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Employee
Compensation
Wages
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COMPENSATION
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Definition of Compensation:
According to HRM, compensation is as money andother benefits received by an employee for providing
services to his employer.
Compensation is something value given in exchange forsomething else.
Example of compensation:
The money a company pays to its employee to do work .
When a person gets into a car accident and injures
someone, the money he pays to the injured victim for his
losses.
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Nature of Compensation:
Nature ofCompensation
Return
System ofRewarding
OrganizationalTool
ManagementInstrument
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Objectives of Compensation:
Objectives
Equity
Retain the besttalent
Reward newideas &
behaviours
CostControl
Compliance
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Other Objectives
To recruit & retain qualifiedemployees
To increase or maintain morale
To determine basic wage
& salary
To reward for job performance
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Need of Compensation:
Compensation
Motivation
NeedSatisfaction
EmployeeRetention
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Evolution of Strategic Compensation:
Today the compensation systems are designed, alignedto the business goals & strategies. The employees are
expected to work and their own decisions. Authority is
being delegated. Employees feel secured and valued
in the organisation. Organisations offer monetary &
non-monetary benefits to attract and retain the best
talents in the competitive environment.
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Principles of Compensation:
Principles
of
Compensation
EquityConsiderations
Non-Discriminatory
PerformanceOrientation
Simplicity &
Flexibility
Legal
Compliance
Ability to pay
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Components of Compensation:
Components
Direct Compensation
Non-MonetaryCompensation
IndirectCompensation
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Direct Compensation:-
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Indirect Compensation:-
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Non-Monetary
Compensation:-Promotes social relationship with co-
workers.
Allocate sufficient resources to perform
work assignments.
Offer supportive leadership &
management.
Enhance physiological health, intellectualgrowth.
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Levels of Compensation:
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Factors influencing
Compensation:
Internal Factors
Ability to pay
Productivity of Labour
Job Need / Requirement
Government Policy
Good Will of the Company
External Factors
Labour Market
Bargaining Power
Cost of Living
Condition of Product
Market
Comparative Wages
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Conclusion:
We can say that good compensation
can increase the productivity of an
organisation because it provides various
rewards, bonus, schemes etc. & its
compulsory for every organisation.
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WAGES
SALARIES
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Wage & Salary:
Wages:
A wage is monetary compensation (or) remuneration
paid by an employer to an employee in exchange for
work done at an hourly or daily rate.
Salaries:
Salary refers to how much you get paid every year.
Salary earners rarely have to punch a time clock, or keep
an accurate account of their hours, because they get paidfor performance rather than by the hour. Salaried
workers are much more likely to have paid sick days and
paid vacations, and are not docked pay for being late or
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Purpose of Wage & Salary:
Attracting talented resources
Financial Management
Legal Requirements
Retaining & motivating employees
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Difference between Wage & Salary:
Wages Salaries
Wage earners are paid by
the hourly/daily basis
Salary earners are paid by
the yearly basis
Wage earners often have to
give up pay for time off
Salary earners usually
receive paid time when they
are not working.
Wage earners get paid more
for working more than 40
hours per week
Salaries are often calculated
as packages
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Types of Wages:
Wages are broadly based on the needs ofthe workers, capacity of the employer to
pay, and the general economic conditions
prevailing in a country.Wages
Subsistence
Wages
Minimum
WagesFair Wages
LivingWages
Real Wages
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Subsistence Wages: The wage that
can meet only to bare physical needs
of a worker and his family is called
subsistence wage.
Minimum Wages:Minimum wage is the wage that
is able to provide not only for
bare physical needs but also
for preservation of efficiencyof worker plus some measure
of education, health and other things.
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Living Wages: "A living
wage is one which should
enable the earner to provide
for himself and his family
not only the bare essentials
of food, clothing and shelterbut a measure of frugal
comfort including education for his children, protection
against ill-health, requirements of essential social needs
and a measure of insurance against the more important
misfortunes including old age.
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Fair Wages: Fair wages is an adjustable step that
moves up according to the capacity of
the industry to pay, and the prevailingrates of wages in the area of industry.
Real Wages: Real wage means that the total amount of
things that this can buy, is equal to real wage. Real wages
are generally taken to be money wages adjusted for
Variations in value of money:
Wr =Wn / PgWhere: Wr =Real Wages
Wn=Nominal or Money Wages
Pg =General Price Level
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Wage as a Motivator:
Motivation
AffiliationMotivation PerformanceMotivation
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Methods of Wage Fixation:
Wages and Salary incomes in India are fixed
through several institutions , those are:
Collective bargaining
Industrial wage bound
Govt. appointed pay commissions
Adjudication by courts & tribunals
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Collective Bargaining:
Collective bargaining relates to those
arrangements under which wages and
conditions of employments are
generally decided by agreements negotiated between
the parties.
Industrial Wage Boards:a) Statutory wage board: Statutory wage board means a body set up
by law or with legal authority to establish minimum wages and
other standards of employment which are then legally enforceable
in particular trade or industry to which boards decision relate.
b)Tripartite wage board: Tripartite wage board means a voluntary
negotiating body set up by discussions between organized
employers, workers and govt. to regulate wages, working hours
and related conditions of employment.
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Government Appointed Pay Commissions:
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Central Pay
Commission
Date of
Appointment
Date of
Submission of
Report
Related With
1st May 1946 May 1946 Living Wages
2nd August 1957 August 1959 Salaries have to
be determined
3rd April 1970 March 1973 Pay Structure
4th June 1983 May 1986 Examine Structure
of central govt.
5th April 1994 January 1997 Restricting Pay
Scale
6th October 2006 March 2008
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Adjudication by Courts & Tribunals:
Courts and Tribunals were primarily
intended to deal with settlement of
industrial disputes. Numerous wage
disputes in many industries have been referred
for adjudication to labour courts and tribunals. Theawards given by these authorities not only helped in
formulation of a body of principles governing wage
fixation but laid foundation for present wage structure
in many of major industries.
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Principles of Wages & Salary
Administration:
Wage policy should be developed keeping in view theinterests of the employer, the employees, the
consumers and the community
Wage policy should be stated clearly in writing to ens
ure uniform andconsistentapplication.
Wage and salary administration should be consistent
with the overall plans of the company. Compensation
planning should be an integral part of the financial
planning.
Wage and salary plans should be sufficiently flexible
or responsive to changes internal and external
conditions of the organization.
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Factors influencing Wage &
Salary Determination:
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Internal Factors
Ability to pay
Job Requirements
Management Strategy
Employee
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External Factors
Demand & Supply
Cost of Living
Trade Unions Barriers
Power
Government Legislation
Psychological & Social
Economy
Technological Development
Prevailing Market Rates