 CONCLUSION
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

50. With this approach the base salary for the international
transfer is linked to the salary structure in the host
country. The multinational usually obtains information
from local compensation surveys and must decide whether
local nationals, expatriates of the same nationalities will
be the reference point in terms of benchmarking.
Key characteristics of this approach
 based on local market rate.
 Compensation based on the selected survey
comparison.
 Base pay and benefits may be supplemented by additional
payments for low- pay countries.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

51. The balance sheet approach to international compensation
is a system designed to equally the purchasing power of
employees at comparable position levels living overseas
and in the home country and to provide incentives to
offset qualitative differences between assignment
location.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

52. International compensation administration may be more
complex than its domestic counterpart but is only slowly
and fitfully evolving from a dominant domestic state of
origin. Domestic pay patterns that is norms and
assumptions, pay strategies and practices, as well as pay
forms and administration are increasingly challenges as
executives in MNCs are expose to alternatives pay forms,
varying , legal and institutional contexts and the rapidly
changing realities of global competitiveness.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

53.  Wages should be decided by market forces rather
than by institutions.
 Implementation of laws should be proper.
 Wages in organized sector as well as in
unorganized sector in Indian should be fixed.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

54.  Piece wage system should be introduced instead
fix wage system so that competitive prices of
products can be introduced.
 Organization should be revised wage as per
market conditions.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

55. HR Department, Institute of Business Management CSJMU,
KANPUR,UP