Ce diaporama a bien été signalé.
Le téléchargement de votre SlideShare est en cours. ×

Compensation Management (1).pdf

Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Publicité
Chargement dans…3
×

Consultez-les par la suite

1 sur 27 Publicité

Plus De Contenu Connexe

Plus récents (20)

Publicité

Compensation Management (1).pdf

  1. 1. COMPENSATION MANAGEMENT Dr Shikha Rana
  2. 2. Concept Of Compensation Compensation refers to a wide range of financial and non financial rewards to employees for their services rendered to the organization. It is paid in the form of wages, salaries and employee benefits such as paid vacations, insurance maternity leave, free travel facility, retirement benefits etc., Monetary payments are a direct form of compensating the employees and have a great impact in motivating employees. Compensation includes three aspects such as Pay, Incentives & Benefits. Pay Refers to the basic pay and salaries employees normally receive (BASE PAY). Incentives includes bonuses, commissions and profit sharing plans (Variable pay) Benefits include insurance, medical, recreational, retirement etc (Benefits)
  3. 3. The system of compensation should be so designed that it achieves the following objectives: To establish a fair equitable remuneration The capable employees are attracted towards the organization The employees are motivated for better performance  The employees do not leave the employer frequently
  4. 4. 3P Compensation Model 1) Pay for Person 2) Pay for Position 3) Pay for Performance
  5. 5. Modern Trends in compensation • Broad Banding • Comparative Pricing • Cafetaria Approach • Skill-Based Approach • Variable pay plans
  6. 6. Components Of Compensation Basic Wages/Salaries Basic wages / salaries refer to the cash component of the wage structure based on which other elements of compensation may be structured. It is normally a fixed amount which is subject to changes based on annual increments or subject to periodical pay hikes. Wages represent hourly rates of pay, and salary refers to the monthly rate of pay, irrespective of the number of hours put in by the employee. Wages and salaries are subject to the annual increments. They differ from employee to employee, and depend upon the nature of job, seniority, and merit.
  7. 7. Dearness Allowance The payment of dearness allowance facilitates employees and workers to face the price increase or inflation of prices of goods and services consumed by him. The onslaught of price increase has a major bearing on the living conditions of the labour. The payment of dearness allowance, which may be a fixed percentage on the basic wage, enables the employees to face the increasing prices.
  8. 8. Incentives Incentives are paid in addition to wages and salaries and are also called ‘payments by results’. Incentives depend upon productivity, sales, profit, or cost reduction efforts. There are: (a) Individual incentive schemes, and (b) Group incentive programmes. Individual incentives are applicable to specific employee performance. Where a given task demands group efforts for completion, incentives are paid to the group as a whole. The amount is later divided among group members on an equitable basis.
  9. 9. Perquisites/Perks/Fringe Benefits: These are allowed to executive and include company car, club membership,Gym Membership paid holidays, furnished house, stock option scheme and the like. Perquisites are offered to retain competent executives.
  10. 10. Bonus The bonus can be paid in different ways. It can be fixed percentage on the basic wage paid annually or in proportion to the profitability. The Government also prescribes a minimum statutory bonus for all employees and workers.
  11. 11. Commissions Commission to managers and employees may be based on the sales revenue or profits of the company. It is always a fixed percentage on the target achieved. For taxation purposes, commission is again a taxable component of compensation.
  12. 12. Non-Monetary Benefits These benefits give psychological satisfaction to employees even when financial benefit is not available. Such benefits are: (a) Recognition of merit through certificate, etc. (b) Offering challenging job responsibilities, (c) Promoting growth prospects, (d) Comfortable working conditions, (e) Competent supervision, and (f) Job sharing and flexi-time.
  13. 13. Mode of Determining Compensation Job Evaluation The core purpose of Job Evaluation is to determine the relative worth of a particular job of an organization. Following Methods are used to evaluate the Job: Non-Quantitative Methods 1) Ranking 2) Grading Quantitative Methods 1) Point Rating 2) Factor Comparison
  14. 14. RANKING METHOD Under this system, all the jobs are arranged or ranked in the order of importance from the simplest to the hardest, or in the reverse order each successive job being higher or lower than the previous one in the sequence
  15. 15. GRADING METHOD Under the classification method, the number of grades is first decided upon, and the factors corresponding to these grades are then determined. Facts about jobs are collected and are matched with the grades which have been established.
  16. 16. • Point-Rating Method: Under this method, each job’s key factor is identified and then the subfactors are determined. These sub-factors are then assigned the points by its importance.For example, the key factor to perform a job is skills, and then it can be further classified into sub-factors such as training required, communication skills, social skills, persuasion skills, etc.
  17. 17. • Factor-Comparison Method: Under this method, the job is evaluated on the basis of key jobs, and the ranks are given on the basis of a series of factors Viz. Mental effort, physical effort, skills required supervisory responsibilities, working conditions, and other relevant factors. Thus, each job is compared against each other on this basis and is ranked accordingly
  18. 18. Methods of wage payment The methods of wage payment are as follows: • Time Rate System • Piece Rate System Time Rate System • Under this system, the amount of remuneration or the total wages outstanding to the workers depends on the time for which he is employed. This is a simple and common method of wage payment. In this method, the workman is paid an hourly, daily, monthly or yearly rate of wages. • Thus, the worker is paid on the basis of time but not on his/her performance or unit of output. A number of wages payable to a workman under this method is to be calculated as follows: • Total wages = Actual time took x time rate • or, Total wages = Total hours worked x Wages rate per hour. Piece Rate System • In this method, wages are paid to the employees after completion of work. Under it, a worker is paid on the basis of output not the time taken by him. This is one of the simplest and most commonly used systems of wage payment. In this system, the wage rate is expressed in terms of per unit of output, per job or per work-order. A number of wages payable to a workman under this method is to be calculated as follows: • Total wages = Total output x Rate per Unit of Output.
  19. 19. Factors affecting Compensation Decisions • Ability to Pay • Supply & Demand Factor • Prevailing Wages • Cost of Living • Job Requirements • Bargaining Power • State Regulations • Fringe Benefits • Productivity
  20. 20. Issues in Compensation Decisions 1) Internal Equity 2) External Equity
  21. 21. Internal Equity There should be a proper relationship between the wages and salaries of various positions within the enterprise. For ex. If the salary of a foreman is lower than that of his subordinate, the foreman is not being paid fairly. An Internal Pay structure is being designed by defining 3 things: 1) No of levels in the organizations 2) Pay difference among Levels 3) Individual Pay determination There are four basic approaches to determine individual pay: 1) Single Rate Approach (Simple Office jobs) 2) Merit Approach (Performance & Output based) 3) Automatic Approach (Amount and period are predetermined) 4) Informal Approach (Without Formal Guidelines)
  22. 22. External Competitiveness • Comparison of the present company wage rates with those being paid in the community for comparable jobs. • The wages and salaries of workers must be in alignment with wages and salaries of other organizations . • To achieve external alignment the management must execute a wage survey to understand the average rates of its key jobs are prevailing in the community . After this it may fix its own wage level at this average level or may decide to fix it at higher or lower level.
  23. 23. Management may decide to pay above average wage level in following cases: 1) When qualified personnel are in short supply 2) When it want to gain reputation of good employer in the community 3) Union Pressure for high wages 4) When wages are linked to productivity which is rising 5) When cost of living is going up
  24. 24. Below Average Rates may be decided in following cases 1) There is an abundance of Labour 2) Enterprise is incurring loses 3) Cost of Living is going down 4) Enterprise pay substantial fringe benefits 5) When wages linked to productivity which is falling

×