Compensation Structure

Salary Structure
Salaries in line with market rates Provide internal equity in grading and maintain competitive rates Consider employee advancement opportunities and motivational aspects
Graded salary structures Salary progression curves

Graded Salary Structures

Defines minimum and maximum range Features
All jobs are allocated into a salary grade within the structure Each salary grade should consist of salary range or grade Increase in the cost of living or in the market rate are taken care

Graded Salary Structures: Feature

The salary grade should be wide enough The differential should be maintained between the mid points of each salary grades There can be overlap between salary grades Progression within a grade depends on the performance of an individual The no. of salary grades will depend upon the no. of distinct levels of job in the hierarchy

Example: Pay Grade

Managerial and professional: 3500-3006500 Technical/supervisory: 3000-250-5500 Administrative and Clerical: 1800-15003000-200-5800 Manual : 1800-100-2300-150-3050

Make-up of a salary Grade

The learning zone The qualified zone The premium zone

Salary Progression Curves

The salary ranges are divided into defines zones There should be incremental systems merit/experience

Incremental Systems
Rigid incremental systems Flexible incremental systems Semi-flexible incremental systems

Pay Structure in Practice

Managerial and professional Technical/supervisory Administrative and Clerical Manual

Pay Structure in Practice

Basic Pay:
The degree of skill The strain of work The experience involved The training required The responsibilities undertaken The mental and physical requirements The disagreeableness of the task The hazard attendant on the work The fatigue involved

Pay Structure in Practice

Basic Pay: the basis of differentials
Interpersonal differentials Inter-occupational differentials Inter-area differentials Inter-firm differentials

Pay Structure in Practice

Dearness Allowance (DA)
allowance paid to enable employees to face the increasing dearness of essential commodities. Also called as COLA

Pay Structure in Practice

Allowances
Attendance Books Car Cash Computer Conveyance Driver Dust Education Family-planning Graduate Leave travel Medical Night duty

Allowances
Tiffin Strain Special Shift Paternity Uniform Telephone Heat Lunch Pension PF Relocation servent

Pay Structure in Practice

Overtime Payment
Virtually all hourly (nonexempt) employees must receive overtime compensation for working:
More than 40 hours per week More than 8 hours per day

Salaried employees do not receive overtime pay.

Designing Pay Ranges and Bands

Ranges
Maximum Maximum

Maximum

Salary Rs
Maximum Minimum

Minimum

Pay Policy Line

Minimum

Minimum

Grades Pay Structure

Designing Pay Ranges and Bands

Bands

Senior Professionals Lead Professionals Professionals Associates

Variable Compensation
Variable pay is countercyclical Employee goals and organizational goals Motivated Employees Bonus/Incentive Plans

Incentive Plans

Individual Incentive Plans

Straight Piecework An incentive plan under which employees receive a certain rate for each unit produced. Differential Piece Rate production exceeds the standard amount of output Ex. Standard o/p = 10; rate per piece = re.1 Case 1: Out put 8; Earnings = 10X1 = 10 Case 2:Output 12hrs; Earnings = 10X1= 10 DPR Earnings = 12X1= 12

Individual Incentive Plans (contd)

Standard Hour Plan
An incentive plan that sets pay rates based on the completion of a job in a predetermined standard time. Bonus: Halsey System Total Earnings =time taken * hourly rate + bonus ( bonus 50%of time saved). Rowan System

Individual Incentive Plans (contd)

Merit Pay Program (Merit Raise)
Links an increase in base pay to how successfully an employee achieved some objective performance standard. Done on individual performance standards

Individual Incentive Plans (contd)

Lump-Sum Merit Program
Program under which employees receive a year-end merit payment, which is not added to base pay. Advantages:
Provides a clear link between pay and performance.

Individual Incentive Plans (contd)

Awards
Often used to recognize productivity gains, special contributions or achievements, and service to the organization.

Non-cash Incentive Awards

Are most effective as motivators when the award is combined with a meaningful employee recognition program.

Group & team Incentive Plans

Team Incentive Plans

Compensation plans where all team members receive an incentive bonus payment when production or service standards are met or exceeded.

Group Incentive Plans (contd)

Gain sharing Plans
Programs under which both employees and the organization share the financial gains according to a predetermined formula that reflects improved productivity and profitability. 5-6% of the employee base salary

Improshare (Improved productivity through sharing)

Based on overall productivity of the work team. Seen as a measure of the total ,finished products. Both production and non production employees are given an incentive. The employee and company each receive a gain of 50% of improvement.

Enterprise Incentive Plans

Profit Sharing
Any procedure by which an employer pays, or makes available to all regular employees, in addition to their base pay, current or deferred sums based upon the profits of the enterprise.

Types of profit sharing plans:

Current distribution plans (cash plans): profit sharing paid as a bonus in the form of cash or shares of the companys stock Deferred payout plans: profit sharing paid as a bonus into a trust fund to be distributed to employees at some time in the future (such as when the employee retires, becomes disabled, or dies)

Enterprise Incentive Plans (contd)

Stock Options
Granting employees the right to purchase a specific number of shares of the companys stock at a guaranteed price (the option price) during a designated time period. The value of an option is subject to stock market conditions at the time that option is exercised.

Enterprise Incentive Plans (contd)

Employee Stock Ownership Plans (ESOPs) Stock plans in which an organization contributes shares of its stock to an established trust for the purpose of stock purchases by its employees.

Payroll Management
Gross pay Deductions Net pay

Company Name Payslip for the Month August-2012 Company LOGO

Total Working Days 31 Employee Code: Days Present 31.0 PF No.: Paid Leave 0.0 UP/32082/288 LWP 0.0 Bank A/c: Total days Payable 31.0 0200104000114691

123 ABC
Earnings Regula r Arrea r 0.0 0.0 0.0 0.0 0.0

Employee Name:

Designation:

Deptt.:

Total 19500. 0 19500. 0 5850.0 300.0 2500.0

Total Earnings Regular

Deductions Arrear 0.0 0.0 Total 4680.0 4000.0 Total Deductions

Basic D.A. H.R.A. CITY ALL S.F.ALL.

19500. 0 19500. 0 5850.0 300.0 2500.0

P.F INCOME TAX

Total: 8680.0

4680.0 4000.0

B & P ALL.
CONVE ALL. ACADEMIC GRADE PAY
Total: 62650.0 Net payable: 53970.0

2500.0
5000.0 7500.0

0.0
0.0 0.0

2500.0
5000.0 7500.0

In Words: FIFTY THREE THOUSAND NINE HUNDRED SEVENTY ONLY