Group B

COMPENSATION ADMINISTRATION
Group Members :
Bilal Siddiqui Ameer Ahmad Noor Jahan Mohd. Danish Syed Mohd. Sufiyan Suhail Mohd. Azhar Subhash Kumar Jha Divendra Kumar Shivanand

COMPENSATION ADMINISTRATION
INTRODUCTION NATURE OF COMPENSATION

OBJECTIVES OF COMPENSATION
COMPONENTS OF COMPENSATION COMPONENTS OF PAY STRUCTURE IN INDIA WAGE POLICY IN INDIA

Introduction
Compensation administration refers to the overall management of compensation costs in a business organization. Compensation administration tasks are important, as competitive compensation is used to attract, retain, and keep top talent in an organization. Establishing an effective compensation administration program will require an analysis of all the positions within the company, evaluating the jobs performed, and establishing a cost for those jobs. Once completed, it is important to maintain and update for changes to salary, employee classification, performance, and length of service. So Compensation administration is the overall management of remuneration paid to the employees of an organization.

NATURE OF COMPENSATION
Compensation offered by an organization can both directly through base pay and indirectly through benefits.

Base pay:- It is the basic compensation an

employee gets, usually as a wage or salary.

Variable pay:-It is the compensation that is linked

directly to performance accomplishments (bonuses, incentives, stock options).

Benefits:-These are indirect rewards given to an

employee or group of employees as a part of organizational membership.

OBJECTIVES OF COMPENSATION
The most important objective of any pay system is fairness or equity. The term equity has three dimensions :

Internal equity:-This ensures that more difficult jobs paid more. External equity:-This ensures that jobs are fairly are compensated in
comparison to similar jobs in the labor market

Individual equity:-It ensures equal pay for equal work, i.e. each
individual's pay is fair in comparison to others doing the same job. In addition, there are other objectives also. The ultimate objective of compensation administration is to reward desired behaviours and encourage people to well in their jobs some of them are as follows:

Attract talents:-Compensation needs to be high enough to attract talented

people. Since many firms compete hire the services of competent people, the salaries offered must be high enough to motivate them to apply.

Retain talent:-:

If compensation levels fall below the expectations of employees or are not, competitive employees may quite in frustration. similar pay Likewise, more qualified people should get better wages.

Ensure equity:-Pay should equal to the worth of job .Similar jobs should get Control costs:-The cost of hiring people should be too high. Effective
compensation management ensures that workers are neither overpaid nor underpaid.

COMPONENTS OF COMPENSATION
A typical compensation of an employee comprises of :

Financial compensation
1. Wages and salary:-Wages represents hourly rates of pay and salary
refers to the monthly rate of pay, irrespective of the number of hours put by an employee. Wages and salaries are subject to annual increments. They differ from employee to employee, and depend upon the native of job
seniority and merits.

2. Incentives:-Also called 'payments by results. Incentives are paid in

addition to wages and salaries. Incentives depend upon productivity, sales profit, or cost reduction efforts. There are:

A) Individual incentives schemes B) Group incentives schemes

Non financial benefits

These include challenging job responsibilities, recognition of merits, growth prospects, competent supervision comfortable conditions.

COMPONENTS OF PAY STRUCTURE IN INDIA

The pay structure of a company depends on several factors such as: Basic Wage:-Before basic wage we understand wage, "payment for labour or services to a worker especially remuneration on hourly, daily, or weekly basis. "The basic wage in India corresponds with what has been recommended by the fair wage committee 1948 and the 15th Indian Labour Conference 1957. While deciding the basic wage the following criteria may be considered : Skill needed in the job Experience needed Difficulty of the work Training needed Responsibilities involved Hazardous nature of the job

Dearness allowance:-It is the allowance paid to employees in order to enable

them to face the increasing dearness of the essential commodities. The dearness is often four or five times to the basic pay. This practice was started after world war second in India when cotton mills Bombay and Ahmedabad paid dearness allowance.

Annual statutory bonus:-Bonus

is the extra amount paid to the employees from the profit earned by the company. As per the bonus act, the minimum bonus to be paid to an employee is 8.33 of his yearly earning, most of the companies pay more than the minimum amount(up to 30%) is the wage to be paid to workers when they work beyond normal working hours. Overtime will double to the normal wages. Overtime working should be avoided as it increases the wage bill and decreases the productivity of the worker.

Overtime payment:-This

Production-linked incentive bonus:-The last major component of

Indian wage packet is the production linked incentive bonus. It refers to all the plans that provide extra pay for performance in addition to regular wage for a job. Incentives are designed to stimulate human effort over and above the current efforts

Other allowance: This refers to the allowances other than dearness

allowance. These allowances are paid depending upon the nature of work, working conditions, place of work etc. These allowances are as follows :

Education allowance Medical allowance Tiffin allowance Traveling allowance City compensatory allowance Conveyance allowance Hill area allowance House rent allowance

WAGE POLICY IN INDIA

These policies can be categorized under three heads :

Minimum Wage:- Minimum wage is that wage which must invariably be paid
whether the company big or small, making profit or not. It is the bare minimum that a worker can expect to get for services rendered by him. The 15th Indian Labour Conference (1957) formally quantified the minimum wage thus ;it is the worth looking into the report of international organization of employers which mentions that in over 80% of countries surveys indicated the presence of a minimum wage policy in respective countries including majority of European union countries. In calculating the minimum wage, the standard working class family should be taken to comprise three consumption units for one earner, the earnings of woman, children and adolescents being disregarded : Minimum food requirements should be calculated on the basis of a set intake of calories as recommended by Dr. Aykroyd for an average Indian adult of moderate activity Clothing should be estimated on the basis of per capita consumption Fuel, lighting, and other miscellaneous items of expenditure should constitute 20 percent of the total minimum wage. In India, minimum wage is fixed mainly for sweated industries under the provisions of Minimum Wages Act 1948.

Fair Wage:- It is the wage which is above the minimum wage but below the living
wage. This is understood in two wage. In narrow sense, wage is fair if it is equal to the rate prevailing in the same trade and in the neighborhood for similar work. In wider sense, it will be fair if it is equal to the predominant rate for the similar work throughout the country and for trader in general. According to the Committee on Fair Wages, 1948 fair wage should be determined taking into consideration the following factors : Productivity of labor, The level of national income and its distribution, The place of industry in the economy of the country, and The employer's capacity to pay.

Living Wage:- Living wage is a step higher than fair wage. Living wage may be
described as one which should enable the wage earner to provide for himself/herself and his/her family not only the bare essentials of life like food, clothing, and shelter but a measure of frugal comfort including education for children requirements of essentials of social needs. A living wage must be fixed considering the general economic conditions of the country. According to the committee on fair wages, the living wage is the highest among three. It must provide : Basic amenities of life Efficiency of worker, and Satisfy social needs of workers such as medical, education, retirement, etc

Conclusion
After discussing about Compensation Administration, we come to know what is compensation administration and why it is administered. It is managed to attract and retain the talent in the organization. The main purpose of compensation is to attract, keep and retain the right employee in the organization.

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