Wage, Salary & Compensation

WAGE:Payment for labor or service to a worker, specially

remuneration on an hourly, daily or weekly basis or by the piece.

Salary: Regular wage received nby an employee from an employer

on an weekly. Biweekly or monthly basis. It includes employee
banafits such as health and life insurance, saving plan and social
security.

Compensation: Direct & indirect monetary and non monetary

rewards to employees on the basis of the value of the job, their
personal contribution and their performance.
 What is compensation
 Compensation is the total reward received by an employee in
exchange for services performed for an organization. It can
include both direct pay ( salary and wage ) and indirect pay
(benefits program).
 Compensation overview

 Q1- What are the basic goals of Compensation system?

 To attract high quality employees.
 To retain high quality employees.
 To stimulate high performance.

 Q2- Whatare the basic components of any compensation?

 Basic pay (wage)
 Incentives
 Benefits.
 Total compensation= Direct + Indirect Benefits.

Base Pay Incentives Benefits.

What does base pay means

 An employee’s initial rate of compensation, excluding extra

lump sum compensation or increases in the rate of pay. An
employee’s as a base hourly rate of pay or monthly annual
salary.
Incentive pay (Pay for performance)

 Incentive pay, alsoknown as “pay for performance” is

generally given for specific performance results rather than
simply for time worked. While incentives are not the answer
to all personal challenges, they can do so much to increase
worker performance.
 Benefits. Holidays Disability

Fitnes
 A payment or entitlement, such as Personal Concern
one made under an insurance Leave Bank
policy or employment agreement
ar public assistance or public Dental Wellness
assistance program. Or generally
something of value or usefulness,.
Life Medical
insurance

Employee Flexible
Assistance schdule Education Vision
& Training
Other parts of C&B

 Allowance
 Over Time Allowanec
 Risk Benefit
 Retirement benefit
 Equity Compensation
 Perquisites
 Expertriate compensation
 How the rewards are classified
Base pay:
Wages &
salaries
Direct
Variable pay:
Incentives(Individual.
Team & organization) Mandatory:
Financial Providend
(Extrinsic fund, Gratuity,
Rewards) Maternity,
leave, health
plan, medical,

Total Indirect Benefits

Compensation Voluntery:
Vacations,
Satisfaction braeks,
Holidays,
Non Derived Security plans,
Financial Educational
assistance,
(Intrinsic Praised & Recreational
Rewards) Rewards
Balanced, Practiacal Reward strategy model

Employer’s Employees
Perspective Perspective

Organization
Capabilities. Competencies

Business Strategy
Employment Demogreaphic
Deal
Organization Values
Structure

Team Rewards Strategy

Pay Benefits

Learning & Work

development Environment

Improve Business result & aligned Employee Behaviours.

Different Types of Compensation
Monetary Non Monetary
1. Basic Salary 1. Leave Policy
2. House rent allowance 2. Car policy
3. Conveyance 3. Hospitalization
4. Leave Travel Allowlance 4. Insurance
5. Medical Reimbursement 5. Leave tarvel agency Limits
6. Special Allowance 6. Perquisites
7. Bonus 7. Club Membership
8. PF/Gratuity 8. Furniture/ Funished home
9. Overtime Payment. 9. Holidays Homes.
 Compensation Overview
Q3. What are the basic tools of a compensation system?

Wages surveys.
Job analysis/evaluatiion.
Performance appraisal.

Q4: Why do wage differ?

Difference by industry.
Difference by occupation
Differences based on Individual performance, seniority etc.
 Compensation Strategy

Business Compensation Contingent

Strategy Strategy Factor
 Contingent Factor

 Legal Requirement/ Government Poliocy

 Strength of gtrade market.
 Labor Market Condition
 Capacity to Pay
 Compensation Policy
General Practice

External Internal External

Equity Equity Equity

Lead The Lag The Lead the

Market Market Market

Retain
Attract New Attach +
Existing
Talent Retain
Talent
The Internal & External Equity

Internal Equity External Equity

Condition of the
Compensation
labor market.
strategy of the
organization
Area wage rate
Worth of job Pay Cost of living
Employee’s Level Collective
relative worth
Bargaining
Employer’s
Legal
ability of pay
Requirement.
All organization faces three basic compensation decisions:

A. Pay-Level Decision:
o Are we going to lead, meet, or lag the market.
o Compsrison: Emploeyees working on similar jobd in other organization.

B. Pay-Structure Decision:
o How do we determine differences in pay for various jobs in our organization?
o Comparison: Employees working on different jobs within the organization.

C. Individual Pay Determination:

o How do we determine how much to pay various people in our organization?
o Comparison: Employees working on the same jobs within the organization.
 A. Pay level Decisions

Wages & salaries surveys are one of the major tools

Used to make external comparisons.

Decision Points:
 Which jobs to make comparison so for?
 What is the appropriate labor market?
 Which organizations to surveys?
 B. Pay Structure Decisions:
Pay structure decisions are typically made in one of two ways:

1). Based on attributes of employees:

---Knowledge –or skill based pay.

2). Based on attributes of the job

Job evaluation:

The process of determining the relative worth of various jobs within

the organization.
 Methods of Evaluation
Rankig Model

Non-Analytical
Job Grading
Method

Job Evaluation
Factor
Comparison
Method
Analytical

Point Ranking
Method
Individual Pay determination
On what do we base our individual pay determination?

Performance
Seniority
???( policies, Non-Job relevant issues)
Comparison Administration Process
Job Analysis
(Job description & Job Specification)

Valuing Jobs
• Job Evaluation Pay Service
• Market Pricing
Pay Structure
• Pay Grades
Pay Policies
• Pay Range

Performance
Individual Pay Appraisal

Implementstion,
Communication &
Monutoring
 Components of pay structure
 Identify the components & Percentage

 Basic is 50% of gross.

 House rent 30-35%.
 HM: 10-15%
 Medical 10-15%
 Conveyance 10-15%
 Entertainment 10-15%
 LFA 10-15%
 Utility 5-10%
 Recreation Allowance 10-15%.
 Compensation Policy Issues
Pay for performance
Pay for seniority
Salary increases and promotions
Overtime and shift pay
Paid and unpaid leaves
Pay holidays
Geographic costs of living differences
Salary Compression (A salary inequity problem generally caused by
inflation, resulting in no longer-trem employees in a position earning
less than workers entering the firm today).
 Designing Pay Structure

Define Designation
 MD
 DMD
 EVP/GM
 VP/DGM
 AVP/AGM
 MANAGER
 DEPUTY MANAGER
 ASSISTANT MANAGER
 EXECUTIVE OFFICER
 OFFICER
 Designing Pay Structure
o Define grade for every designation-
• MD-AVP: 10
• Manager: Officer: 15

Define gap between two grades 5-8%

Define salary grade 1 in lowest position.

Salary of EO should be equivalent to O-5/6/7 (If 15 grades)

Try to fix consistent enhancement for every position : Like 30% gap
for all grade 1 position. There may be 3 level and you can vary for
these 3 levels to define all gaps.
 Annual leave
Type Days

Annual 1 day per 18 workings day of respective

employees.

 For annual leave of employee need to work at least 1 year.

 Annual leave will be contued on calender year.
 The highest limit of leave accumulated of 40 days for factory
& 60 days for establishment.
 50% of cash may be withdrawn from eligible annual leave.
 Provident Fund

 Not Mandatory
 Need to introduce if ¾ employee apply.
 Form a trustee board worker+Owner+Finance(2+2+1).
 Recognition from NBR.
 Registration with Sub registry/RJSC.
 As per Law: 7-8%, but for recognition of NBR it needs 10% or
more .
 From both patry.
 Both party contribution will be allowed if you are member of
pf fund for 1 year & service length is 2 year.
 Gratutity
 Not mandatory.
 Need to manage as like as PF fund.
 Will be eligible if serves more then 6 months.
 Calculation based on more than six month.
 Up to 10 years=30 days per completed year.
 More then 10 years = 45 days per completed year.
 Note: If you resigned from your service then eligibility of
gratuity is minimum five years for respective employee.