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HRM 201

ASSIGNMENT On

COMPENSATION MANAGEMENT
Submitted by:
MD. Shafiqul Islam (1011210126624th Intake) Topu Royhan (09102101205---21st Intake) Abdullah Al Faisal (10112101420---24th Intake) MD Salauddin Rony (10113101036---24th Intake)

Submitted to:
Mr. Md. Rashedul Hoque Department of Human Resource Management

BUBT

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HRM 201

Compensation defined
Compensation can be defined as all of the rewards earned by employees in return for their labor. This includes:

Direct financial compensation consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals Indirect financial compensation including all financial rewards that are not included in direct compensation and can be understood to form part of the social contract between the employer and employee such as benefits, leaves, retirement plans, education, and employee services Non-financial compensation referring to topics such as career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions

In determining effective rewards, however, the uniqueness of each employee must also be considered. People have different needs or reasons for working. The most appropriate compensation will meet these individual needs. To a large degree, adequate or fair compensation is in the mind of the employee.
Compensation means what the employee receive in exchange for their work. It is the monetary plus non-monetary return paid to employees for the work done by them. A good compensation strategy includes a balance between internal equity and external competitiveness. Compensation and benefits affect the productivity and happiness of employees, as well as the ability of your organization to effectively realize its objectives. It is to your advantage to ensure that your employees are creatively compensated and knowledgeable of their benefits.

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Total Compensation =

Direct + Indirect Compensation

Base Pay & Incentives

Benefits

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Objectives of compensation
The objectives of compensation system is to create a system of rewards, so that the employee is attracted to work and is motivated to do a job for the employer. To To To To To To To To To acquire qualified employees retain current employees ensure equity manage conflict generate motivation among employees reduce absenteeism enhance or improve productivity ensure continuity of sound working environment reduce turnover

Prerequisites for effective compensation

An effective compensation should fulfill the following criteria: Adequate Minimum governmental, union and managerial pay level position must be met by the compensation system. Equitable Care should be taken so that each employee is paid fairly, in line with his or her ability, efforts, education, training, and experiences. Secure Employees security needs must be adequately covered by the compensation package. Cost effective Pay must be neither excessive nor inadequate considering what the enterprise can afford to pay. Acceptable to all employees All employees should understand the pay system well and feel it is reasonable for the enterprise and the individual. The compensation system of an organization includes anything that an employee may value and desire and that the employer is able or willing to offer in exchange for employee contributions.

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Advantages of Fair Compensation System:

Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following: If an ideal compensation system is designed, it will have positive impact on the efficiency and results produced by workmen. Such system will encourage the normal worker to perform better and achieve the standards fixed. This system will encourage the process of job evaluation. It wills also helping setting up an ideal job evaluation, which will have transparency, and the standards fixing would be more realistic and achievable. Such a system would be well defined and uniform. It will be apply to all the levels of the organization as a general system. The system would be simple and flexible so that every worker/recipientwould be able to compute his own compensation receivable. Such system would be easy to implement, so that it would not penalize the workers for the reasons beyond their control and would not result in exploitation of workers. It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers. Such system would help management in complying with the various labor acts. Such system would also bring about amicable settlement of disputes between the workmen union and management. The system would embody itself the principle of equal work equal wages. Encouragement for those who perform better and opportunities for those who wish to excel.

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Importance of Compensation
Money makes the mare go is the proverb. It holds good for all the factors participating in the business process expects its fair share of prosperity of the business. Compensation/ Reward System plays a vital role in the business organization. And its importance can be very well ascertained as follows: Sound Compensation/Reward System brings amicability and peace in the relationship of employer and employees. The system brings out the best out of every employee in the organization. It aims at creating a healthy competition among them. And as such, encourages them to work hard and efficiently. The system provides adequate opportunities to those who wish to perform better. The system provides growth and advancement opportunities to the deserving employees. The system upholds the principle of equal wages. It provides transparency and parity too. The perfect Compensation system provides platform for happy and satisfied workforce. This minimizes the labor turnover. The organization enjoys the stability. The organization is able to retain the best talent by providing them adequate compensation thereby stopping them from switching over to another job. The business organization can think of expansion and growth if it has the support of skillful, talented and happy workforce. The sound Compensation system is hallmark of Organizations success and prosperity. The success and stability of organization is measured with pay-package it provides to its employees. Both employer and employees get benefited because of the sound Compensation System. A sound Compensation System helps the organization keep pace with changing environment. It helps the organization to cope up with the wage levels in neighboring industries. Sound Compensation System minimizes the complaints from the employees, provides them the congenial work environment to perform better and sets up for them the targets to be achieved. Definite targets help employees know their role in the organization, which minimize wastage, and enhance overall efficiency. It also helps organization to reduce the cost of production and maximize profits.
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Components in Direct Compensation

Components in Indirect Compensation

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Types of Compensation Management

1. Direct Compensation 2. Indirect Compensation Components in Direct Compensation The basic salary in INDIA corresponds with what has been recommended by the Fair Wage Committee (1948) and the15th Indian Labor Conference (1957). The various awards by Wage tribunals, Wage boards, Pay commission reports and job evaluations also serve as guiding principles in determining BASIC SALARY. While deciding the basic salary, the following criteria may be considered: Skill needs of the job Experience needed Difficulty of work: mental as well as physical Training needed Responsibilities involved Hazardous nature of job HRA (House Rent Allowance): Organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees Conveyance: Organizations provide for cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them. Leave Travel Allowance: These allowances are provided to retain the best talent in the organization. The employees are given allowances to visit any place they wish with their families. The allowances are scaled as per the position of employee in the organization.

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Medical Reimbursement : Organizations also look after the health conditions of their employees. The employees are provided with medi-claims for them and their family members. These medic-claims include health-insurances and treatment bills reimbursements Bonus: Bonus is paid to the employees during festive seasons to motivate them and provide them the social security. The bonus amount usually amounts to one months salary of the employee. This is apart from the salary. Special Allowance: Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club memberships, etc. are provided to employees for motivation and companys Productivity.

Components in Indirect Compensation

o Leave Policy: It is the right of employee to get adequate number of leave while working with the organization. The Leave Policy differs in every organization. The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc. o Overtime Policy: Employees should be provided with the adequate allowances and facilities during their overtime, if they happened to do so, such as transport facilities, overtime pay, etc. o Hospitalization: The employees should be provided allowances to get their regular check-ups, say at an interval of one year. Even their dependents should be eligible for the medi-claims that provide them emotional and social security.
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o Insurance: Organizations also provide for accidental insurance and life insurance for employees. This gives them the emotional security and they feel themselves valued in the organization. o Leave Travel: The employees are provided with leaves and travel allowances to go for holiday with their families. Some organizations arrange for a tour for the employees of the organization. This is usually done to make the employees stress free. o Retirement Benefits: Organizations provide for pension plans and other benefits for their employees which benefits them after they retire from the organization at the prescribed age. o Holiday Homes: Organizations provide for holiday homes and guest house for their employees at different locations. These holiday homes are usually located in hill station and other most wanted holiday spots. The organizations make sure that the employees do not face any kind of difficulties during their stay in the guest house. o Flexible Timings: Organizations provide for flexible timings to the employees who cannot come to work during normal shifts due to their personal problems and valid reasons.

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