Employee Compensation System

Compensation

• Nothing but the REMUNERATION package offered by the organization to attract the talented person for different position, such as

• For Dy.managers

• For Manager

• For Executive officer

• For lower level officer

• For an organization to attract and retain talent, it is of utmost importance that it is able to provide an attractive compensation package.

• Along with the brand value of the organization, for attracting top talent, a well designed compensation package plays a crucial role

Compensation system

• It is the backbone of HRM• It hold the real power to - attract - retain and - motivate Employees to give outstanding performance

The system may differ from company’s to company

Principles of compensation system

• According to Steven Applebaum of Concordia University, the following principles play’s vital role in determining the better compensation for better employee

market conditions

• If the market is good the companies are ready to pay more

Employee Characteristics

• Based on the

- education

- seniority

- qualifications

- experience

The employee must give preference for good compensation

Industry Characteristics

• Based on the status or standard of the company the wages may vary considerably.

• Ex- Software companies pay good packages when compare with manufacturing wage package

Job Characteristics

• Here the packages may vary according to

- mental requirements

- physical requirement

- skill requirement

- level of public contact

- the effort required to carry out the work

Employee behavior characteristics

• Here, the packages may vary based on

- performance

- absenteeism

- turnover

Problems

• Compensation is a critical issue for organisational effectiveness.

• Dissatisfaction in compensation system can cause number of HR related problems.

- poor employee performance - regular absenteeism - low employee turn over - poor employee involvement

problems

• Unless compensation system is effective, the other interventions such as

- development

- empowerment

- communication

- career planning

Will not produce any positive results for the organisation.

Models of Compensation

• From the above information it could be clearly understand that compensation package is ultimately plays very significant role for the organizational effectiveness as well as the employee effectiveness.

• It is the ultimate task of the HR to design the perfect compensation package for tackling the competitors.

Models of Compensation

• There are two important models of compensation

1. performance based compensation

2. fringe benefits

3. Gain Sharing

4. ESOP

performance based compensation

• It involves rewarding employees as per their performance or results achieved.

fringe benefits

• The fringe benefits have often been described as

- welfare Expenses

- other than wages

- social charges

Gain Sharing

• It is also known as

- production incentives,

- Profit Sharing

- Team Incentives

ESOP

• Employee stock ownership plan is a right granted to an employee to purchase a specified number of shares of stock of the company at a predetermined price during a specified period.

• How does a company go about designing their compensation package?

Compensation Benchmarking

• Compensation Benchmarking is a key element in designing a pay package.

Procedure

• identify similar organization existing in your city.

• check and compare with their salary structure with respect to specific grades and how the fitmentation part is done in their industry.

• Generally other company HR cannot give this info. Some Top officials in your industry or HR Head needs to tackle this.

• Survey for atleast 3 - 4 companies.

Procedure

• Like this you need to do for the 'N' number of positions you need to compare with your salary standards.

• If it is a deviation about 5 % you don’t have to worry about it. Anything above 10 % then a focus required on this.

• While doing the Survey one has to prepare a set of questionnaire and this needs to be circulated to the other companies and do the analysis.

• Also one has to focus on their attrition analysis and then only take a final call on this.