Compensation Mgmt

R.SURESH

Concept of Compensation
Whats
Why

Compensation ?

is it important ?
Strategies

Compensation

Whats Compensation
It

does not mean the same to everyone. For some its a return in an exchange between their employer and themselves For some its a measure of justice For some its an entitlement, or Reward. For some its their return on their investments and contributions

Compensation Contd..
In

English Compensation means something that counterbalances, offsets or makes up for something else. New economic Environment We can conclude Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

Organisation as a Network of returns

1.

Transactional Returns or Total compensation Cash compensation (Base,COL, incentives etc) and Benefits(Income protection, worklife focus,Allowances etc) Relational Returns Recognition and status, employment security, learning oportunities, challenging work etc

2.

Some more definitions

Compensation

may be defined as money received in performance of work and many kinds of services and benefits that organisation provides to their employees.

Objectives of compensation

To recruit and retain qualified employees To increase morale To motivate employees for higher productivity To determine basic wages and salary admn To support,communicate and reinforce an orgs culture ,value and competitive strategy Comply with legal requirement To Reward exceptional performance

Total compensation package

Direct

compensation compensation

Indirect Non

monetary compensation

Direct compensation

Direct compensation includes money,popularly basic salary or wage,where the individual is entitled for his job ,overtime, bonus on performance,profit sharing etc Base Pay It is the first component of compensation. It is determined thru job evaluation ie according to the level of skill ,effort and responsibilty required to perform the job and severity of the working conditions

Direct compensation
Bonus It is mainly a gift given occasionally to reward exceptional performance or for special occasions. As per dictionary bonus is a boon or gift over and above what is normally due as remuneration to the receiver and which is therefore something wholly to be good. Egs Production Bonus, Bonus as an implied contract between the parties, customary bonus like festival bonus, and Profit Bonus Profit bonus has been given statutory recognition in the payment of Bonus Act.

Direct compensation
Longterm incentives or stock option its defined as a right to buy a piece of business,which may be given as a reward for long and excellent service. Perks is a major source of income In additional to normal perks like PF, Gratuity, employees also enjoy perks such as vacation, travel, membership in club, furnished house ,car fuel, telephone bills etc.

Indirect compensation
Retirement

programs Health insurance Subsidized housing Magazine subscriptions Moving expenses Paid leaves

Non monetary
These

include challenging job responsibilites,competent supervision, offer supportive leadership and mgmt and comfortable working conditions

Compensation Strategies
Whats

Compensation Strategy Philosophies of compensation Sector wise compensation Industry Compensation benchmarks Theories on wages Laws related to Compensation

Compensation

Employee compensation is of one the major determinants of employee satisfaction in an organization. The compensation policy and the reward system of an organization are viewed by the employees as indicators of the managements attitude and concern for them. It is not just the compensation in toto, but its fairness as perceived by the employees that determines the success of a compensation management system.

Issues in wage determination

Organisations

Margins Labour Market Demand and Supply Cost of living Consumer Price Index Society Social considerations, social philosophies etc Economy Capitalism, Backlash against capitalism

Compensation
Very

important for the management to design and implement its compensation system with utmost care and tact. A good compensation system should be able to attract and retain employees, give them a fair deal, keep the organization competitive and motivate employees to perform their best.

Compensation

Work concept - Traditionally, pay scales in companies reflected the importance of the work and the responsibility level. Worth Concept - Today organizations try more to assess the worth of an individual in terms of his performance and contribution to the organization. Growing demands of the workforce and the constant challenges in the business environment, organization strive for a systematic, constant, and accurate manner to determine. It also helps in estimating the basic pay for each job in accordance with the importance of the job in the organizational hierarchy.

Relevant Legislations in Wages

The The

Payment of Wages Act 1936 Minimum Wages Act 1948

Incentives
Individual

incentive plan Group Incentive plan Organisations wide incentive plan Payment by results to indirect workers

How to make incentives successful

Proper

climate Simple to understand and implement Equitable Flexible Not be very costly Not be detrimental to health of employees Transparent and open to discussion

Job Evaluation Programmes

What

do they mean ?

Issues

and Problems in designing a Job Evaluation Program to implement a successful Job Evaluation Program

How

Wage Boards and Collective Bargaining

Whats

collective Barganing Its Benefits

Boothalingam Commitee

Ravi Bhoothalingam serves as President of The Oberoi Group and was responsible for the operations of the Group worldwide. Mr. Bhoothalingam is a Specialist in the dynamic field of Human Resource Development having spent a significant part of his career in this area. Mr. Bhoothalingam served as Head of Personnel at BAT PLC, Managing Director of VST Industries Ltd. Mr. Bhoothalingam served as President of the Employers' Federation of Southern India, member of the government ...

Profile of Mr. B

Mr. Bhoothalingam has been an Independent Director of Dr. Reddy's Laboratories Ltd. since 2000. He serves as a Director of ITC Limited. He also serves as Director of Nicco Internet Ventures Limited and as an Independent Director of Sona Koyo Steering Systems Limited. Mr. Bhoothalingam serves as Member of the Advisory Board of Genesis Public Relations Pvt. Ltd. and Genesis Burson-Marsteller. He holds a Bachelor of Science degree in Physics from St. Stephens College, Delhi and a Master of Experimental Psychology degree from Gonville and Caius College, Cambridge University. .

Recommendations

It would not be possible for us to do away with wage differentials today altogether. Depending upon the availability of skills the wage differentials will vary Wage drift is nothing but wage differentials BC examined this problem reasonable wage differentials between different kinds of jobs. Narrow down the differentials BC realised the difficulties in rationalisation across If collective bargaining is accepted as the mechanism that should evolve overtime to determine wages the it would include wage differentials for skills,output and performance according to BC

Boothalingam commitee
BC

gave lots of suggestions on wage ratios The difference between highest and lowest is to be 1 to 10. Suggested the National Pay Commission

THANK YOU