Compensation Adminisatration

Definition: Compensation is what employees receive in exchange for their Contribution Compensation consists of Basic Pay Variable Pay and Benefits

Objectives of Compensation system

Retain Talent Ensure Equity Reward Desired Behavior Control Costs Comply with Law Ease of operation Attract Talent

Principles of Wage and Salary Administration

Flexibility. Based on scientific job evaluation Be consistent with overall organization plans and programs. Be in conformity with the social and economic objectives of the country Be responsive to the changing local and national conditions

The Elements of Wage and Salary System

Wage and salary system should have relationship with the performance, satisfaction and attainment of goals of an individual.

The Elements of Wage and Salary System

a) Identifying the available salary opportunities, their costs, estimating the worth of its members of these salary opportunities and communicating them to employees. b) Relating salary to needs and goals. c) Developing quality, quantity and time standards relating to work and goals. d) Determining the effort necessary to achieve standards. e) Measuring the actual performance.

f) Comparing the performance with the salary received. g) Measuring the job satisfaction gained by the employees. h) Evaluating the unsatisfied wants and unreached goals of the employees. i) Finding out the dissatisfaction arising from unfulfilled needs and unattained goals. j) Adjusting the salary levels accordingly with a view to enabling the employees to reach goals not attained and fulfills the unfulfilled needs.

Components of Pay Structures in India

Wages: Basic wage depends on: Skill needs of the job Experience needed Difficulty (physical & mental) of work Training needed Responsibilities involved Hazardous nature of job

Components of Pay Structures in India

Dearness Allowance (DA):Money paid to neutralise the effects of inflation. Varies depending on the All India Consumer Price Index

Components of Pay Structures in India

Other Allowances Attendance, City Compensatory, Deputation, Education, Group Insurance, LTA, Lunch, Medical, Night Shift, Relocation, Transport, Uniform etc.

All statutory payment: ESIS, PF / EPF contributions, Bonus..

Factors Affecting Compensation Levels

Ability to pay Cost of living Prevailing wage rates Unions Productivity State Regulations Demand and supply of labour Job Needs

Executive Compensation
Salary, bonus, commission, PF, Family pension, Superanuation Fund, Medical Reimbursement, LTA, House Rent Allowance, Group Insurance, Driver, Education, Lunch, Relocation, Conveyance, Servant .

Incentives and Employee Benefits

Types of Variable Pay or Incentive Pay Individual Incentives Group Incentives Organisation wide Incentives

Merits & Demerits of Incentive Plans

Merits 1. Motivates employees 2. Higher earning, improved standard of living 3. Better utilisation of equipment 4. Reduced supervision 5. Reduced scrap, reduced lost time/ absenteeism /employee turnover

Merits & Demerits of Incentive Plans

Demerits 1. Produce more by sacrificing quality 2. Misuse precious resources 3. Increase accidents by rushing to produce more 4. High expectations may lead to frustration / blame the Management 5. Problems when demand falls

Organisation wide Incentive Plans

Reward on the basis of the success of the organisation Over a specified period Promotes a culture of ownership

A. Profit Sharing: portion of profit is distributed to employees with certain service conditions and qualification B. Gain Sharing: proportionate to the increased productivity / reduced costs resulting gains, distributed on monthly/ quarterly basis

Organisation wide Incentive Plans (Contd)

C. Employees Stock Ownership Plans: Eligible employees are allotted companys shares below the market price