Compensation

Management

Is a human resource management function that

deals with every type of reward individuals receive
in exchange for performing organisational tasks.
provides a step-by-step approach for designing a
remuneration system that recognises job
requirements;employee-related knowledge and
skills; and performance related incentives that link
individual, team, work unit and organisational
performance.

Includes benefits that protect and expand the

lifestyle and health of workers and their
families.
represents its labor costs-costs that contribute
to improved employee performance and on the
other hand, expanded productivity
Makes organisation competitive and profitable

Types of Compensation

Direct Wages, salaries, bonuses or

commissions.
Indirect financial rewards Ex.Vacation,
insurance, child care services etc.
Non-financial rewards - praise,
self-esteem and recognition affect employees
motivation, satisfaction and productivity.

Compensation Strategy
Develop a compensation program
that recognises the lifestyle and
standard of living of all employees.

Compensation plans
Strategic Plans
For the human resources/ compensation specialist,
the assignment to ensure accomplishment of
organisational strategy begins with determining:
work to be performed
the kinds and levels of knowledge and skills
required,
quality of people
rewards

Nature & Significance of Wage &

Salary Administration

Employers perceive wage as a cost.

Employees consider wage as a means for

satisfying their needs in terms of an expected
standard.

Objectives of W & S Administration

Recruitment of people

Control of payroll cost

Satisfaction

Motivation

Functions
Equity Function

Standard for evaluating the individuals past performance

and current effectiveness.
Relief from financial worries.
Work devotion.
Belief that physical and mental efforts are paid
adequately.
Leads to desirable behaviour of participants to attain
organizational goals.

Motivational function

For future initiative.

Differential increase of remuneration causes

direct and proportional differential increase of
efforts.

A highly complex issue

Elements in W & S Admin.

Pay Levels

-Wage structure is high, average or low .

Internal pay structure Hierarchy of pay rates, pay grades and job
classification and revolves around the job evaluation.

Individual pay system revolves around seniority and merit.

Payment by time In terms of time spent on the job.

Special problems of salesmen, managers and professionals relates to

incentive plans, tax saving, fringe benefits plans and pay plans in terms of
qualifications and performance as compared to pay plans

Fringe benefits and pay supplements insurance, pensions, paid holidays,

bonuses, profit sharing.

Control of wages and salaries Annual review of job classification,

evaluation of incentive plans and careful budgeting of pay increases.

Significance of Financial
Compensation

Individual viewpoint - status, prestige

Enterprise viewpoint - Profit, Employee &

customer satisfaction

National Viewpoint Sound econonmy

Wage Philosophy
Productivity Philosophy
Best infrastructure
Production should increase unit cost
decrease.
Market should expand leading to
enhanced sales volume.
The enhanced profits should be used
to increase the wages of the
employees .

Purchasing power Philosophy

To be increased to attain national prosperity.
Workers form a large proportion of the work force.
The effective demands should enlarge in each
establishment.
The productivity per worker should increase while
the unit cost of output should decrease leading to
enhanced profits.
The increased wages should be paid from this
enhanced income to regenerate the cycle.

Criteria in determining wages in an

enterprise

Law of supply and demand

Prevailing wages for the same category of
workers in the same industry.
Ability to pay.
Governmental factors
Standard and cost of living
Productivity
Bargaining power

Wage Differentials

Several grievances and dissatisfactions with wages

are the result of pay rate differences between jobs and
individuals.
Increased responsibility in supervisory position
should accompany higher earnings.
Attempts are to be made to maintain differentials
between skilled and unskilled jobs.
There may arise wage differentials in view of varying
occupational proficiencies.