Compensation HRM 1

7/31/2019 Compensation HRM 1

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Compensation


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Compensation Management

If you pick the right people and give them theopportunity to spread their wings - and putcompensation and rewards as a carrier behind it -you almost dont have to manage them.

Jack Welch


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Overview

The total of all rewards provided to employees

in return for their services.

It is the package of quantifiable rewards an

employee receives for his or her labors.

It includes three components:

Base compensation

Pay incentives

Indirect compensation/Benefits


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Base compensation is the fixed pay an employee

receives on a regular basis, either in the form of a

salary or as an hourly wage.

Pay incentive is a program designed to reward

employees for good performance.(bonus, profit

sharing)

Benefits includes health insurance ,medical care ,Pf,gratuity,uniform,recreation,etc. A special

category of benefit is called perquisites or perks.


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Remuneration

Financial Non Financial

Hourly and

monthly

rates

wagesSalaries

Incentives

Individual

Plans

Group

Plans

Fringe Benefits

PF

Gratuity

Medical Care

Accident Relief

Health &

Group

Insurance etc.

Prerequisites

Company Car

Club

Membership

Paid HolidaysFurnished

House

Stock OptionScheme etc.

Job Context

Challenging Job

Responsibilities

Recognition

Growth Prospects

SupervisionWorking Conditions

Job Sharing etc.

Direct Indirect

Environment

Components of Remuneration


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Factors influencing compensation

External Factors Labour market

Going rate system

Cost of living

Labour unions Labour laws

Society

The economy

Internal Factors Business strategy

Job evaluation

Performance appraisal


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Objectives of compensation planning

Equity: (fairness)

Internal equity: The perceived fairness of the pay

structure within a firm.(more difficult jobs are

paid more)

External equity: The perceived fairness in pay

relative to what other employers are paying for

the same type of labor. Individual equity: The perceived fairness of

individual pay decisions.


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Consequence of Pay Dissatisfaction

Desire for More

Pay

Pay

Dissatisfaction

Performance

Strikes

Grievances

Search For Higher

Paying Jobs

Lower Attractiveness

of Jobs

Job

Dissatisfaction

Absenteeism

PsychologicalWithdrawal

Visits to the

Doctor

Visits to the

Doctor

Absenteeism

Turnover


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Motivation & Performance Model

Employee Sets

Expectations and

Goals

Performance is

Rewarded

Employee considersequity of

Performance

Rewards

Feedback toEmployees

Rewards

Are Given

Employee Sets New Goals And

Expectations Based on Prior Experiences


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The Wage Determination Process

Job Analysis

Job Description& Specification

Performance

Standards

Job Evaluation WageSurveys

Wage Legislation

Wage Structure

Rules of

Administration

Differential

Employee

Appraisal

Wage Payments


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Job evaluation

A job is rated in order to determine its value

relative to all other jobs in the organisation

which are subject to evaluation

The relative job value is then converted into

money value to translate the job classes into

rate ranges.


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Methods of job evaluation

Non-quantitative methods: here a job is comparedas a whole with other jobs.

Ranking or job comparison

Grading or job classification

Quantitative methods: Key factors of the jobs areselected and measured

Point rating

Factor comparison


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Point method

Determine the job to be evaluated.(benchmark jobs)

Select the factors. (measurable)

Define the factors

Determine the degrees Determine relative values of job factors

Assign point values to degrees

Find point value of the job

Assign money values.


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Example:

Factors: skill, effort, responsibility & job

conditions

Factors Sub Factors

SkillEducation,

Experience &

Training

Effort Physical &

MEntal


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Degrees

Education:

Graduation Inermediate School Read & Write

4 3 2 1


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Factors No. of

Points

1s t

Degree

2nd

Degree

3rd

Degree

4h

degree

Skill 148

Education 40 10 20 30 40

Experience 88 22 44 66 88

Training 20 5 10 15 20


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Assigned Money Value

Point Range Daily Wage Rate Job Grade

100-150 Rs. 15-25 1

150-200 Rs. 25 -35 2

200-250 Rs. 35-45 3


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Wage & salary surveys: It ensures external

equity.

Determine pay grades: (Job evaluation)

Price each pay grade or Rate ranges: (Wage

curve)


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Plotting a Wage Curve

0 100 200 300 400 500

5

6

7

8

9

10

Wage Curve

Points For Jobs

WageRates

(InRs.)


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From above fig (example):

Grade I = 50-100points = Rs. 2,000- Rs. 5,500

Grade II = 100- 150 points =Rs. 2,800- Rs. 6,500

Grade III = 150 points-200 points = Rs. 5,800- Rs. 7,500


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Broadbanding

It means collapsing salary grades and ranges

into just a few wide levels or bands, each of

which contains a relatively wide range of jobs

and salary levels.


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Wage policy in India

Minimum wage

It is the wage which provides not only for bare sustenanceof life, but also for preservation of efficiency of worker.

Need based minimum wage-

Fair wage

Equal to the rate prevailing in the same trade and in theneighborhood, or equal to the predominant rate forsimilar work through out the country.

Living wage Higher than fair wage, provides for bare essential plus

frugal comforts.


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State Regulation of Wages

Employer

Collective Bargaining

Legislation Minimum Wages Act

Payment of Wages Act

Adjudication Machinery

Wage Boards

Pay Commissions


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Types of Fringe Benefits

Payment for Time

Not WorkedEmployee Security Safety & Health

Welfare

Recreational

Facilities

Old Age &

Retirement

Benefits

Hrs of

Work

Paid

Holidays

Shift

Premium

Holiday

Pay

Paid

Vacation

Retrenchment

Compensation

Lay off

Compensation

Safety Measures

Workmens

Compensation

Health Benefits

Canteens

Consumer

Societies

Credit

Societies

Housing

Legal Aid

Employee

Counseling

Welfare Orgns.

Holiday Homes

Educational

Facilities

Transportation

EducationalFacilities

Parties &

Picnics

Miscellaneous

Provident Fund

Deposit Linked

Insurance

Gratuity

Medical Benefits

Pension


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Compensation HRM 1

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