COMPENSATION

STRATEGIES IN
INDIA

PRESENTED BY-
ANITA KUMARI(06)
ANJALI RAI(07)
ANKITA BUCHASIA(08)
ANKITA KRISHNA(09)
COMPENSATION STRATEGY

The compensation strategy is derived from the HR

Strategy and it defines the position of the organization on
the job market, the level of the total cash, the main bonus
principles in the organization and rules for the base
salary setting.
ASPECTS OF
COMPENSATION
STRATEGY
I. Following tasks are performed-

•Model the changes from a proposed salary or compensation

reorganization, based on market values, to evaluate the cost of
moving the workforce up to market levels.

•Create new types of variable compensation to help motivate the

workforce, and evaluate the cost impact.

•Target special compensation plans for specific groups of employees,

such as executives, salespeople, or workers with mission-critical job
skills.
II. Following tasks are performed:

•Model compensation cost changes

based on forecasted workforce growth
and reduction.

•Establish a merit matrix or other rules for pay out of annual base
pay increases.

•Determine what types of performance goals or related pay out

rules we need for any base compensation or variable compensation
types in the compensation plan.

•Examine the compensation cost effects based on organizational

performance indicators, for periodic bonuses and so on.
•Set proposed compensation budgets for
departments or business units.

•Allocate compensation pools across

organizations, special classifications, groups, and individuals.

 Compensation Strategy Importance

•Manage the personnel expenses of the

organization

•Gives the certainty to the HR employees

and HR managers

•Acts as the basic document

MODELS OF COMPENSATION
STRATEGY
 POSITION BASED MODEL

Fixed pay model

Compensation based on attributes and

challenges of position

Based on grade structure and

designation

Motivation through high compensation

PITFALLS

Encourage a bureaucratic orientation.

Entails top-down decision making and

information flow

Costly and time consuming

May not reward desired behaviour

PERSON BASED MODEL
 Personal and professional attributes
necessary for for effective performance
 Based on individual’s skills, knowledge and
experience
 Pay for what employee is capable of
doing and not what he actually
performs
 Retain competent employees
 Self-efficacy
PITFALLS

 Very costly

 Topping-out

 Difficult to determine market

rates
PERFORMANCE BASED MODEL

 Objective:-

 To develop a Productive, Efficient, and Effective organization

to increase employee Motivation and Performance.

 To keep Employee engaged throughout their work as they

are rewarded based on the outcome of their work.
ESSENTIALS FOR EFFECTIVE PAY
 VISION- Organization must have a clear purpose for
establishing pay for performance programme.

 ALIGNMENT- Organization should consider that compensation level

should match with the level of performance desired or achieved.

 HOLISTIC APPROACH- Human Resource create competitive

advantage for their organization, as a result integrated compensation
strategy should be formulated.

 TOP MANAGEMENT COMMITMENT- The words and action of top

management is essential for success of pay for performance ,so that
people may not lose confidence and belief while at work.
PITFALLS

 Its difficult to successfully implement in

government organization.

 It induces the employees to manipulate the

compensation system, as only those aspects of the
job will be seen which can directly be rewarded,
instead of seeing the other equally valuable tasks.

 Inculcate a habit of looking at short- term goals for

making more money.

 Often they doubt against the fairness and sensitivity

of pay as they feel personal biasness.
CONT....
 Highly dependent upon having enough money to
fund incentives.

 The use of extrinsic motivation may

erode intrinsic motivation which
affects productivity.

 Undermines teamwork.
COMPENSATION STRATEGIES IN
INDIA

India maintains its Labour

cost advantage
India continues to maintain its labour cost
advantage relative to the US, with fixed
compensation levels for entry-level and
mid-career professionals ranging between
15% and 25% of US base salaries.
INDIA IS DIVERSE, SO ARE ITS
COMPENSATION PRACTICES

Just as India is a highly diverse nation-made up of

multiple languages, religions, ethnic groups, and
custom spread across a tremendous geographic
range- so too are its compensation practices
 Double digit fixed compensation increases
continue
 As overall economic growth moderates in India, fixed
compensation(salary) increase budgets are slowing down
as well.

 Increasingly, compensation professionals will need to

reconcile between specific cases where practices might
differ widely from macro trends.

 For ex-offering 25%annual increase to a group of key

employees in India, while others in the same location
receive 5% to 10% increases.
 CONCLUSION

Tackle work avoidance(position based model)

Inducing greater effort(performance based

model)

Performance based model best because it

controls not only the type but also rate at which
activities are performed.
THANKYO
U