Here is a compilation of essays on ‘Wage and Salary Administration’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Wage and Salary Administration’ especially written for school and college students.

Essay on Wage and Salary Administration

Essay Contents:

  1. Essay on the Modern Concept of Wage and Salary Administration
  2. Essay on the Aspects of Wage and Salary Administration
  3. Essay on the Modern Approach to Wage and Salary Administration
  4. Essay on the Wage and Salary Compression
  5. Essay on the Compensation Theory of Wage and Salary Administration
  6. Essay on the Wage Criteria in Wage and Salary Administration

Essay # 1. Modern Concept of Wage and Salary Administration:

In an organisation, wage and salary inequities are, among others, the most dangerous sources of friction and low morale. In the context of prevailing problems in personnel management, it would be more relevant to talk about ‘wage administration’ rather than ‘wage and salary administration’.


Because in the absence of arty sound policy of wage administration industrial wages, tend to be often determined on the basis of ‘personalized’ arbitrary decisions without reference to wage structure.

Thus viewed, wage administration may be conceptualized as a systematic procedure for establishing a sound compensation structure. This approach is capable of reducing inter-group friction, inequities in employees earnings of raising individual morale.

A good wage administration programme “sets wages high enough to permit the company to recruit competent employees, motivates people to work for pay increases and promotions, reduces union and employee grievances and enables management to exercise centralised control over labour cost”.

Essay # 2. Aspects of Wage and Salary Administration:


The following are the main aspects of wage administration:

(i) Wage and salary surveys

(ii) Job evaluation

(iii) Merit rating


(iv) Incentives and

(v) Fringe benefits.

But the most difficult task facing management is determining the overall wage and salary level that is determining the overall wage and salary policy, that is, whether to pay wages and salaries that are high, average or below average as compared with standards elsewhere.

The following factors may affect management wage and salary policy involving also problems:


(a) The company wage policy being related to its recruitment and selection policy, high wages may attract more competent candidates. Nevertheless, high wages do not necessarily guarantee high motivation and production. On the other hand, a sound merit rating and pro­motion policy may provide required motivation.

(b) Prevailing employment conditions that is unemployment may enable management to pursue a lower level wage policy, whereas the tight labour market may require management to pay more to new recruits.

(c) Reputable and big companies are sometimes constrained to pay higher wages for maintaining good public relation and high image as an ideal employer in the society. Smaller companies may not be under such social compulsion.

(d) Both unionised and non-unionised com­panies may be under pressure to pay higher wages though for different reasons. The former may pay higher wages under the union pressure, while the later may pay to keep the union out. But, in both cases, other employers may object to this type of high wage policy and exert subtle pressures to bring the company in the prevailing line of wage policy.


(e) Company’s profitability is a limiting factor. Companies of high profitability may pay higher wages, and those of low profitability may not pay more than minimum.

(f) There are certain other factors, like stability of company (i.e., without lay-off, lockout etc.), fringe benefits, and collective bargaining providing wages linked with produc­tivity and cost of living may affect wage policy.

Essay # 3. Modern Approach to Wage and Salary Administration:


Wages and salary are regarded as a subset in compensation which plays the roles of financial rewards in wage and salary administration. Wages, salary and many employee benefits and services (including fringes) are forms of compensation.

However, benefits and services have become so extensive nowadays, that these constitute separate division and therefore require separate treatment. Modern approach to work theory stressed the special importance of financial rewards which are essential parts of employment system.

In broad sense, attractive rewards involving an non-monetary variables like safe job environment, participative management, recognition, opportunities for career development, interes­ting work today constitute essential elements in sophisticated wage and salary administration.

The modern affluent society is exerting great influence and impact on compensation system by affecting non-financial considerations more than financial aspects.


The following are the main terms used in modern wage and salary administration which are distinguished for their separate meanings and entries:

(i) Wage

(ii) Salary

(iii) Earnings

(iv) Real wages

(v) Purchasing power of money payments


(vi) Take-home pay

(vii) Time rates

(viii) Flate rates

(ix) Price rates

(x) Rate ranges

(xi) Incentive wages


(xii) Commissions

(xiii) Job rates

(xiv) Wage structures and differentials

(xv) Labour grades.

Essay # 4. Wage and Salary Compression:

In recent years, wage inflation has been the main cause of wage and salary compression which means that workers are gaining more wages and employees more salary due to rising cost of living. In many case blue-collar wages are rising faster than white-collar salaries taking into account automatic cost of living increases and overtime. This phenomenon is narrowing the gap between these two groups.


Another dimension of compression problem is the emergence of shortages of some specific ^killed personnel in professional and technical jobs as a result of which these personnel are getting higher start of compensation than those of experienced men who are already in these lines.

Essay # 5. Compensation Theory of Wage and Salary Administration:

There are some who favour to consider the motivation theories of Herzeberg, Vrooms Expec­tancy theory and Jaques Equity theory as compen­sation theory. But there is disagreement among researchers as to the degree of behavioural impact of pay on motivation and performance.

Different wage theories have made remarkable contributions to the understanding of wage and salary administration. Some specific theories of wages have analysed labour force, labour markets and labour productivity which have affected compensation theory in understanding the rationality of compensation or pay.

In this respect, minimum wage theory as compensation theory has lately become contro­versial. While this approach to compensation has given some positive benefits to unorganised and exploited labour, by reducing poverty and employee turnover, it contributes to inflationary price rise.

Moreover, there is considerable disagreement about the desirability of a legal minimum wage without reference to quality and productivity of labour.


Essay # 6. Wage Criteria in Wage and Salary Administration:

Management has to determine wages of diff­erent categories of workers by taking wage decisions cm the basis of certain specific wage criteria.

These wage criteria are often based on economic aspect, such as:

(i) Comparability

(ii) Cost of living

(iii) Ability to pay and


(iv) Productivity.

Comparability of wages in both private and public sector in same industry is an important criterion for taking wage decisions. This is also interpreted as key bargaining in collective bargaining. Formal wage and salary surveys are also used both for union and non-union employees in determining wage rates. These surveys select key jobs for pricing and do not attempt to secure wage and salary information.

Like the comparability criterion, the cost of living criterion focuses on wages as income in the context of inflation. The consumer price index is used as indicator of cost of living changes.

Real incomes are protected by using escalator clauses in cost of living adjustment. Discrimination in the matter of covering diff­erent categories of workers and employees under escalator causes for cost of living adjustment often creates dissension.

Evaluation of Compensation Policy:

Management attempts to identify and interpret certain key variables for identify in managerial inputs which serve as guidelines for setting of an effective compensation policy. 

Whatever compensation policy might be adop­ted by management, it must recognise certain current and prospective environment including constraints improved by the public policy, unions and individual employees. These policies then should provide guidelines for selecting specific compensation programms specifying what organisations intend to pay for and what they expect in return from employees.

Compensation policies should also be estab­lished with certain overall objectives such as:

(i) Attracting and retaining qualified personnel

(ii) Equitable pay for work performed

(iii) Equal pay for equal work

(iv) Promoting a relationship between pay and commitment to organisational goals.

In the context of industrial relations and productivity the compensation policy today is also to take into account the following aspects:

(i) Union wage policies

(ii) Market prices and labour costs

(iii) Contributions

(iv) Secrecy

(v) International issues

(vi) Public wage and income policy

(vii) Wage legislation.

These aspects have become both issues as well as constraints to management. In this connection, it may be useful to examine compensation policy with reference to developing countries like India. There are several constraints of compensation policy of a company both of micro and macro level in India.

Several specific wage legislations like Minimum Wages Act, Payment of Wages Act, Bonus Act, Equal Remuneration Act impose limitation on micro level company wage policy.

From these standpoints, compensation policy in Indian in­dustries virtually amounts to wage policy. In the absence of a national wage policy, which of course is extremely difficult to formulate and adopt in a very big country as ours, macro level compensation policy is under severe strain.

The concept of social justice as enshrined in the Directive Principles of State Policy under Indian Constitution, Wage Boards and Industrial Tribunals awards have in the past raised a lot of controversial issues regarding wages. These developments have attached lega­listic rather than economic approaches to the wage issues.

Again, because of the varied character and vastness of the country a national standardised wage policy in Indian industries on the basis of collective bargaining at national level has not been possible to formulate. All these constraints over the past decades since Independence notwithstanding recommendations of National Commission on Labour, have impeded the rationality of company wage policy in private sector.

The wage and salary admi­nistration of a company is also to take into consideration the following special problems:

(a) Fringe benefits

(b) Wage supplements

(c) Hi­gher coverage for social security laws

(d) Wage differentials.

While in India the compensation policy in public sector and in government departments is somewhat formal and follows some semblance of rules, in private sector the approach and practice is largely informal and arbitrary excepting some large enterprises.

The job evaluated rate of compensation is also hardly the same as bargaining rate. Some linkage of compensation with productivity in the context of high inflation is urgently called for. These protective approaches to compensation are to be replaced by, or to be supplemented with produc­tive approach sharing the gains of productivity both at macro and micro level.

Job evaluation as a very important part of wage and salary administration will be discussed. The theory and practice of job evaluation is integrated with the techniques of merit rating. Fringe benefits also constitute another important part of wage and salary administration which has been also discussed subsequent to job evaluation.