Compensation Management

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COMPENSATION/REWARD SYSTEM

Compensation/Reward system

• Compensation is a systematic approach to

providing monetary value to employees in

exchange for work performed

• Different types of compensation include:

• Base Pay

• Overtime Pay

• Bonus, Profit Sharing

• Travel/Meal/Housing Allowance

• Benefits including: dental, insurance, medical,

vacation, leaves, retirement, taxes...

MAJOR PHASES OF COMPENSATION MANAGEMENT

Phase IIdentify & study jobs

Phase IIInternal equity

Phase IIIExternal Equity

Phase IVMatching Internal& External worth

Job evaluation

Job ranking

Job analysis

Point system

Professional associationDept.of labour

Wage & salary surveys

Job grading

Employer association

Factor comparison

Self-conducted surveys

Rate range for each job

Labour market worthMatchJob evaluation

Pricing jobs

Job evaluation MatchJob evaluation Labour market worthMatchJob evaluation

Job evaluation

Job analysis

Job ranking

Job evaluation

Job analysis

Job gradingJob ranking

Job evaluation

Job analysis

Factor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Dept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Employer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Self-conducted surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Pricing jobs

Self-conducted surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Job evaluation

Pricing jobs

Self-conducted surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

MatchJob evaluation

Pricing jobs

Self-conducted surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Labour market worthMatchJob evaluation

Pricing jobs

Self-conducted surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Rate range for each job

Labour market worthMatchJob evaluation

Pricing jobs

Self-conducted surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Point systemFactor comparisonJob gradingJob ranking

Job evaluation

Job analysis

Job evaluation

Pricing jobs

MatchJob evaluation

Pricing jobs

Labour market worthMatchJob evaluation

Pricing jobs

Rate range for each job

Labour market worthMatchJob evaluation

Pricing jobs

Job evaluation

Pricing jobs

MatchJob evaluation

Pricing jobs

Labour market worthMatchJob evaluation

Pricing jobs

Rate range for each job

Labour market worthMatchJob evaluation

Pricing jobs

Dept.of labour

Wage & salary surveys

Employer associationDept.of labour

Wage & salary surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Self-conducted surveys

Professional associationEmployer associationDept.of labour

Wage & salary surveys

Wage and salary determination

Job Descriptions

Job Analysis

Job Evaluation

Pay Structures (with each grade containing a

minimum salary/wage)

Salary Surveys

Policies and Regulations

Factors influencing wage and salary

1. External Factors Demand and supply Cost of living Trade unions bargaining power Government legislation Prevailing market rates

2. Internal Factors Ability to pay Job requirements Managerial strategy The employee

Equity compensation

Equity compensation is non-cash compensation

that represents an ownership interest in the

company

The two most common forms of equity

compensation are

Stock options (A stock option is a right to purchase shares of a company’s stock at a predetermined price)

Restricted stock (repurchase right that allows the company to repurchase a portion of the founder’s stock if his or her employment is terminated by the company for cause, or if the founder voluntarily resigns within a certain period of time)

Dearness allowance (D.A.) is part of a person's salary. D.A. is

calculated as a percent of the basic salary

Employee benefits (fringe benefits, perks) are various non-

wage compensations provided to employees in addition to

their normal wage and salaries

Fringe benefits can also include but are not limited to:

insurance (health, life etc.), retirement benefits, sick leave,

vacation (paid and non-paid), profit sharing and other

specialized benefits

The term perks is often used to refer to those

benefits of a more discretionary (optional)

nature. Often, perks are given to employees who

are doing notably well and/or have seniority

Common perks are company cars, hotel stays,

free refreshments, leisure activities on work

time (Ex. golf ), allowances for lunch etc.

Managerial compensation

Managerial compensation is not based on individual performance measure but on organizational performance

It cannot be compared with wage and salary scheme meant for other employees in the organization

Remuneration received depends on employer’s ability to pay and employees bargaining strength

It is reviewed annually

Social security

Social security is that security which the society furnishes through appropriate organization against certain risks or contingencies to which its members are exposed

The contingencies which may impair a persons ability to support himself and his family may include sickness, old age, invalidity, unemployment, death etc.

Social security in India

Workmen’s compensation Act, 1923

The Employee State Insurance Act, 1948

The Maternity Benefit act, 1961

The employee’s provident fund act, 1952

The Payment of gratuity act, 1972

Group Life Insurance