Compensation –

Concept and Context

UNIT 3 FRAMEWORK OF COMPENSATION
POLICY
Objectives

After going through this unit you should be able to:

• understand the framework/considerations for compensation policy at macro and
micro levels,
• appreciate the difficulties in translating the policies into action, and
• understanding the need to integrate compensation policy with other subsystems in
human resource management:
Structure
3.1 Introduction
3.2 Macro Policy Framework
3.3 Micro Policy Considerations
3.4 Divergent Perspectives of Management and Labour
3.5 Case Study - An Approach to Public Sector Pay Revision
3.6 Case Study - Wage Revision in Newspaper Industry
3.7 Exercises
3.8 Review Questions
3.9 Further Readings

3.1 INTRODUCTION
Most modern societies have become welfare states. Laissez faire no longer prevails.
The State actively intervenes, sets the tone, direction and conditions which govern,
among other things, the Wage and Salary Administration Policies. Constitution,
Employers and Unions, Legislatures and Courts actively influence public policy. The
tone and tenor of Public Policy on Wages/Salaries in post-Independent India have
been set out in the Industrial Truce Resolution (1947), Industrial Policy Resolution
(1948), the Constitution, successive plan documents, ministerial speeches, etc.

Compensation policies at the company level are subject to the overall legislative and
other mandatory principles/framework established by the Government. A variety of
considerations, both objective and subjective, weigh the determination of
compensation policies at the company level. There is a need for a fit between
organization design and company policies. Companies also need to consider the
policies of other companies, the pressures of collective bargaining (for unionized
staff) and the profile and expectations of the workforce. There is often divergence in
the interests of workers and management which need to be reconciled.

In actual practice compensation policies and structures are determined (a) unilaterally
by employer in situations where the employer could exploit the prevailing labour
market situation; (b) jointly by management and workers' union(s) through collective
bargaining; (c) through consultations among the three partners it government,
management and labour representatives ii under the minimum wages legislation; (d)
wage boards (we now have only one wage board for journalists against for about 20
industries in early 1970) and pay commissions; and, (e) courts through adjudication.
The best method is collective bargaining.

In companies which are managed professionally and in a democratic manner job

evaluation, employee satisfaction surveys and compensation surveys across
companies in the industry/region provide useful inputs in determining the policy
framework. Companies which wish to establish with performance and profitability
24
additionally need to have in
 Framework of
place in performance management systems with democratic goal setting, pre- Compensation Policy
determined criteria and procedure for evaluation and a transparent mechanism for
administering pay policies.
In this session we examine the key considerations. in compensation policy at macro
and micro levels, the divergence in the interests of workers and management and two
case illustrations of the range of issues and dilemmas faced in developing a
framework for compensation policy/revision.
3.2 MACRO POLICY FRAMEWORK: KEY
CONSIDERATIONS PUBLIC POLICY
AT MACRO LEVEL
The key considerations in Public Policy concerning wages/salaries in India may be
identified as following:
a) End exploitation and provide remuneration to capital and labour such that "while
in the interests of the consumers and the primary producers excessive profits
should be prevented by suitable measures of taxation and otherwise, both will
share the product of their common effort after making provision for payment of
fair wages to labour, a fair return on capital employed in the industry and
reasonable reserves for the maintenance and expansion of the undertaking"
(Industrial Truce Resolution, 1947)
b) A living wage, conditions of work ensuring a decent standard of life and full
enjoyment of leisure and social and cultural opportunities ..." (Constitution of
India, Article 43) The Fair Wages Committee observed that IA living wage
should enable the male earner to provide for himself and his family not merely
the bare essentials of food, clothing, and shelter but a measure of frugal comfort
including education for the children, protection against ill-health, requirements
of essential needs and a measure of insurance against the more important
misfortunes including old age.
c) Fix statutory minimum wages in sweated industries and promote fair wage
agreements in the more organised industries (Industrial Policy Resolution, 1948)
d) Ensure equal pay for equal work (Constitution of India)
e) Provide for wage differentials
f) Regulate wages and salaries to eliminate/reduce undue disparities
g) Link remuneration to productivity
h) Compensate for rise in cost of living
i) Determine fair wages over and above minimum wages with due regard to (i) the
productivity of labour; (ii) the prevailing level of wages; (iii) the level of
national income and distribution; and (iv) the place of industry in the economy
of the country. According to the Fair Wages Committee, &minimum wage must
provide not merely for the bare substance of life but for the preservation of the
efficiency of the worker. The minimum wage must also provide for some
measure of education, medical requirements and amenities.’?Fair wage should
be above minimum wage and below living wage. While the lower limit of the
fair wage must obviously be the minimum wage, the upper limit is equally set
by what may broadly be called the capacity of the industry to pay.
j) The capacity to pay. However, Supreme Court ruled that `an employer who can
not pay minimum wages has no right to exist.' The capacity to pay becomes a
subject of consideration to 'determine fair wages over and above minimum
wages
k) Basic needs of Labour. The 15th session of Indian Labour Conference held in
1957 suggested that the minimum wages be need-based. The Second Central
Pay Commission, observed that need-based wages should ensure the minimum
human needs of the industrial worker irrespective of any other 'considerations.
Dr. Akroyd, Consultant to the Second Central Pay Commission observed that
need-based minimum wages should be determined having regard to the 25
following: (i) in calculating the need-based minimum wage, the standard
working class family should
Compensation –
Concept and Context be taken to consist of 3 consumption units for one earner; the earnings of
women, children and adolescents should be disregarded; (ii) minimum food
requirements should be estimated at a per consumption of 18 yards per annum
which would give for the average workers' family of four, a total of 72 yards;
(iv) in respect of housing the norm should be the minimum rent charged by
Government in any area for houses provided under the subsidized Industrial
Housing Scheme for low income groups; and, (v) fuel, lighting and other
emiscellaneous' items of expenditure should constitute 20 per cent of the total
minimum wages.
l) Wages should be adequate, sufficient and non-derogatory (IV Central Pay
Commission).
m) The effect of wages in one sector on the rest of the economy must be reckoned.
Practical Difficulties in implementation
In actual practice, one finds the following practical difficulties in implementation.
a) Many terms like minimum wage; living wage and fair wage are not amenable
for translation into money terms easily. It is difficult to operationalise the
concept of a living wage and decent standard of life. It is not unusual to find
workers, who by the measure of gross pay packet may constitute the middle
class and be reckoned as relatively affluent by local community standards, but
continue to live in abject poverty leading a sub-standard life.
b) Minimum wages do not really matter. In the organized sector (particularly large
and medium firms) most workers get much more than the minimum wages. In
the unorganised sector, usually workers get less than the minimum wages.
Widespread unemployment and underemployment make it difficult for even
trade unions and government authorities to ensure strict compliance.
c) The wages are not exploitative in the organized sector, but they are, usually, in
the unorganised sector. In the organized sector, several firms may be usually
found wanting in terms of norms of fairness due to bargaining pressures, etc.
d) The concept of equal pay for equal work has a very limited and narrow
application in Indian law and practice. The concept, as envisaged in the ILO
Convention No. 100 focuses on equal pay for work of equal value. It is decided
with reference to four attributes, i.e., skill, effort, responsibility and working
conditions. In practice, however, collective bargaining, government interference
and neutralization for rise in cost of living undermine the link between pay and
the four attributes mentioned above. Wage differentials within the enterprise and
across the enterprises were significantly compressed over the years. Differences
in dearness allowance payment systems created additional disparities.
e) So far linking wages to productivity remained a far cry. In the absence of
systematic attempts at defining and measuring factor productivity most of the
existing collective arrangements were borne out of relative bargaining power of
parties and other expediencies based on short-term considerations. The IV
Central Pay Commission observed that there were many short-comings in the
conceptualisation and implementation of the productivity linked bonus schemes.
In several instances bonuses were paid without productivity.
f) The question whether real wages are maintained or declining in the organized
sector depends on whether the reference point is the basic wage or the total
emoluments. The subject has become quite contentions on three grounds: (i)
elements and computation of index; (ii) method and degree of neutralisation;
(iii) elements of pay reckoned for neutralisation.
g) It is difficult to determine whether wages are adequate, sufficient and non-
derogatory. As Mahatma Gandhi observed, it is possible to pay for one's needs,
not his greed. Whether wages are non-derogatory depends also on the
occupational values in the society.
h) Wage relatives are worsening over the years. Workers in the organised sector -
not just the public sector seem to get more and more for working less and less
26 and the
 Framework of
reverse seems to be generally the casein the unorganised sector. The degree of Compensation Policy
worsening of the real, wage rates in. the unorganised sector of our economy seems to
be inversely related to the growth of trade union power and official intervention in
the labour markets in the organised sector in general and 'in the public sector in,
particular.

3.3 MACRO POLICY CONSIDERATIONS: COMPANY

COMPENSATION POLICY (Micro Level Considerations)
Compensation policies need to. be established in every . enterprise taking the
following" aspects into consideration, besides due regard to the provisions of public
policy, job -evaluation and collective bargaining.
1. ATTRACTION AND RETENTION
Usually an enterprise endeavours to recruit and, retain the best people available. One
of - the ways of attracting and retaining the best and the brightest is to pay more than
what they would get anywhere else for similar skills and levels.' Some firm
endeavour to be wage leaders'. This deliberate corporate strategy may create a
situation of `wage islands' which pose problems from societal point of view.
Unlimited wage disparities cause distortions in. the economy. Still, enterprises with
prime concern for micro consideration may adopt this strategy subject to
governmental restraints on account of national wage/income policies. Multinationals
operating in developing countries usually pay much higher than the indigenous firms
in both private and public sectors.
2. INTERNAL CONSISTENCY
Compensation policies should take into account the differentials in skills, and levels
in respect of both responsibility and authority. A sense of proportion needs to be
maintained to achieve internal consistency so that wage/salary levels conform to the
differences .in hierarchy and skills. III-conceived differentials may lead to conflict
among work groups. In a fabrication unit, after wage revision the welders were
getting less than gardeners. The technical staff in the organisation resented this by
sloganeering and protests: Should, grass-cutters (gardeners) get more than gas-cutters
(welders)? At the macro level similar questions (e.g., should a peon in a rural bank
get more than a school teacher in the same village?) arise due to occupational values
in the society and skill endowment at a given stage of economic development. But at
the micro level, internally within the firm, such questions need careful examination
each time decisions are taken to review salary scales.
3. EXTERNAL CONSISTENCY
The simplest and most widely used criteria is to consider what is generally known as
the going rate in the labour market for comparable jobs in the industry/region. While
deciding wage rates in public sector, comparison may be made of wage rates in
private sector for comparable jobs. It is possible that public sector units may fix
relatively lower wage rates than private sector units because the former affords a
greater -sense of job security. But if the differentials are significant enough, public
sector may find it difficult to attract the right talent. For key jobs if the rates are not
uniform, inter and intrasectorally and among industry groups, there may be
imbalances in the distribution of skills and talents.
4 ABILITY TO PAY
As already mentioned, wherever minimum wage legislation is applicable, enterprises
should pay minimum wages irrespective of their capacity to pay. Over and above the
minimum wages, enterprises pay more depending upon their ability to pay. Also,
enterprises vulnerable to union pressures may end up paying more than this due to
the coercive bargaining power of the unions. It is not uncommon to see entaqvises
paying much less than what they can pay just because the employees are not 27
organised.
Compensation –
Concept and Context 5. PAY AND PERFORMANCE
Linking pay to performance is sound and makes good sense. However in the
organised sector in India, the compensation policies have, unfortunately, a remote
relationship, if ever, between pay and performance. Analysis of the components of
total wage/salary reveals that over the years a substantial part of the rise in the pay is
intended to meet the rise in the cost of living. While basic wage/salary and even
bonus is not usually related to performance, many enterprises have a wide range of
production incentive systems.
It is important for any organization which wishes to establish any linkage between
pay and performance to design the organization, jobs and work flow in such a manner
where employees covered by the performance linked pay system are able to make a
difference to the outcomes of their work. This means democratization of workplace
with locus control in the hands of those who perform work.
Another key problem with linking pay with performance concerns the absence of
criteria and tools to measure performance objectively and the inability to evolve
mutually satisfactory norms of sharing the fruits of performance between labour and
capital.
6. LABOUR COSTS AND PRODUCTIVITY
Wages and salaries can be linked to the productivity and profitability of an enterprise.
Growing and profit-earning enterprises find it easier to pay more than stagnant and
loss-incurring enterprises though it is the latter category which would be most hard
pressed to attract and retain skills. Again wage costs as a percentage to total costs
would be higher in labour intensive firms than capital intensive firms and in
assembly-type units than in process units. For instance, in India, the labour cost as a
percentage of total cost could be around 60 in coal mining against barely 2 or 3 per
cent in petro- chemicals or fertilizers. In most manufacturing firms it does not exceed
15 to 16 per cent. Capital intensive process units can thus afford to pay substantially
more than labour intensive units because the impact of higher wages and salaries on
output costs is not so acute as in labour intensive units. Also in recent years,
productivity bargaining is gaining ground in India too. For example, the ITC
increased the pay scales of unionised employees substantially through wage
agreement whereby the union agreed to cooperate with the management in
maintaining the share of labour cost in the ex-factory cost per cigarette at the same
level over a five-year period. Many firms have entered into wage agreements which
entailed a trade off between more jobs versus more wages. For example Premier
Automobiles Ltd could accomplish a major productivity bargaining agreement.
Several other chemical and engineering firms had, in recent years, "entered into
similar agreements. However, such agreements raise questions about their effects on
level of employment in the economy, particularly in the context of widespread
unemployment and on the firm in the event of a recession. The counter argument is,
"What is the point in keeping wages low, if you can not keep the labour costs too
low?" Quite often firms in India find labour is cheap, but not the cost of labour.
7 COST OF LIVING
Dearness Allowance (DA) and City Compensatory Allowance (CCA) now form
integral part of most wage structures. The general principle underlying these
allowances is to neutralize at least a portion of the increase in the cost of living.
Where these allowances do not form part of the wage structure, ad hoc and lumpsum,
increases in pay are unilaterally announced by managements to partially provide for
such neutralization. It may be observed in certain private sector organizations which
follow both the systems, the ad hoc pay increases are (usually for staff and
managerial employees) at least equal to the increase in DA sanctioned to those
governed by the DA scheme (usually workmen) since the time ad hoc pay increase
was sanctioned last till the current ad hoc pay increase. Wage and salary increase
related to increase in cost of living usually poses additional burden on the employer
without corresponding improvement in productivity. The additional financial burden
is met by adjusting the prices, if the market can bear and public policy allows.
Otherwise the pressure is on firms to cut costs elsewhere or seek productivity
improvements to absorb the increase in wage costs.
28 8 MERIT AND SENIORITY PROGRESSION
Merit progression refers to the practice of rewarding a person according to one's
 Framework of
contribution. Merit progression is usually based on annual performance appraisal. Compensation Policy
When the person's performance is outstanding or distinctively above average, the
organization may like to reward him with extra (over and above the normal)
increment(s). There are, of course, other less used ways of rewarding merit/superior
performance. These include, production incentive and profit-sharing schemes, bonus,
promotions, job enlargement and job enrichment.
Usually most pay-scales provide for step increases over a time scale. Annual
increments in basic pay accrue to the employee as he accumulates experience till he
reaches the end of the pay scale. Some organizations provide for time bound
promotions and stagnation allowances too. Time-bound promotions refer to the
practice of promotion to the next grade after the person completes service in the
present grade for a specified number of years. Stagnation allowance refers to the
practice of sanctioning extra increments or lumpsum amount after the person reaches
the end of the pay-scale.
As a result of the above practices, the senior employees get more pay (higher basic
and consequential increases in other benefits like DA, Provident Fund, etc., which are
usually expressed as a fraction or. percentage of basic pay) than their juniors even
though both would be doing same or similar work. The logic for seniority
progression is that as a person accumulates experience, his skills get sharpened and
productive efficiency goes up. This may, in jobs requiring manual skill and dexterity
continue to happen only up to a point and thereafter, because of age, and other
considerations, the productive efficiency may decline. In jobs requiring mental skills
(teaching, for instance), there may not be any similiarly evident saturation or
declining point unless the person becomes senile.
9. MOTIVATION
"Money may not be everything but everything else may be way behind!" Company
compensation policy can be an effective tool to motivate people for superior
performance. There is a lot of debate on whether after a point money ceases to be a
motivating factor, due to several reasons such as individual preferences,
consequential trade offs (in terms of family and social obligations, etc), taxation
policies, etc. A wide variety of non-monetary incentives have therefore been devised
to compensate, reward, sustain and improve superior performance.
10. INTEGRITY
James Burnham predicted in his famous book, Managerial Revolution, which he
wrote half-a-century ago, that the future belongs to professional managers who would
be the `rulers'. Berle and Means pointed out the divorce between ownership and
control, in their well-acclaimed book, "The Rise of the Modern Corporation". Now,
professional managers have access to and control over resources. They do not, of
course, usually own them. As we have seen in Chapter 4, integrity has been identified
as one of the most important attributes in selection criteria for managerial employees
who wield control over corporate resources. Having given them the power, there are
many like the veteran civil servant L K Jha, who argued that it is important to
compensate them adequately enough to keep them out of temptation, L K Jha once
asked, "whether we can afford not to pay more for civil servants who wield such
enormous power?" The question is indeed ticklish. To paraphrase Mahatma Gandhi,
companies can give enough to meet a person's needs and to let him lead a life
befitting the position he occupies, but no company can give a person enough to meet
his greed.
3.4 DIVERGENT PERSPECTIVES OF MANAGEMENT
AND LABOUR
The perspectives of management and labour vary on matters concerning pay and
benefits as shown in Table 1.
As balance sheets are some times pieces of even in public sector, it is difficult to
assess the real capacity to pay of the employer. It is useful to watch what the senior
management tells the media and the shareholders, and what they tell the trade unions
and the workers. Also, typically employers focus on the product markets, and trade
29
union leaders focus on the labour markets. When one looks at product markets one is
reminded
Compensation –
Concept and Context of the rapid changes, shorter product life-cycles, higher competition, and eroding
margins. Therefore, employers would argue that they have less capacity.

Labour would argue that since labour costs are usually less than 20 per cent of the
total costs, instead of focusing on reducing labour costs, managements should seek
the cooperation of labour in reducing other costs and share the gains with the labour
and other stakeholders.
Therefore, at the micro level, the policy framework on compensation varies
depending on the viewpoint: management or labour. In some industrialised countries
with cooperative relations n particularly Japan, Germany and Scandinavian countries
n labour and management cooperate at the workplace level for expanding the pie and
resolve the conflict at the bargaining table over how much more each of them should
get. Since the pie has already been expanded both can get more without shrinking the
share of the other. Thus, even if, to begin with interests are divergent, it is possible to
find commonality of purpose work for mutual gains.

3.5 CASE STUDY - AN APPROACH TO PUBLIC SECTOR

PAY REVISION
Justice Mohan Committee, appointed by the Government of India on 31 August 1996
to recommend revised pay structure, allowances, perquisites and benefits for the
board level functionaries, below board level executives and non-unionised
supervisory staff submitted its report in December 1998. It had to contend with three
issues:
a) The capacity to pay of the public sector. Till 1991 capacity to pay was not
reckoned. There was broad uniformity in pay structure and some allowances even
though most profit making companies tended to pay higher gross emoluments to
their employees than the others. In the post-liberalisation (1991 to date) pay
revision was deferred in loss-making companies. The historical circumstances and
constraints and continued administrative hurdles make it impossible for many
public sector companies to earn profits without substantial financial restructuring
and considerable autonomy in decision-making. Therefore the union's argument is
that capacity to pay cannot be considered in isolation.
b) The relativity between the emoluments paid in the public sector enterprises and
other similarly situated employees in the Government sector, and in the private
sector. Historically government tended to decide pay structure in public sector
having regard to corresponding pay scales in the government departments.
Government has revised the pay and benefits of civil servants without regard to its
financial situation. This created problem for some state governments whose
financial situation was even worse because their own employees expect the state
government to pay on par with central government. When the Government, as
owner, is now asking the public sector to revise pay only if they earn profits
without increasing unit labour costs and price revision, the unions in public sector
are genuinely asking questions on the legitimacy and morality of such instructions
from the government.
c) The need for autonomy for public sector enterprises in determination of employee
30 compensation. Without civil service reforms, both reforms and autonomy in the
public sector remain wishful indulgence. Without autonomy and market mechanism,
 Framework of
insistence on capacity to pay is considered arbitrary by the unions and even most, Compensation Policy
managers.
Additionally, the pay revision, due from 1 January 1997 is saddled with the following
other issues:
d) Duration: In the past pay civil service pay was revised once in 10 to 12 years and
public sector pay once in three to five years. In the private sector pay revision
continues to takes place usually once in three years and in rare cases once in four
to five years. The government now insists on pay revision once in 10 years for the
employees in public sector units. The unions have been resisting. While a few
public sector firms revised pay for officers on a 10 year commitment, the Group
of Ministers appointed by the Government is inclined to rollback the government
instructions and recommend a pay revision once in five years. This might result in
reopening of the already concluded pay revisions executives in some public sector
units. If five-year agreements continue to be the norm the agreements signed now
(April 2000 or thereafter) will expire by December 2001.
e) Parity between officers and workers. The parity between the lowest paid worker
and the highest paid executive was reduced from about 20 in early 1970s to less
than 6 at the end of 1999. Justice Mohan Committee recommended that the parity
should be raised to 10. But if one were to go by the scales it recommended for the
executives in the public sector undertakings, without reducing the existing pay
scales of unionized workers at a time when the existing wage agreements expired
and became overdue for revision - it would not be possible to increase the parity
to 10.
f) Parity between the public sector and private sector. This is a tricky issue. At the
worker level, emoluments in the public sector were estimated to be 1.5 times
higher than their counterparts in the private sector. From senior manager onwards
emoluments in the public sector could be at least 5 to 10 times less than
counterparts in the private sector.
g) Parity at the worker level between the permanent and casual/contract worker.
For far too long collective bargaining distorted wage differential at similar skill
level at the lowest rungs based on whether the job is permanent or not. In many
companies permanent workers doing similar jobs with more or loss similar skills
get upto 8 to 10 times more pay than the casual and contract workers working on
similar jobs at the same site. While successive pay commissions and collective
agreements in most cases scuttled the issue, it is frequently raised by a few unions
and some non-governmental organizations. A few collective agreements and some
court judgments now insist that there should be no such discrimination.
h) Performance linked pay: Public sector does not generally have either the concept
or the culture of performance linked pay. In the public sector units where
performance linked payments exist the proportion of such payments in the total
pay never exceeded 8 per cent till 1999. Justice Mohan Committee recommended
that perquisites and allowances should not exceed 50 per cent of the pay.
Payments above this should be linked to performance and not exceed another 50
per cent of the pay and gross ceiling of 5 per cent of distributable profits for all
the employees of the company. In the private sector, Companies Act allows
payment of 11 per cent of distributable profits among the full time directors
whose number would be usually less than 10. In the public sector, as per Justice
Mohan Committee recommendation, 5 per cent of the distributable profits should
be distributed among all the employees whose number usually ranges from over
3,000 to over 100,000. The per employee share of distributable profits would, in
several cases could be so low that they may not be adequate to inspire, induce or
motivate people for aspiring to get the paltry extra emoluments linked. to
performance.
3.6 CASE STUDY-WAGE REVISION IN NEWSPAPER
INDUSTRY
In the year 2000 wages are determined through wage board mechanism only for
working journalists and non journalists in the newspaper industry. The issues 31
encompassing the policy framework for determining wages for them include the
following:
Compensation –
Concept and Context a) The industry characteristics are heterogeneous. Some have composite with units
including their own establishments for printing. Trade unions have been
questioning adoption of new technologies (computerization, printing facsimile
editions, etc.) outsourcing, contractualisation of jobs and other non-standard work
and employment practices. Industry is arguing that it can go against the trends in
the national and global economy and the changes in the industry taking place in
other parts of the world. Trade unions are worried about their loss of control over
jobs due to technology and reduction in the size of workforce and their increased
vulnerability due to downsizing and contractualisation of their jobs.
b) Establishments in the industry include small, medium and large. All do not have
the same capacity to pay. Therefore there is merit in classifying industries
according to size and fixing different levels/ranges of remuneration for different
categories of employees in each size group.
c) Should such classification be based on investment, gross revenue, sales turnover,
employee strength or a combination of these or any other parameters?
Classification and categorization of newspapers according to sales turnover.
Should sales turnover include not only subscription but also advertisement
revenue. In a few cases other sources of revenue - such as estate rentals form a
significant portion of revenue.
d) Some large newspaper establishments have reduced the subscription tariff, but
doubled the number of print pages, introduced colour page section. This resulted
in increase in circulation, without corresponding increase in subscription revenue.
Increase in circulation led to increase in advertisement revenue. However, while
projecting future earning potential of establishments for the purpose of projecting
their capacity to pay, the industry is arguing that earning potential can not be
extrapolated based on past trends because of the changes in the relative fortunes
of print media and electronic media in the wake of information revolution and
convergence of technologies. Some have even questioned the viability and growth
of the print media over a period.
e) The industry complains about the rising costs of inputs and falling output prices
and potential decline in circulation levels due to the fast growing popularity of
electronic and entertainment media. Trade unions question the wisdom of
reduction of subscription tariff and suicidal cut-throat competition between some
of the major players in the industry. They also point out that some of the large
establishments have profit margins comparable to some of the fast moving
consumer goods companies.
f) The industry cries wolf and says it does not have the capacity to pay. When the
employers' association in the industry has to articulate a viewpoint on the subject
it is usually based on a common denominator of consent that does not normally
cut much ice with the other parties, i.e., trade unions, wage board committee
members and the government.
g) Close to half the establishments in the industry have not paid wages and benefits
recommended by the previous wage board. Trade unions mobilized support to
raise questions in the parliament and dispute before the Supreme Court. Both
agreed with the union point and held that the recommended wages be paid. While
the trade union federations make noise at the national and regional level, in most
cases at the unit level unions are keeping mum because they feel that pressing the
issue might endanger their employment or further bring down the wage levels.
There is no evidence of any establishment being closed on account of sickness.
Quite a few in the industry, particularly the local newspapers are run for political
reasons which even if the establishments lose money. In some such cases the first-
level outcomes could be political gains and the second-level outcomes could be
indirect financial gains.
h) Significantly some of the prominent employer representatives come from major
newspaper establishments. In their own firms they have been complying with the
recommendations of the successive wage boards and most of them have been
paying, for categories of their employees, much more than what the wage boards
recommended. Still, when it comes to representing the industry, they have to
32 plead inability.
 Framework of
i) There is a problem with balance sheets and transparency of booking practices Compensation Policy
which is not peculiar to this industry alone. There also conflicting views,
particularly among managements and trade unions about the trends and
interrelationship between and among the demographic characteristics of the
population, technology, circulation and advertisement. Managements feel that
external environmental factors have a more decisive influence on the fortunes of
their business while trade unions believe that locus of control is substantially
internal and it is. primarily a question of mindsets and assumptions.

Finally, when it comes to addressing the issue on the subject of relativity, parity and
equity, the question is with which other industries/occupations should the pay and
benefits of journalists and others working in the newspaper establishments be
compared?

3.7 EXERCISES
Read the case on public sector pay revision. Prepare a policy document for
Government of India addressing all the issues mentioned in the case.

Read the case on wage revision in newspaper industry. (a) Indicate what type of
information is required and from what sources/how it can be generated? What type of
time series analysis and assumptions need to be made to make out a case, addressing
all issues mentioned in the case, on behalf of the employers' association in the
industry.

Using the formula given by Akroyd, estimate, on behalf of the trade union, in money
terms, need-based minimum wage in the current year. Critically evaluate the estimate
from employer's point of view and list out on behalf of a company, what type of data
and information is needed to argue about the company's capacity to examine, and if
necessary scale down, the union's demand.

3.8 REVIEW QUESTIONS

1. What are the public policy considerations in wage policies. State the practical
difficulties, if any, translating the lofty ideals into action.
2. Why and how pay design should be linked to organization and job design?

3.9 FURTHER READINGS

Government of India. Five Year Plan Documents (Various plan documents). New
Delhi: Government of India.
Government of India. 1998. Fifth Central Pay Commission. New Delhi: Government
of India.
Government of India. 1998. Report of the Pay Revision Committee for Public Sector
Executives. New Delhi: Government of India.

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