Factors Influencing Compensation

- Going Market Rate - Labour Market

- General Economy
- Inflation Rates - Taxation Policies

- Government Regulations
- Bargaining Power of Unions - EQUITY - Individual - Internal - External - ABILITY TO PAY

- Management Philosophy

Components of Executive Compensation

- Basic Pay
- Dearness Allowance

- Performance Pay
- Benefits and Perks

Reasons for Benefits and Perks

- Government Regulations - Tax Planning - Valence

- Cafeteria Approach
- Asset Creation - Wealth Creation - Union Demands - Sense of Belonging

- Involving Family members

Perks and Benefits

- Retirement Benefits - Provident Fund - Gratuity - Pension / Super Annuation - Transport - Company Bus / Vans - Company Car - Conveyance Allowance - Conveyance Reimbursement

- Canteen
- Lunch Coupons - Lunch Allowance - Health Case - Company Hospital - Occupational Health Centre - Medical Reimbursement - Hospitalisation Insurance - Premium Health Checkup

Perks and Benefits

Leave Travel Assistance GIFTS Company Products at discount Loan with no / subsidised interest Housing - Company Housing Colony - Company Leasing Houses - House Rent Allowance ESOP Get together & Picnics Education Assistance Magazines and Newspapers Club Memberships Telephone / Mobile Phones Credit Cards Sports Clubs, Gyms, Fine arts clubs, Libraries Uniforms and Shoes Working Hours / Flexitime Holidays Leave facilities Help Desks

Performance Pay
- Variable Pay - Annual / Monthly / Quarterly - Cash / Gifts / ESOP

- Variable CRITERIA - Performance - Attendance - Service - Specific Criteria - Team Performance

- Result Orientation Culture - In alignment with VROOMS Theory INSTRUMENTALITY - Conflicts and STRESS Inhibits TEAM WORK

CONCEPTS
3-P APPROACH POSITION PERFORMANCE PERSON CAFTERIA APPROACH

PERFORMANCE PAY
-INDIVIDUAL OBJECTIVES TEAM OBJECTIVES SBU OBJECTIVES COMPANY OBJECTIVES HALF YEARLY ANNUAL /PERIODICALLY INCREMENTS/LUMPSUM/ESOPS

Benefits of JE
- Linking Pay to Job Needs - Systematic Procedure - Fair and Equitable - Participation of Unions, Managers, Employees - Less Grievances - More Motivation - Increased Trust

Guidelines
- Rate the Job Not the Person

- All Facts Accurately

- Objectivity - Systematic - Unbiased - Committee Evaluation - Consistency - Acceptance / Participation of Employees - Minimum Possible Grades

Process of JE
- Gaining Acceptance - Communicate - Explain
- Committee Formation - HR, UNIONREPS, Senior Employees / Executives - Selecting Benchmark Jobs - Job Description / Job Analysis - Selecting JE Method - Classifying / Creating Job Hierarchy / Monetary Values Finalisation - Installing / Implementing JE Programme - Periodical Reviews

Point Method
1. Conduct Job Analysis - Benchmark Jobs - Compensable Factors 2. Determine Factors and Subfactors SKILL Mental Experience etc. EFFORT Physical Mental etc. RESPONSIBILITY Effect of Error Innovation etc.

WORKING CONDITIONS Environment Hazards etc.

Point Method
3. Scale The Factors - Assigning Degrees 4. Fix Relative Weightages 5. Compute Points 6. Assign Money Value to Points 7. Prepare JE Manual HAYS METHOD FOR MANAGERS KNOW HOW PROBLEM SOLVING ACCOUNTABILITY

Job : Stores Officer

Skill
1 2

Degree
3 4 5

Weight 45% 45%

Points (Total) 180 135

Mental Expce. Effort Physical Mental Responsibility Effect of Error Innovation Working Conditions Environment Hazards

30% 30%

60 120

20% 20%

80 60

5% 5%

5 5 645

Factor Comparison Method

1. Select Factors - Job Evaluation Committee Eg. Skill, Mental ability, Physical ability, Responsibility, Working Conditions 2. Identify 15-20 Key Jobs 3. Rank the factors for Key Jobs JOBS Tool Maker Electrician Carpenter Helper - Assessment by committee - OR Techniques SKILL 1 2 3 5 MA 1 4 3 5 PA 5 3 2 1 R 2 4 1 5 WC 4 3 3 5

Factor Comparison Method

4. Principles of Benchmark Job Eg. Tool Maker Rs.14/Hour (Going Rate, Fixed Rate) Rs.5 Skill Rs.4MA Rs.0.5PA (Committee Decision) Rs.3 Responsibility Rs.1.5 W.C. These become Standards 5. Pricing of Key Jobs - Ranking Factors in comparison - Rating the Rank in terms of Money - Pricing by Adding up 6. Price All Jobs 7. Prepare Wage Structure

Factor Comparison Method

JOBS Tool Maker Electrician Carpenter Helper

SKILL 1/Rs.5 2/Rs.4 3/Rs.3 5/Rs.1

MA 1/Rs.4 4/Rs.1.5 3/Rs.2 5/Rs.0.5

PA 5/Rs.5 3/Rs.1.5 2/Rs.2 1/Rs.5

R 2/Rs.3 4/Rs.1. 5 1/Rs.4 5/Rs.1

WC 4/Rs.1.5 3/Rs.2 3/Rs.2 5/Rs.1

TM = Rs.14 E = Rs.10.5 C = Rs.13 H = Rs.8.5

(1) (3) (2) (4)

Objectives of Compensation and Benefits for Expatriates Attraction and retention of employees who are qualified for foreign assignments Providing an incentive to leave the home country for a foreign assignment Maintaining a given standard of living Taking into consideration expatriates career and family needs Facilitating reentry into the home country at the end of the foreign assignments

Elements of Expatriate Compensation

Salary

Taxes

Housing

Allowances and Premiums

Common Allowances in Expatriate Pay Packages

Financial Allowances

Social Adjustment Assistance

Family Support

The Balance Sheet Approach

Based on the premise that employees on overseas assignments should have the same spending power as they would in their home country. The home country is the standard for all payments. The objective is to: Ensure cost effective mobility of people to global assignments Ensure that expatriates neither gain nor lose financially Minimize adjustments required of expatriates

Balance Sheet Approach

Equivalent Salary and Allowances, Host Country $10,200 Relocation Bonus

Home Country Currency

$1,500 Home Country Salary $7,000 Taxes $1,000 Housing $700 Goods and Services Allowances, paid by company

Taxes $2,000
Housing $2,000 Goods and Services $2,000 Reserve $1,000

Reserve

Other Approaches to Compensation for Expatriates

Negotiation Localization Lump Sum Cafeteria Plan Regional Systems