COMPENSATION

MANAGEMENT

ABOUT WAGE
POLICY
IN INDIA
& ABROAD

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

Prepared by:
Swadeep Shukla
Swati Gautam
Shruti Chaturvedi
Roli Tiwari

TOPICS COVERED
Introduction
Wage Policy in India
Payment of Wages Act 1986
Minimum Wages Act 1948
Wage Boards
Pay Commissions
Wage Policy Under Plans
International Wage & Compensation Policies
Recommendations & Suggestions
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

Wage Policy in India

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

PAYMENT OF WAGES ACT 1936

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

SCOPE & COVERAGE

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

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

EMPLOYERS OBLIGATIONS

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

The employer should not make any deduction from

wages other than the following :

DEDUCTION MADE FROM WAGES

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

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 cooperative societies, 75% of the wages; and
HR Department, Institute of Business Management CSJMU,
b) In any other case, 50% of KANPUR,UP
the wages.

THE MINIMUM WAGES ACT

1948
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

FIXING MINIMUM WAGES

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

OBLIGATIONS OF EMPLOYERS

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

PENALTIES
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

Wage Board structure, scope,function

&
Pay commission

Institutions Related to
Compensation

Wage Board
(Private sector)

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

Pay Commissions
(Public sector)

WHAT IS WAGE
BOARD?
A committee
committee who
who determines
determines the
the fair
fair wages.
wages.
A

Based on industry cum region.

To provide
provide better
better climate
climate for
for
To
industrial relation.
relation.
industrial
To standardize
standardize wage
wage structure
structure in
in
To
the industry.
industry.
the
In accordance
accordance with
with the
the social
social &
&
In
economic policy
policy of
of the
the government.
government.
economic

Tripartite in nature.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

SCOPE OF WAGE BOARD.

Improve

conditions for
relations in the country.

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

better

industrial

SCOPE OF WAGE BOARD.

Standardize

wage structure uniformly across a

given industry.

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

SCOPE OF WAGE BOARD.

Pave

the way for wage settlement in consonance of

social & economic policies.

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

FUNCTION OF WAGE BOARD.

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

PAY COMMISSION

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(2 nd FYP)
Third pay commission 1973(4 th FYP)
Fourth pay commission 1984(6 th FYP)
Fifth pay commission
1996(8 th FYP)
Sixth pay commission
2008(11 th FYP)
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

FIRST PAY COMMISSION

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.

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

SECOND PAY COMMISSION

Concept of living wage was extended to the matter of

social policy.

Minimum wages should deal not only

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.

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

economic

THIRD PAY COMMISSION

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.

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

FOURTH PAY COMMISSION

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.

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

FOURTH PAY COMMISSION

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
6,000/month.

employees

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

drawing

basic

pay

above

Rs.

FIFTH PAY COMMISSION

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

SIXTH PAY COMMISSION

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

SIXTH PAY COMMISSION

To work out a comprehensive pay package for all the

categories of employees.

To harmonize
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.

the

functioning

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

of

the

Central

Govt.

Wage Policy Under Plans

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

FIRST FIVE YEAR PLAN(1951-56)

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

SECOND FIVE-YEAR PLAN{1956-61(2ND

P.C.-1959)}

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

THIRD FIVE-YEAR PLAN(1961-66)

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

FOURTH FIVE-YEAR PLAN{(1969- 74)3RD P.C.1973}

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

SIXTH FIVE-YEAR PLAN{(1980-85) 4TH P.C.1984}

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

SEVENTH FIVE-YEAR PLAN(1985-90)

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

EIGHTH FIVE-YEAR PLAN{(1992-97

1996}

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

5TH P.C.-

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HR Department, Institute of Business Management CSJMU,

KANPUR,UP

International Wage &

Compensation Policies

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

OBJECTIVES OF INTERNATIONAL
COMPENSATION AND WAGES POLICIES

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

OBJECTIVES FOR AN
INTERNATIONAL EMPLOYEE
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

KEY COMPONENTS OF
INTERNATIONAL COMPENSATION

BASE SALARY
FOREIGN SERVICE INDUCEMENT/HARDSHIP
PREMIUM
ALLOWANCES

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

KEY COMPONENTS OF
INTERNATIONAL COMPENSATION
INCENTIVES

FOREIGN
SERVICE /
HARDSHIP
PREMIUM

INTERNATIONAL
COMPENSATION

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

ALLOWANCES

BASE SALARY
Benefits:
Base
salary is
the
amount of
money
that an
expatriate
normally
receives in
the home
country.

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

ALLOWANCES
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

FOREIGN SERVICE
INDUCEMENT/HARDSHIP PREMIUM
This is often perceived as an inducement in the form of a
salary premium to accept an overseas assignment.
Generally, salary premiums vary from 540% 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 (20062007). Expatriates in such environments are paid 2-3 times
more than their domestic salaries.
HR Department, Institute of Business Management CSJMU,
KANPUR,UP

TAXES
The final component of the expatriates 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

INCENTIVES
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

APPROACHES TO
INTERNATIONAL COMPENSATION

GOING RATE APPROACH( OR MARKET RATE

APPROACH)
BALANCE SHEET APPROACH( OR BUILD-UP
APPROACH)
CONCLUSION

HR Department, Institute of Business Management CSJMU,

KANPUR,UP

THE GOING RATE APPROACH

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

BALANCE SHEET APPROACH

The balance sheet approach to international compensation

is a system designed to equalize 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

CONCLUSION

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

RECOMMENDATIONS FOR INDIAN

WAGE SYSTEM

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

CONTD

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

HR Department, Institute of Business Management CSJMU,

KANPUR,UP