COMPENSATION MANAGEMENT in COMPENSATION- it is what employees receive

exchange for their contribution to the organization. Such as bonuses, commissions & profit sharing plans & incentives. Compensation is offered in form of Base Pay- basic comp. an employee gets usually as a wage or salary Variable Pay- comp. that is linked directly to performance accomplishments ( bonuses, incentives, stock options) Benefits- indirect rewards given to an employee or group of employees as a part of organizational membership ( health insurance, vacation pay, retirement pension, etc.) Wages- the amt. paid by the employer for the services of hourly, daily, weekly, fortnightly employees.

Objectives of comp. planning

Major objective is fairness & equitya. Internal equity- ensures that most difficult jobs are paid more b. External Equity- ensures that jobs are fairly compensated in comparison to similar jobs in the labor market c. Individual equity- ensures equal pay for equal work Other objectivesi. Attract talent ii. Retain talent iii. Ensure equity iv. New & desired behavior v. Ctrl. Costs vi. Comply with legal rules vii. Ease of operation

steps for achieving equity

Find worth of each job through job evaluation Conduct a salary survey to find what other employers are paying for comparable jobs To ensure external equity Formal or informal Published sources- reports published by ministry of labor, pay commission reports, trade journals of specific industry, etc.

 a)

b) c) d) e)

Survey methods to collect info.Key job matching similar key jobs are identified b/w org. & wage particulars about those comparable jobs are collected Key class matching- info. about similar class of job is collected Occupational mthd.- data is collected about basic occupational groups. Job evaluation method- all the parties use same method & mechanism for evaluating similar jobs Broad classification method- info. About broad homogenous jobs i.e. by industry, by profession or by geographical area is collected

Group similar jobs into pay gradesPrice each pay grade- wage curve Fine tune pay rates & determine wage structure COMPONENTS OF PAY STRUCTURE IN INDIA WAGE & SALARY ADMINISTRATION Factors influencing compensation levels1. Job need 2. Ability to pay 3. Cost of living 4. Prevailing wage rate 5. Unions 6. Productivity 7. State regulations 8. Dd. & spp. Of labours

Incentives

a)

b)

Incentive is a stimulus or a reason for producing action. Almost all of the human motivations can serve as incentive anxiety, worries, fear, hope, prestige, money, security & so on are all actual or potential incentives in our daily life. Monetary & Non-Monetary Incentives Individual Incentives- pay for performance Piece Rate: Taylors Differential Piece Rate System- There shall be 2 piece work rates- Higher (for finishing work within std. time or producing more that std. o/p), Lower ( for slow workers) Std. Hour Plans: F A Halsey- pay bonuses on the basis of time saved- worker receives guaranteed wage for completing the work on time or taking extra time, if job completed in less than std. time worker gets bonus of 50% of time saved at time rate Rowan plan- it takes into a/c a proportion- time saved/time allowed

Gantt Task & Bonus Plan- combination of time, piece & bonus system Day wages are guarenteed Std. time is fixed & time wage as well as high rate per piece are determined Worker who cant finish within std. time is paid on time basis If reaches std. he will be paid time wage + bonus If exceeds std. he is paid higher piece rate

Bonuses- incentive payment given to an employee beyond ones normal std. wage d) Merit Pay & Individual Incentive Plans- reward based on how well an employee has done the assigned job, payout depends on individual employees performance. e) Lump sum Merit pay- employee receive a single lumpsum payment at the time of their review. f) Commissions for Sales People Salary Plan Commission Plan Combination Plan
c)

1.

2.

3.

Group or Team Based Incentive Plans- reward all team members equally based on overall performance of the team members. Oganisation Wide Incentive Plans- reward employee on the basis of the success of organisation over a specified time pd. , seek to promote culture of ownership. Profit Sharing- employers undertake to pay a particular portion of net profits to their employees on compliance with certain service conditions & qualificaitons Gain Sharing aims at increasing productivity or decreasing labor costs & sharing the resultant gains ESOPs- the eligible employees are allotted Co.s shares below the market price.

Fringe Benefits
The extra benefits provided to employees in addition to the normal compensation paid in the form of wage or salary. Indirect monetary & nonmonetary payments an employee receives for continuing to work for the Co. They may be statutory or voluntary- PF is statutory, transport is voluntary Need for Benefits1. Employee dd. 2. Trade Union dd. 3. Employers Preference 4. As social security 5. To improve Human Relations

Types of Benefits
Payment for time not workeda) Hours of work- Sec.51 of Factories Act,1948, specifies no adult worker shall work in a factory for more than 48hrs. A week & 9hrs a day b) Paid Holiday- an adult worker shall have weekly paid holidays, preferably Sunday. c) Shift Premium- premium to workers who are required to work during odd hours d) Holiday Pay -double salary to work on holiday e) Paid Vacation

Employee Security1. Retrenchment comp.- 1mth notice or 1mth salary 2. Lay-off Comp. Safety benefits Workmens Compensation Health benefits- sickness, maternity, disablement, dependants benefit, medical benefit Welfare & recreational facilities1. Canteens- 250 workers 2. Consumer stores 3. Credit societies 4. Housing 5. Legal aid6. Employee counseling 7. Welfare officers 8. Holiday homes 9. Education 10. Transportation 11. parties

 1. 2. 3.

4.

5.

Old Age & Retirement Benefits: Provident fund- 12% of Basic Pension- 1/3 of salary Deposit Linked insurance- if a member of the employees provident fund dies while in service, his dependents will be paid an additional amt. equal to the average balance during last three yrs. In his a/c Gratuity- reward to an employee for his long service with his present employer, payable to all the employees who render a min. continuous service of 5 yrs., 15 days wage for every completed yr. Medical benefit- to retired employees & their family members.