Wage is the remuneration paid to a worker for his services. It is essential for management to develop a suitable wage system. An industry generally pays 60% of its total cost in the form of wages to the employees. If an industry pays fewer wages to its employees, it increases the profits but it can cause dissatisfaction among workers. It can also results in reduction of efficiency of workers. A suitable wage plan is essential for better efficiency, higher production and industrial peace. Wages refers to amount paid on hourly or daily basis. Salary refers to monthly payment. Wages should be sufficient to fulfill the needs of a worker and provide him comforts of life to maintain his standard of living.
Classification of wages:
Nominal wages: It consists of wages paid in cash only. It does not include other benefits like medical allowance, residence, transport etc.
Real wages: It consists of wages paid in cash along with other benefits like medical allowance, residence, transport, children education etc.
Sometimes, two workers performing the similar job in same or different industry get different wages. It is due to the difference in their qualification, skill, responsibility and experience. This is known as wage differentials.
Types of wages:
Minimum wage: The wage which is sufficient for a worker to cover his basic necessities of life i.e. food, shelter and clothing is called minimum wage. It is required to keep him alive. Most of the countries have made Minimum wages act in order to fix the lowest limit of wages.
Living wage: It ensures to maintain the decent standard of living of an employee. Various incentives are given to the employees so that he can save for his future needs after fulfilling his basis necessities.
Fair wage: It is somewhat in between minimum wage and living wage. The lower limit of fair wage is minimum wage and upper limit depends upon the paying capacity of an industry.