Compensation Management: Wage and Salary Administration, Incentives and Job Evaluation (Basics) Questions

Q: List factors affecting wages and salaries (any six) using internal vs external table.

Factors affecting wages: | **Internal factors** | **External factors** | |---|---| | ability to pay | labour market supply–demand | | job requirements (skill/effort) | cost of living/inflation | | productivity | government policy/labour laws | | pay policy | unions/collective bargaining | These factors jointly decide wage levels and wage differentials.

Q: Explain wage and salary administration process with a flowchart (brief).

Wage/salary administration: Job analysis → **Job evaluation** → Wage survey → Pay structure (grades/ranges) → Implementation/communication → Review and control This ensures **equity**, competitiveness and cost control.

Question 1

Define compensation.

Accepted Answer

Compensation is the total reward an employee receives for work performed, including **direct pay** and **indirect benefits**.

Question 2

State one objective of compensation management.

Accepted Answer

One objective is to ensure **internal equity** (fair pay for similar jobs).

Question 3

What is job evaluation?

Accepted Answer

Job evaluation is the systematic determination of the **relative worth of jobs** (not people) to build a rational pay structure.

Question 4

Minimum wage is the lowest wage fixed by law. (True/False)

Accepted Answer

True. **Minimum wage** is the legally fixed lowest wage to meet basic needs and prevent exploitation.

Question 5

State one example of indirect compensation.

Accepted Answer

Provident fund (PF) contribution is an **indirect benefit** (indirect compensation).

Question 6

What are incentives?

Accepted Answer

Incentives are additional rewards given to motivate **higher performance/productivity** beyond normal wages or salary.

Question 7

Differentiate wages and salary using a table (any three points).

Accepted Answer

Wages vs salary:

| Basis | **Wages** | **Salary** |
|---|---|---|
| Payment basis | hourly/daily/weekly | monthly (fixed period) |
| Variation | may vary with hours/days | relatively stable |
| Common for | workers | staff/managers |

Thus, wages are time-based and variable, while salary is fixed for a period.

Question 8

Explain minimum wage, fair wage and living wage using a small table.

Accepted Answer

Wage concepts:

| Concept | Meaning |
|---|---|
| **Minimum wage** | legal minimum to meet basic needs |
| **Fair wage** | above minimum; considers prevailing rates and industry capacity |
| **Living wage** | supports decent living standard (health, education, comfort, savings) |

Order: Minimum < Fair < Living.

Question 9

List factors affecting wages and salaries (any six) using internal vs external table.

Accepted Answer

Factors affecting wages:

| **Internal factors** | **External factors** |
|---|---|
| ability to pay | labour market supply–demand |
| job requirements (skill/effort) | cost of living/inflation |
| productivity | government policy/labour laws |
| pay policy | unions/collective bargaining |

These factors jointly decide wage levels and wage differentials.

Question 10

Explain wage and salary administration process with a flowchart (brief).

Accepted Answer

Wage/salary administration:

Job analysis → **Job evaluation** → Wage survey → Pay structure (grades/ranges) → Implementation/communication → Review and control

This ensures **equity**, competitiveness and cost control.

Question 11

Explain components of a basic pay structure with a small table (any three components).

Accepted Answer

Basic pay structure components (any three):

| Component | Meaning |
|---|---|
| **Basic pay** | fixed base amount for the job |
| Allowances | DA/HRA/transport etc. to meet specific needs |
| **Incentives/bonus** | extra pay for performance/productivity |
| Benefits | PF/insurance/leave (indirect) |

Thus, gross pay is usually Basic + Allowances + Incentives/Bonus (+ benefits as indirect compensation).

Question 12

Explain job evaluation: objectives and methods (exam-style) with a table and conclusion.

Accepted Answer

### Meaning
**Job evaluation** determines the relative value of jobs to create a fair pay structure.

### Objectives
- ensure **internal equity** and reduce pay anomalies
- create pay grades and wage differentials
- provide base for wage negotiation and HR decisions

### Methods
| Method | Key idea |
|---|---|
| **Ranking** | order jobs overall |
| **Classification** | group jobs into grades |
| **Point factor** | assign points to compensable factors |
| **Factor comparison** | compare factor-wise with monetary values |

### Conclusion
Job evaluation focuses on **jobs**, not employees, and supports a rational and equitable wage structure.

Question 13

Explain objectives of compensation management (exam-style) with a table and conclusion.

Accepted Answer

### Objectives
A sound compensation system aims to balance employee expectations and organisational capacity.

| Objective | Meaning |
|---|---|
| **Equity** | fair pay for similar jobs (internal) |
| Competitiveness | match market rates (external) |
| **Motivation** | link pay with performance/skills |
| Compliance | follow legal/statutory rules |
| Cost control | manage wage bill and productivity |

### Conclusion
When compensation is fair and competitive, it improves attraction, retention and performance.

Question 14

Write an exam-style note on incentives: types and advantages (include a table and conclusion).

Accepted Answer

### Meaning
**Incentives** are additional rewards to encourage higher performance.

### Types
| Type | Examples |
|---|---|
| **Financial** | bonus, commission, piece rate, profit sharing |
| **Non-financial** | recognition, promotion, awards |

### Advantages
- increases **productivity** and morale
- supports performance culture
- reduces idle time and wastage

### Conclusion
A well-designed incentive plan links rewards with measurable performance and supports organisational goals.

Question 15

Differentiate job evaluation and merit rating (performance appraisal) (exam-style) with a table and conclusion.

Accepted Answer

Job evaluation vs merit rating:

| Basis | **Job evaluation** | **Merit rating (appraisal)** |
|---|---|---|
| Focus | **job** worth | **employee** performance |
| Purpose | pay structure/grades | increments/rewards |
| Nature | stable | varies with performance |

Thus, job evaluation is for jobs; merit rating is for people.

Basis	Wages	Salary
Payment basis	hourly/daily/weekly	monthly (fixed period)
Variation	may vary with hours/days	relatively stable
Common for	workers	staff/managers

Compensation Management: Wage and Salary Administration, Incentives and Job Evaluation (Basics)

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