Compensation

Compensation in other terms also called as Employee Remuneration.

Remuneration is the compensation; an employee receives in return for his or her contribution to the organization. Remuneration occupies an important place in the life of an employee. His or her standard of living, status in the society, motivation, loyalty, and productivity depend upon the remuneration he or she receives. For the employer too, employee remuneration is significant because of its contribution to the cost of production.

Aims of Employee Compensation

Attract capable employees to the organization. Motivate them toward superior performance. Retainment of their services over an extended period of time.

Ensure equity Control costs

Comply with regal rules

Ease of operation New and desired behaviour

The most important objective is fairness or equity.

Internal equity External equity Individual equity

Equity & pay rates: Need for equity is imporant in determining pay rates. Following steps are involved,

Find the worth of each job through job evaluation Conduct a salary survey Group similar jobs into pay grades.

Job Evaluation

The worth of job is ascertained through job evaluation. Ensures internal equity Committee is appointed to collect the information The evaluation is done through the use of market pricing, use of ranking, point or factor comparison methods.

Factors affecting compensation policy

Supply and demand Cost of living Government Labor unions

Components of Compensation

Components of Compensation Conti.

Direct- Wages, Salaries, Commissions, Bonuses Indirect- Insurance plans, Social Assistance, Educational Assistance, Paid Absences The Job- Interesting Duties, Challenge, Responsibility, opportunity for recognition, feeling of advancement, achievement opportunity The Environment- Sound policies, Competent supervision, Congenial coworkers, Appropriate status symbol, Comfortable working conditions, flexitime, Job sharing, Cafeteria compensation

Factors Involved in Determining Salary

Kinds and Levels of Required Skills. The single most important factor influencing an individuals rate of pay is the kind of work performed. Some professions require a high level of education which made the job a highly paid job.

Supply and Demand of Labor. Any job is worth what the marketplace will bear. Individuals with certain skills may be in varying degrees of demand. Sometimes the demands vary across specific locations. At other times, they are national in scope. Those who have the particular knowledge, skills, and credentials that are in high demanda current example is information technology professionalscan request and will usually receive premium wages.

Geographic Location Levels of employment/unemployment do not affect all regions of the nation equally. Certain areas where the cost of living is high have historically paid higher wages.

Factors Involved in Determining Salary

Profitability of the Organization Employees working for a highly profitable business have a greater chance of receiving higher wages than those working for a less profitable enterprise.

Employee Tenure and Performance. Traditionally, an employees pay increases with years of service. A widely held view is that, through experience, employees become more effective problem solvers and are more dependable. However, as the global economy increasingly demands ongoing business change and higher levels of productivity, employers have looked at how pay and reward systems can improve an organizations performance. For many employers, the goal now is to integrate the organizations compensation and reward philosophy with its strategic initiatives regarding customers, profitability, and the development of a strong, competitive work force focused on the success of the organization.

Factors Involved in Determining Salary

Employment Stability We all want the security of knowing that we will have our job as long as we want it. The idea of not having a regular job to pay debts and day-to-day living costs is distressing. Employees who feel that a job is secure are often willing to accept less than they would be paid in a potentially unstable environment.

Compensation Philosophy Some employers are committed to a philosophy of paying their employees above industry or area standards in order to attract and retain the very best pool of skilled workers available. Others pay at the 50th percentile; still others pay as little as they can. Size of the Organization. Large organizations can often pay at a higher wage rate than smaller ones.

WAGES
Minimum Wages These are the wages that ensure more than just adequate sustenance, these ensure certain medical & other essential requirements of individuals catered to ensure:1. 3 extra compensation unit to a family of a single earning member. 2. 2700 calorie of food intake per member per day. 3. 18 yards of cloth per member and for an unit of four members i.e. 18 x 4 = 72 yards cloth per annum. 4. To ensure land, shelter equivalent of what is provided by industrial housing scheme. 5. Amenities catered to by wages 20% of minimum wage.

WAGES
LIVING WAGES Ensure more than adequate sustenance to the extent that certain greater needs like social needs, sanitations, health aspects, and protections from misfortunes. FAIR WAGES These are fixed on the basis of:

1. Productivity of Labour 2. Prevailing level of wages 3. Industry Policy to wages & income distribution in the country.

4. Contribution of industry to the economy

The upper limit is fixed on the basis of the above factors and ensures minimum wages.

Wage Policy
Wage policy deals with remuneration of work rendered by employees in any organization. Wages are that compensation given to employees done for work in return. Wages are given to the worker (blue color) who are the shop floor employees and salaries are given to executive cadre (white color) according to Public Policy, a good wage policy should look into the following:

1. An equitable distribution of return between capital & labour. 2. To establish justified wage differentials 3. Equal pay for equal work 4. To base wages on need basis

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