This article throws light upon the top thirteen essentials of a sound wage plan for workers. Some of the essentials are: 1. Equitable to All 2. Fair and Adequate Compensation 3. Simplicity, Certainty and Flexibility 4. Incentive Wages 5. Merit Rating 6. Minimum Guaranteed Earnings Base Rate 7. Easy Collective Bargaining 8. Wage Control 9. Significance of Economic Reward 10. Hedge against Inflation and Others.

Equitable to All:

The government must secure the willing acceptance arid wholehearted support of labour and management for the proposed wage policy and/or plan. On the one side, it must ensure on the spot the norm of a need-based minimum in wage revision claims and in the long run, sooner or later, the target of achievement of living wage for labour.

On the other side, the wage plan must be within the capacity of industry ability to pay the wages set by the plan.

Fair and Adequate Compensation:

The wage plan must recognise the principle of “equal pay for equal work”. Of course, there should be proper wage differentials, based on job evaluation, to compensate skill, training, experience and other job requirements.

Simplicity, Certainty and Flexibility:


The wage plan should be simple so that it is easily understandable to average employees and can be administered smoothly. It should have reasonable certainty and stability and yet it should pen it adjustment according to changing business conditions, profit situation, etc. The plan should be periodically reviewed to keep it up to date.

Incentive Wages:

Wherever desirable and practical we should introduce elements of wage incentives, i.e., payment by results, and compensation should be directly in proportion to the output above the standard quota.

We should introduce Merit Rating for linking payment directly with merit or performance so that services of able and skilled operatives can be retained and integrated sequences of job promotion by merit can be easily secured. Incentive wages through productivity bonus or premium can facilitate higher production and higher rate of economic growth.

Merit Rating:

Introduction of performance appraisal studies as a regular feature will enable easy promotion, transfers, etc., i.e., organisational flexibility. Sound merit rating policy primarily based on ability and competence will ensure higher employee morale and better industrial relations.

Minimum Guaranteed Earnings Base Rate:


Under any wage incentive plan, we must establish a base wage rate and a salary schedule through a wage survey so that a company wage schedule will be in line with general wage level in that area and incentive workers will be protected against unavoidable delay in production due to machine failure, power failure, material shortage, etc. i.e., lowering of output due to factors beyond the control of workers.

Minimum or base wage rate for each job is fixed on the basis of job evaluation studies. This will give security of income to incentive workers.

Easy Collective Bargaining:

The wage plan should simplify collective bargaining process between the Management and Labour Union. Voluntary conciliation and arbitration are definitely superior devices than compulsory conciliation and arbitration for settlement of wage problems.

Wage Control:

The wage plan should help wage-cost determination, control and payroll administration as well as budgeting. Modern management under competitive conditions is vitally interested in unit cost of labour.

Significance of Economic Reward:


In poor and/or underdeveloped (even developing) countries physical survival occupies nearly 100 per cent time of an average individual. Worker has neither energy nor interest left over for ego-satisfying drives such as power, prestige, status, craving for self-advancement and right of participation in management. Give a decent ‘Take Home Pay’ that is all workers, in general, are interested in.

In the context of current economic situation India, which is wedded to ‘GaribiMitao’ policy, monetary or financial incentives constitute the greatest motivators compelling men and women to work with interest. Without economic rewards, in India particularly work cannot become meaningful and interesting.

Economic security alone can ensure high employee motivation and morale. Let us reiterate that unsatisfied want only can act as motivator, a spark plug igniting the will to work and hence, in India, mental tonic or therapy can never be a substitute for physical tonic or therapy/ physiotherapy.

Hedge against Inflation:

Since 1940, all over the world, inflation has become our permanent though unwanted guest. It was the legacy of the Second World War. In India, we are having the trend of runaway inflation due to an unprecedented ‘Deficit Financing’ for huge Five Year Economic Plans.


Under continuously rising cost of living index number, the wage plan must have the provision to prevent erosion of real wages in the form of ‘Escalator Clause’ which will link dearness allowance with Cost of Living Index in our wage structure. Of course, it cannot be a curative solution. However, it is necessary at present to minimise the impact of inflation on living costs.

Standing Grievance Mechanism:

Under a sound wage plan, management must provide, particularly under incentive plan, effective grievance procedure for listening and adjusting wage disparities and complaints which are almost certain to arise a part of regular machinery for handling of grievances.

Current Going Rate:

Actual wages and salaries under any plan must be at least in line with the going or prevailing pay level in the labour market or in industry.

Additional Payments and Allowances:

The wage plan should also establish supplementary compensation and/or fringe benefits, e.g., overtime rates, shift differentials, paid vacations, sick leave, insurance, pension or provident fund benefits, severance pay, etc.


Fringe benefits include paid vacation, profit and bonus, social security payments, welfare cess, employer’s contribution under voluntary schemes, e.g., post-retirement, medical, educational, cultural, recreational needs of employees, monetary equivalent like free housing, lighting, water, fuel, telephone, car use, etc.

Thus, fringe benefits are supplements to ordinary wages or salaries which are of value to employees and their families.

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