Compensation & Benefits

16MBAHR303
Mod.1
Introduction to compensation

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Meaning
Gary Dessler, comp means all forms of pay or
rewards going to employees and arising from
their employment
4 perspectives:
- Employer
- Employee
- Society
- Stockholder
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
 Forms of Pay
Comp- all forms of financial returns and
tangible services and benefits employees
receive as a part of an employment
relationship.

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Base wage (Basic)
Paid for work performed
Reflects value of ur work/skills
Ignores differences btn individual e/e
Wage/sal no much diff

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Merit Pay
Increments to base pay in recognition of past
work behaviour
May or may not have formal evaluation

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Cost of living adjustment
Like DA
Increases to everyone irrespective of
performance

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Incentives
Directly based on perf
Doesnt increase the base- re-earned each
period
Tries to influence future behavior unlike merit
pay thats rewards past behaviour
Can be given to indivi, team, buz unit or combi
Obj: bring down cost, increase perf, volume,
custo sats, revenues, ROIs, stk value etc
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
 Income protection
Legal requirements
Ex.: insurance, healthcare, retirement etc
Cheaper than e/e s can obtain them for
themselves.

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Work life balance
Prgms that help in integrating wk and life
responsibilities
Vacations
Financial planning activities
Telecommuting
Sabbaticals, work schedule flexibility
To ensure e/e are fully present at work

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Allowances
Housing
Conveyance
Food
Hostel
Uniform
Others..

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Non financial returns
Effects e/e behaviour substantially
Recognition
E/t security
Challenging work
Learning opportunities

These are part of the total returns much

broader than total compensation

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
 The Pay Model (vvv imp)
Framework for examining the current pay
systems.
3 building blocks:
- Compensation objectives
- Policies forming foundation of comp sys
- Techniques in comp sys
Now, refer the chart

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
 Objectives

Why design a pay system for an

organisation???

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Basic objectives as per the Pay
Model
Efficiency
Fairness
Compliance

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Efficiency
To improve perf
Increase the quality
Delight customers and stockholders
Control labour costs

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Fairness
Fundamental obj
To treat all employees fairly by recognising
their contribution and needs

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Compliance
Conforming to law
Globally and locally
Legally comply with rules and regulations

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Policy choices
Guidelines for managing the Pay to accomplish
the objectives
Internal alignment
External competitiveness
Employee contributions
Management of the pay system

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Internal alignment
Relates to pay rates both for employees doing
equal work and for those doing dissimilar
work
What is the pay for what job?
It affects the objectives- are the e/e paid
fairly? Complying to law? Also affects the
workforce capabilities and efficiency.
Basically a comparison among jobs & skill
levels inside a single orgtn.
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
 External competitiveness
Compare pay with competitors
How much do we wish to pay in comparison
to what other e/r s pay and also of what mix
we use? (mix- base, inc, stock, benefits etc)
Impacts both efficiency and fairness

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 E/e contributions
How much do you emphasise on merit/ perf?
Affects e/e attitudes and work behaviours
Usage of team-based pay and corporate profit
sharing plans by companies brings a sense of
belongingness amongst e/e.
Affects fairness

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Management
What is the policy in place to manage the pay
system?
Are right people getting the right pay?
Are the right objectives achieved in the right
way?
3Cs- Cost, communication and change

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Techniques
Techniques tie the policies to the objectives
Job analysis and evaluation
Market definition and surveys
Various incentive programs etc..

By: Ms. Divya Prabhu P., Asst. Prof.@ MITE

 Best Practices v/s Best Fit
The better the fit, the greater is the
competitive advantage. Few disagree..
On the contrary, a set of best pay practices
which are applied universally results in better
performance with any strategy.
Having a best pay practice makes an orgtn
gain superior e/es leading to competitive
advantage.
But the challenge is which are the best
practices???
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
Guess what this means..
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE
 Some relevant messages for LIFE..

Credits: FB
By: Ms. Divya Prabhu P., Asst. Prof.@ MITE