COMPENSATION MANAGEMENT

Presented By : Divya Arora Vishavdeep Singh Sidhu Deepak Sawnani Amit Sharma

Introduction
Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. The good compensation will also serve the need for attracting and retaining the best employees. .

Compensation
Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the workemployee relation by providing monetary and non-monetary benefits to employees

Contd.
When managed correctly, it helps the organization achieve its objectives and obtain, maintain, and retain a productive workforce.
Compensation is a key factor in attracting and keeping the best employees and ensuring that your organization has the competitive edge in an increasingly competitive world. Without adequate compensation, current employees are likely to leave and replacements will be difficult to recruit. The outcomes of pay dissatisfaction harm productivity and affect the quality of work life.

Compensation Management
Compensation management is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. The Compensation Management component enables you to differentiate between your remuneration strategies and those of your competitors while still allowing flexibility, control and cost effectiveness.
It provides a toolset for strategic remuneration planning that reflects your organization culture and pay strategies.

Types of compensation
Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Financial Compensation: Total Financial compensation = Direct + Indirect Compensation Direct Financial Compensation pay received in forms of wages, salaries, bonuses and commissions , fringe benefits

Fringe Benefits
Fringe benefits described as Welfare expenses Wage supplements Perquisites other than wages Sub wages Social charges

Types of compensation (contd..)

Indirect Financial Compensation(benefits) - All financial rewards not included in direct compensation. For examples workers compensation, Family & medical leave, Disability Protection,
Nonfinancial Compensation - Satisfaction person receives from psychological & or physical environment in which person works. For examples, skills variety, experiences, good working conditions, flextime

Need of Compensation Management

A good compensation package is important to motivate the employees to increase the organizational productivity. Unless compensation is provided no one will come and work for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals. Salary is just a part of the compensation system, the employees have other psychological and self-actualization needs to fulfill. Thus, compensation serves the purpose. The most competitive compensation will help the organization to attract and sustain the best talent. The compensation package should be as per industry standards

Objective Of Compensation Management

Contd
To help the organization achieve strategic success while ensuring internal and external equity. Internal equity- ensures that more demanding positions or better qualified people within the organization are paid more. External equity - assures that jobs are fairly compensated in comparison with similar jobs in other firms Attract qualified personnel Retain current employees Reward desired behaviour Control costs Facilitate understanding

DETERMINING COMPENSATION
Internal Factors: Employers Compensation strategy Worth of a Job Employees Relative Worth Employers Ability to Pay

Contd
External Factors: Labor Market Conditions Area Wage Rates Cost of Living Collective Bargaining

The Compensation Structure

Wage and Salary Surveys Collecting Survey Data The Wage Curve Pay Grades Competency Based Pay

Governmental Wage Policy of India

Payment of Wages Act, 1936 Industrial Dispute Act, 1947 Minimum Wages Act, 1948 Equal remuneration Act, 1976 Payment of Bonus Act, 1965 Wage Board

Wage boards

Wage boards consist of an impartial chairman , two other independent members and two or three representatives workers and employers each The recommendations of the board are first submitted to the government for the acceptance After acceptance the government requests the parties to implement them.

Objective Of A Good Wage Policy

To establish good labor relations. To decide on appropriate wages To decide wages based on individuals capability To develop a pre-determine scheme for payment of wages To establish linkages of wages payment with performance To provide for incentive payment To guarantee minimum wages To provide for neutralization of price rise To develop a wage structure which can attract talent

Compensation Issues
The Issue of Equal Pay for Comparable Worth The Issue of Wage Rate Compression Living Wage Laws The Issue of Low Salary Budgets

CONCEPT
Job evaluation is a systematic way of determining the value/worth of a job in relation to other jobs in an organisation. It tries to make a systematic comparison between jobs to assess their relative worth for the purpose of establishing a rational pay structure.

Features
It tries to assess jobs, not people. The standards of job evaluation are relative, not absolute. The basic information on which job evaluations are made is obtained from job analysis. Job evaluations are carried out by groups, not by individuals. Some degree of subjectivity is always present in job evaluation. Job evaluation does not fix pay scales, but merely provides a basis for evaluating a rational wage structure

PROCESS

METHODS
Ranking Method :- Perhaps the simplest method of job evaluation is the ranking method. According to this method, jobs are arranged from highest to lowest, in order of their value or merit to the organization. Classification Method:- According to this method, a predetermined number of job groups or job classes are established and jobs are assigned to these classifications. This method places groups of jobs into job classes or job grades. Factor Comparison Method:- A more systematic and scientific method of job evaluation is the factor comparison method. Though it is the most complex method of all, it is consistent and appreciable. Under this method, instead of ranking complete jobs, each job is ranked according to a series of factors. Point Method:- This method is widely used currently. Here, jobs are expressed in terms of key factors. Points are assigned to each factor after prioritising each factor in order of importance. The points are summed up to determine the wage rate for the job.