Compensation

WELCOME TO OUR PRESENTATION

IUBAT—INTERNATIONAL UNIVERSITY OF BUSINESS AGRICULTURE AND TECHNOLOGY

HRM 502- Human Resources Management, Section –MBA

Instructor: Ferdous JalalA presentation on -Compensation

Group Members of Focus group

Serial No Name ID No.

1 Jannatun Nahar Tania 14104028

2 Happy Akter 14104020

3 Nasima Nasrin 14104025

4 Md.Ahad Rahman 14104034

CONTENTS

1

o About Compensation

o Definitions

o Objectives of Compensation

o Importance of Compensation practices

o Model for Compensation System

o Total Compensation

o Different Types of Pay

o Design of Compensation strategy

o Designing Compensation Strategy in Bangladesh

o Compensation practise in Bangladeshi garments

o Compensation and Organizational Performance

o Conclusion

ABOUT COMPENSATION

Compensation means what the employees receive in exchange

for their work. It is the monetary plus non-monetary return paid

to employees for the work done by them.

Compensation system results from the allocation, conversion,

and transfer of a portion of the income of an organization to its

employees for their monetary and in-kind claims on good and

services. 2

DEFINITIONS

Remuneration – money paid for services or work done.

Total remuneration / rewards – includes both monetary and

non monetary rewards provided for services or work done.

Incentives – designed to encourage employees to perform in

a certain manner, and commonly take the form of a payment

to stimulate greater output or improved quality. E.g. stock

option, discounts, free memberships, lump sum pay etc.

Benefits – Indirect financial payments which employees are

legally entitled to receive. E.g. paid annual leave, sick leave. 3

OBJECTIVES OF COMPENSATION

To acquire qualified personnel

To retain current key employees

To ensure equity

To reward desired behavior

To control costs

To comply with legal regulation

To further administrative efficiency4

IMPORTANCE OF COMPENSATION PRACTICES

Compensation is important for both employers and

employees.

It is one of the main reasons for which people work.

It creates substantial cash out flow of an enterprise .

Compensation includes both financial and non-financial.

5

MODEL FOR COMPENSATION SYSTEMAnalyze Present Compensation Structure

Formulate Salary Policies

Select Compensation System

Evaluate and Monitor the Plan

6

TOTAL COMPENSATION

Employee Satisfaction

Salary

• Pay

• Overtime (if in non-exempt classification)

Rewards

• Bonus

• Salary Increases

• Promotions

• Equity Offerings

• Awards

• Recognition

• New job assignments

Benefits

• Health Plans

• Retirement Plans

• Vacation/ time off

• Paid Training

• Working Hours

7

DIFFERENT TYPES OF PAY

Wages – are calculated by multiplying the number of hours worked by the agreed

hourly rate of pay.

Salary – total monthly / annual paid for performing the job.

PRP – performance related pay when pay is determined on the basis of individual /

group performance.

Other tangible – vacation, flexible hours, membership, free tickets, time off,

coupons, using company resources for personal use, any other favourable benefit.

Social rewards – praise, recognition, positive feedback, greetings, complements,

company/social gatherings, nonverbal signs.

Status enhancement – office size, location, promotion, furniture and fixtures, “hall

of fame”, company crests, pins, ties etc. 8

DESIGN OF COMPENSATION STRATEGY

Design of compensation strategy are primarily driven by the

organisation’s compensation philosophy based on:

kinds and levels of required knowledge and skills. kind of business. capital intensive versus labor intensive. total compensation package. employment stability . profitability of the organization. geographic location.

9

DESIGNING COMPENSATION STRATEGY IN BANGLADESH

Design of compensation strategy in BD probed into four

dimensions namely –

The perceived importance of strategically designed

compensation for organisational growth.

Importance of giving the right person the right compensation.

Importance of linkage between compensation and

organisational performance.

Importance of regular review of salary with market

benchmark. 10

COMPENSATION PRACTISE IN BANGLADESHI GARMENTS

In Bangladesh, many garments industry have been following the same compensation practices since long.

Since the per capita income is not very high, industry do not risk experimenting with the earning of individuals.

Garments industry should consider a strategically designed compensation is critical for success.

Though Garments industry have attached importance to a well designed compensation system, employee turnover is still high in these sectors.

In Bangladesh there were very low in comparison to competing nations.

11

COMPENSATION PRACTISE IN BD GARMENTS

Compensation has been researched from different

perspectives at home and abroad. most of the garments

industry (87.5%) paid one or more types of allowances

in addition to salary. we found that nearly 7% enterprises

paid festival bonus, 20% paid medical allowance, and

20% provided pay increment.

12

COMPENSATION AND ORGANISATIONAL PERFORMANCE

Individual performance contribute to the organisational performance.

Individual performance may not results in organisational profitability because of various reasons.

Considering organisational performance and individual performance to determine compensation strategy is important.

Majority of the Bangladeshi organisations determine individual performance as a parameter for deciding salary increments.

This is not as per leading practices worldwide. Majority organisations practice increment policy – which is a

promise of continual payment for a performance in one particular year.

Performance should be linked more to variable pay and bonuses. 13

CONCLUSION

Compensation as a tool to drive performance culture and success of organisations will become more prominent in future.

Given the relatively lower per-capita income of Bangladesh, uncertainty of earnings may backfire at junior levels.

Inflation, cost of living, individual performance are the key determinants for annual increments.

Compensation system should be introduced carefully and with utmost sensitivity.

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THANK YOU