This document provides an overview of compensation and benefits. It discusses key concepts like wages, salary, factors that influence salary structure, and the legal framework around compensation in India. It also outlines the process for determining salary, including job analysis and performance appraisal. Components of compensation structure like basic salary, allowances, and retirement benefits are explained. Formulas for calculating statutory deductions like PF, ESIC, and gratuity are also included. The document emphasizes having management buy-in when designing compensation policies and getting employee feedback.

1. A session on Compensation & Benefits Shashikanth Jayaraman

2. Some thoughts to begin with People do what they do to satisfy some need Before that, they look for a reward or pay-off From gross salary to Cost to Company Offering long term security to sudden higher levels of compensation Grade oriented compensation to Performance based As you sow, so you reap What you see is not what you get There is always a slip between the cup and the ‘pay slip’ Profit making to profit sharing A paradigm shift

3. Basic definitions Wage: Usually refers to the hourly or daily rate paid to at a worker level For the blue collar worker Salary: Refers to the weekly or monthly compensation paid to clerical, administrative or professional employee For the White collar worker

4. Theory of wages Fixed as a result of individual bargaining, collective bargaining or public regulation Subsistence theory – Iron law of wages – David Ricardo Wage fund theory – Adam Smith Surplus value theory of wages – Karl Marx Residual claimant theory – Francis A Walker Marginal productivity theory Bargaining theory of wages

5. The process of Salary determination

7. Recruitment

8. Selection

9. Training and Development

10. Performance Appraisal

11. Compensation and Benefits

12. Safety and Health

13. Employee and Labor Relations

14. Legal Considerations

15. Job Analysis for TeamsTasks Responsibilities Duties Job Descriptions Job Analysis Job Specifications Knowledge Skills Abilities

16. Factors influencing salary structure & administration Organization’s ability to pay Supply and demand of labour Prevailing market rate The cost of living Productivity parameters Bargaining power of unions Job requirements Psychological and social factors

17. Legal framework for salary administration Payment of wages act 1936 The minimum wages act 1948 The Equal Remuneration act 1976 Employees’ provident fund act 1952 Employees’ pension scheme Employees’ state Insurance Act 1948

18. 9 The Pay Model Business Goals Compensation activities serve Business Objectives CEO Business Strategy Compensation strategy is periodically reevaluated and the Compensation plan periodically developed Compensation Strategy HR Head Org.Structure Non-Financial Rewards Compensation Plan Market Surveys Job Evaluation Performance Management C & B/S M Unit Inputs Compensation Manager, along with team is responsible for carrying out compensation related activities Pay levels / structures Contribution /outputs Total remuneration Employee Performance linked Pay Individual Pay Internal Equity External Equity

19. 10 Employment Relationship TRANSACTIONAL Low ----- High RELATIONAL Low ----- High

20. Compensation structure Basic Salary Grade wise flat allowances Reimbursements Annual payments Benefits Employee stock option schemes Retiral benefits

21. Anatomy of a Pay structure Pay Structure – consists of a series of Pay Ranges, or “grades”, each with a minimum and maximum pay rate Pay Range - Has a minimum pay value, maximum pay value and a “midpoint” Midpoint of a range – represents the competitive market value for the job or group of jobs. Monday, March 28, 2011 12

22. Some benefits Company accommodation Company provided vehicles Medical coverage Retiral benefits Easy loan schemes Entertainment benefits

23. Some arithmetic ESIC – 4.75% contribution by employer and 1.75 5 by employee PF – 12% of Basic pay by Employee and Employee Pension fund – 8.33% of Basic (part of PF) Superannuation – 15% of Basic Gratuity – Last drawn Basic + DA per month X 15 X Total no of completed years of service__________________________________________________ __________26

24. Statutory deductions Provident fund Profession tax Income tax Labour welfare fund ESIC Gratuity

25. Keep in mind the following Job evaluation methods and implementation of the structure needs endorsement from the management Formulation of a compensation policy/philosophy Review the policy after a period of time Take feedback from people – What you think is best need not be for the employee