HRM611

Compensation Policy
Spring Semester, 2017
Week 3
Todays Lecture outline
Define & discuss
Compensation Management (CM)
Objectives of CM
Principles of CM
Factors affecting CM
o External factors
Equal Employment Opportunity (EEO)
Bangladesh Constitution
Rules & Regulations related to EEO
o Internal factors
 Defining Compensation
.The sum total of all forms of
payments or rewards provided to
employees for performing tasks to
achieve organizational objectives.
Is the process of providing
adequate, equitable & fair
remuneration to the employees. It is
what employees receive in exchange
for their contribution to the
organization.
It is a comprehensive term which
 Defining Compensation
Compensation is a systematic approach
to providing monetary value to employees
in exchange for work performed.
Compensation may achieve several
purposes assisting in recruitment, job
performed & job satisfaction.
Term compensation administration or
wage & salary administration denotes the
process of managing a company's
compensation program.
Goals of compensation administration are
to design cost effective pay structure that
 Defining Compensation
Money received in performance of
work plus many kinds of services &
benefits that organization provides to
their employees.
May be classified into base or primary
compensation and supplementary
compensation.
Primary compensation refers to basic
pay in form of wages & salary. It is fixed
& non incentive pay on the basis of time
expanded in job.

Objectives of CM
To establish fair & equitable
compensation offering similar pay
for similar work.
To attract competent & qualified
personnel.
To retain present employee by
keeping wage levels in tune with
competitive units.
Objectives of CM
To keep labour & administrative
cost in line with the ability of
organization to pay.
To improve morale & motivation
of employees & to improve union
management relation.
To project good image of
company & to comply with legal
 Principles of CM
Compensation policy should be
developed keeping in view the interest
of all concerned parties that is
employer, employee, consumers,
society.
Compensation policy should be flexible
or responsive to internal & external
conditions of organization.
Compensation policy must be
consistent with overall organizational
plans & programs.
Compensation policy should be in
 Principles of CM
Compensation policy should be
responsive to changing local &
national conditions.
Workers should be associated in
formulation & implementation of
Compensation policy.
Adequate database & organizational
set up should be developed for
compensation determination &
administration.

Factors affecting CM
External factors
1. Demand & supply: Labour rates in
markets depends upon the demand &
supply of labour. When the demand for
labour is more & supply is less then wages
provided to workers will be more on
contrary when supply is more & demand is
less then wages rates will automatically
come down.
2. Cost of living: Wage rates are directly
influenced by cost of living of a place.
Workers will accept a wage which may
 Factors affecting CM
External factors
3. Trade union bargaining power:
Wage & salaries are influenced by
bargaining power of trade union. Stronger
the trade union higher will be the wage
rates. The strength of trade union is judged
by its members, financial position & type of
leadership.
4. Prevailing market rates: Wage rates
paid in the industry or firm will form a
basis for fixing wage rate. If the company
pays low wage rate compare to its
Factors affecting CM
External factors
5. psychological & social factors: Level
of compensation is perceived as a
measure of success in life.
Management should take into
consideration the psychological needs
of employee while fixing the wage
rates so that employee take pride at
their work.
6. Economy: Refers to economic
conditions prevailing in country, e.g.
recession, deflation
 Factors affecting CM
External factors
7. Technological development: Increased
technological development at faster rate has
lead to increase demand for skilled workforce in
organization. High technology implemented in
company requires skilled workers which leads to
payment of high salary for workers in company.
8. Government legislation (Statutory
requirements): To improve the working
conditions of workers government may pass
legislation for fixing minimum wages for
workers. This may ensure them minimum level
of living. In emerging/developing countries the
workers bargaining power is less, to protect
Equal Employment Opportunity (EEO)

Equal Employment
Opportunity is the policy of
providing uniform, standardised
access to employment, training
and promotion to all individuals
regardless of age, colour, sex,
disability, religion or ethnic
background.
Discrimination in work
place
Example:
Giving men high rates of pay even
thought woman do the same amount
of work in the job, or making sexiest
remarks to women in work places.
Preferring a plain land Bangladeshi
over a tribal because of prejudices.
Deciding not to interviewing a person
with a Christian sounding name.
Equality / inequality
Equality is having equal
opportunities and rights. It is being
treated fairly. It also means being
able and supported to reach your
potential.
Inequality is when people arent
given equal opportunities and
rights. They are treated unfairly
and experience discrimination.
Negative consequences of
inequality
When we experience
discrimination & are not treated
equally it can lead to many
negative consequences, for
example:
Unhappiness
Under achievement
Low self-confidence
Poor relationships
Equal Opportunities
Equal Pay
Sex Discrimination
Employment Equality (sex,
religion, belief)
Race Relations
Disability Discrimination
Compensation Policy & EEO
A main function of the HR
department is to ensure the
organisation is fully aware of any
relevant legislation.
All policies & procedures should
be in line with current legislation.
Legislation is continually being
updated which makes this an on-
 Statistical Profile of
Women
Women constitute of the
worlds population, 2/3 of the
worlds labour force but get
1/10 of the worlds income &
th

1% of the worlds Wealth.

Government interventions to
secure minimal standards for:
Just pay: through national minimum
wage.
Working time: maximum of 48 hours
working week.
The right to employee
participation: the entitlement of
workers to participate in the running
of their organization ( statutory trade
union recognition).
Equal opportunities for all employees.
Policy commitments on EEO
issues
The Constitution of Bangladesh
National Policy for the Advancement of
Women, 2011
National Action Plan (NAP) for womens
Advancement
National Strategy for Accelerated Poverty
Reduction (NSAPR)
Convention on Elimination of all forms of
Discrimination Against Women (CEDAW)
Beijing Platform for Action (BPFA)
Millennium Development Goals (MDGs)
 Bangladesh
Constitution
Article 10: Steps shall be taken
to ensure participation of
women in all spheres of national
life.
Article 19: The state shall
endeavour to ensure equality of
opportunity to all citizens.
Bangladesh Constitution
PART II: FUNDAMENTAL PRINCIPLES OF
STATE POLICY
Work as a right and duty:
Article 20. (1) Work is a right, a duty and a matter
of honour for every citizen who is capable of
working, and everyone shall be paid for his
work on the basis of the principle from each
according to his abilities, to each according to his
work.
(2) The State shall endeavour to create conditions
in which, as a general principle, persons shall not
be able to enjoy unearned incomes, and in which
human labour in every form, intellectual and
physical, shall become a fuller expression of
Bangladesh
Constitution
Article 28(1) That the state shall not
discriminate against any citizen on grounds
only of religion, race, cast, sex or place of
birth.
Article 28(2) Women shall have equal rights
with men in all spheres of the state and of
public life.
Article 28(4) Nothing in this article shall
prevent the state from making special
provision in favour of women and children or
for the advancement of any backward
Bangladesh Constitution
Article 29: Equality of opportunity
in public employment
29. (1) There shall be equality of
opportunity for all citizens in respect
of employment or office in the service
of the Republic.
(2) No citizen shall, on grounds only of
religion, race, caste, sex or place of
birth, be ineligible for, or discriminated
against in respect of, any employment
Bangladesh Constitution
Article 29: Equality of opportunity in public
employment
29. (3) Nothing in this article shall prevent the
State from
(a) making special provision in favour of any
backward section of citizens for the purpose of
securing their adequate representation in the
service of the Republic;
(b) giving effect to any law which makes
provision for reserving appointments relating to
any religious or denominational institution to
persons of that religion or denomination;
(c) reserving for members of one sex any class
of employment or office on the ground that it is
National Policy for the Advancement of Women, 2011

Enhancing the legal framework &

enforcement mechanisms
Enforcement of equal pay for equal work (as
mandated in the Constitution).
Galvanize the legal system to respond to
complaints about infraction of laws relating to
equal opportunity so as to create a
demonstration effect that discrimination will
not be tolerated.
Create a better legal framework for the service
sector in general and the low-end service
sector in particular.
Key Rules & Regulations Relating to
Womens Right
The Guardians and Wards Act 1980
The Disability Welfare Act 2001
Bangladesh Service Rules (BSR Part I & II)
The Maternity Leave Order 2011 (Bangladesh
Service Rules (Part-1)rule 197, sub-rule (1))
National Policy for the Advancement of Women,
2011
The High Courts Guidelines on Prevention of
Sexual Harassment laid down on 14.5.2009
Directed the Government to enact
Factors affecting CM
Internal factors
1. Ability to pay: A profitable company will
be in position to pay better compensation
package compare to the one running under
loss.
2. Job requirements: Basic wage depends
largely on the level of difficulty, physical &
mental stress involved in performance of
task.
Job which requires service of skilled people
will have more pay scale compare to work
involving requirement of semiskilled or
Factors affecting CM
Internal factors
3. Management strategy: Company's
strategy is one of important factor
affecting compensation in company.
Company which is development
oriented focuses on retaining employees
by paying high salary, while company
focusing on stabilizing itself in market
prefer paying reasonable pay package to
employees in company.
4. Employees: Performance, seniority,
experience, potential are important