Comben 1

Compensation ManagementCompensation Management
What is compensation managementWhat is compensation management
Its importanceIts importance
Types of CompensationTypes of Compensation
Constituents of Compensation – CTC,Constituents of Compensation – CTC,
headsheads
Purpose of CompensationPurpose of Compensation
Factors affecting CompensationFactors affecting Compensation
Anatomy of Pay StructureAnatomy of Pay Structure
Laws governing and affecting Pay StructureLaws governing and affecting Pay Structure
Some interesting comparisonsSome interesting comparisons
Recent trends in CompensationRecent trends in Compensation

What is compensation managementWhat is compensation management
Compensation Management is designing andCompensation Management is designing and
implementing total compensation package with aimplementing total compensation package with a
systematic approach to providing value tosystematic approach to providing value to
employees in exchange for work performance,employees in exchange for work performance,
Compensation is a systematic approach toCompensation is a systematic approach to
providing monetary value to employees inproviding monetary value to employees in
exchange for work performed.exchange for work performed.
Compensation may achieve several purposesCompensation may achieve several purposes
assisting in recruitment, job performance, and jobassisting in recruitment, job performance, and job
satisfaction.satisfaction.

Compensation is an integral part of human resourceCompensation is an integral part of human resource
management which helps in motivating themanagement which helps in motivating the
employees and improving organizationalemployees and improving organizational
effectiveness.effectiveness.
Effectiveness in terms of:Effectiveness in terms of:
 Attracting & Retaining TalentAttracting & Retaining Talent
 Motivating talent for better performanceMotivating talent for better performance
 Cost effectivenessCost effectiveness

Effective
Compensation
Motivate &
Retain Staff
Attract talent
Image Building
Administratively
Efficient
Reward Valued
Behavior
Ensure Equity
Institutional
effectiveness
Legal
Compliance
Employee
Management

HIGH COMPENSATION –HIGH COMPENSATION –
LOW COMMITMENTLOW COMMITMENT
Hired GunsHired Guns
HIGH COMPENSATIONHIGH COMPENSATION
– HIGH COMMITMENT– HIGH COMMITMENT
ProfessionalsProfessionals
LOW COMPENSATION –LOW COMPENSATION –
LOW COMMITMENTLOW COMMITMENT
Workers as commodityWorkers as commodity
LOW COMPENSATIONLOW COMPENSATION
– HIGH COMMITMENT– HIGH COMMITMENT
Family orientedFamily oriented
organizationorganization

Elaboration…. And discussionElaboration…. And discussion

Direct compensationDirect compensation
It refers to monetary benefits offered andIt refers to monetary benefits offered and
provided to employees in return of the servicesprovided to employees in return of the services
they provide to the organization. The monetarythey provide to the organization. The monetary
benefits include basic salary, house rentbenefits include basic salary, house rent
allowance, conveyance, leave travel allowance,allowance, conveyance, leave travel allowance,
medical reimbursements, special allowances,medical reimbursements, special allowances,
bonus, PF/Gratuity, etc. They are given at abonus, PF/Gratuity, etc. They are given at a
regular interval at a definite time.regular interval at a definite time.

Indirect compensationIndirect compensation
It refers to non-monetary benefits offered andIt refers to non-monetary benefits offered and
provided to employees in lieu of the servicesprovided to employees in lieu of the services
provided by them to the organization. Theyprovided by them to the organization. They
include Paid Leave, Car / transportation,include Paid Leave, Car / transportation,
Medical Aids and assistance, Insurance (for selfMedical Aids and assistance, Insurance (for self
and family), Leave travel Assistance, Retirementand family), Leave travel Assistance, Retirement
Benefits, Holiday Homes.Benefits, Holiday Homes.

headsheads
Wage and Salary:Wage and Salary:
The most important component of compensation and these areThe most important component of compensation and these are
essential irrespective of the type of organizationessential irrespective of the type of organization
Administered individuallyAdministered individually
Provides employee stabile income and can plan chores of dailyProvides employee stabile income and can plan chores of daily
life, budgetlife, budget
Incentives:Incentives:
Incentives are the additional payment to employees besidesIncentives are the additional payment to employees besides
the payment of wages and salaries. Often these are linked withthe payment of wages and salaries. Often these are linked with
productivity, either in terms of higher production or cost savingproductivity, either in terms of higher production or cost saving
or both.or both.

headsheads
Fringe Benefits:Fringe Benefits:
Fringe benefits include such benefits which are provided to the employeesFringe benefits include such benefits which are provided to the employees
either having long-term impact like provident fund, gratuity, pension; oreither having long-term impact like provident fund, gratuity, pension; or
occurrence of certain events like medical benefits, accident relief, health andoccurrence of certain events like medical benefits, accident relief, health and
life insurance; or facilitation in performance of job like uniforms, Canteens,life insurance; or facilitation in performance of job like uniforms, Canteens,
recreation, etc.recreation, etc.
Administered for a group mostlyAdministered for a group mostly
Perquisites:Perquisites:
These are normally provided to managerial personnel either to facilitateThese are normally provided to managerial personnel either to facilitate
their job performance or to retain them in the organization. Such perquisitestheir job performance or to retain them in the organization. Such perquisites
include company car, club membership, free residential accommodation,include company car, club membership, free residential accommodation,
paid holiday trips, stock options, etc.paid holiday trips, stock options, etc.


 Purpose of CompensationPurpose of Compensation
BUSINESS
STRATEGY
PEOPLE
REQUIREMENT
Compensation
Management

 Purpose of CompensationPurpose of Compensation
 For EmployerFor Employer
 Brand image (employer of choice) for attractingBrand image (employer of choice) for attracting
candidatescandidates
 Motivating employees for higher productivity andMotivating employees for higher productivity and
performanceperformance
 Retaining talentRetaining talent
 Consistency in compensationConsistency in compensation
 Provoking healthy internal competitionProvoking healthy internal competition
 For EmployeeFor Employee
 Work-life BalanceWork-life Balance
 Recognition as tool to self esteemRecognition as tool to self esteem
 Planning for better quality of lifePlanning for better quality of life

 Factors affecting CompensationFactors affecting Compensation
 Mental requirements,Mental requirements,
 Physical requirements,Physical requirements,
 Skill requirements,Skill requirements,
 Responsibility level, andResponsibility level, and
 Working conditions (risk, time, hazards)Working conditions (risk, time, hazards)

 Factors affecting CompensationFactors affecting Compensation
 Organizational AffordabilityOrganizational Affordability
 Man power planningMan power planning
 Sales – salary ratioSales – salary ratio
 Market Rate for TalentMarket Rate for Talent
 Economic ConditionsEconomic Conditions

 Inputs in Compensation StructureInputs in Compensation Structure
 Job EvaluationJob Evaluation
 Job SpecificationJob Specification
 Job DescriptionJob Description
 Time and Motion StudyTime and Motion Study
 Market SurveyMarket Survey
 Demand and SupplyDemand and Supply
 Industry wise bench markingIndustry wise bench marking

Laws governing and affecting Pay StructureLaws governing and affecting Pay Structure
Minimum Wages Act (discuss – minimumMinimum Wages Act (discuss – minimum
remuneration, its headsremuneration, its heads
Income Tax Act (discuss – heads which provideIncome Tax Act (discuss – heads which provide
tax relief)tax relief)
Equal Remuneration ActEqual Remuneration Act
Payment of Wages Act (discuss – permissiblePayment of Wages Act (discuss – permissible
deductions)deductions)
Acts on social securities (PF, Bonus, Gratuity,Acts on social securities (PF, Bonus, Gratuity,
Employee Compensation)Employee Compensation)

Monthly salary componentsMonthly salary components
Basic SalaryBasic Salary
Dearness AllowanceDearness Allowance
House Rent AllowanceHouse Rent Allowance
Conveyance AllowanceConveyance Allowance
Others (Shift Allowance, Uniform Allowance,Others (Shift Allowance, Uniform Allowance,
Education Allowance)Education Allowance)

IncentivesIncentives
Time based incentiveTime based incentive
Production based incentiveProduction based incentive
Task based incentiveTask based incentive

Social Security / Statutory paymentsSocial Security / Statutory payments
Contribution towards Provident FundContribution towards Provident Fund
Contribution towards ESIContribution towards ESI
Payment of BonusPayment of Bonus
Payment of Gratuity (not part of wages butPayment of Gratuity (not part of wages but
considered part of CTC)considered part of CTC)

Some interesting comparisonsSome interesting comparisons
The salary of top executives of public sector areThe salary of top executives of public sector are
miserable compared to private sector .miserable compared to private sector .
S B I of India chief is paid 10%of HDFC Bank ManagingS B I of India chief is paid 10%of HDFC Bank Managing
DirectorDirector
BHEL’S chief gets about 10 to 12 lakhs per annum asBHEL’S chief gets about 10 to 12 lakhs per annum as
against ABB ‘S MD getting nearly 40 to 50 lakhsagainst ABB ‘S MD getting nearly 40 to 50 lakhs

Recent trends in Compensation ManagementRecent trends in Compensation Management
Employees’ Stock Ownership PlanEmployees’ Stock Ownership Plan
Employee Stock Ownership Plan (ESOP) is an employee benefit plan.Employee Stock Ownership Plan (ESOP) is an employee benefit plan.
The scheme provides employees the ownership of stocks in theThe scheme provides employees the ownership of stocks in the
company. It is one of the profit sharing plans. Employers have thecompany. It is one of the profit sharing plans. Employers have the
benefit to use the ESOPs as a tool to fetch loans from a financialbenefit to use the ESOPs as a tool to fetch loans from a financial
institute. It also provides for tax benefits to the employers.institute. It also provides for tax benefits to the employers.
Organizations strategically plan the ESOPs and make arrangements forOrganizations strategically plan the ESOPs and make arrangements for
the purpose. They make annual contributions in a special trust set up forthe purpose. They make annual contributions in a special trust set up for
ESOPs. An employee is eligible for the ESOPs only after he/she hasESOPs. An employee is eligible for the ESOPs only after he/she has
completed mutually agreed time period within a year of service. Aftercompleted mutually agreed time period within a year of service. After
completing 10 years of service in an organization or reaching the age ofcompleting 10 years of service in an organization or reaching the age of
55, an employee should be given the opportunity to diversify his/her55, an employee should be given the opportunity to diversify his/her
share up to 25% of the total value of ESOPs. Law has also provided anshare up to 25% of the total value of ESOPs. Law has also provided an
amendment for the employees who have attained the age of 60 and theiramendment for the employees who have attained the age of 60 and their
ESOP shares are allotted after December 31, 1986. The amendmentESOP shares are allotted after December 31, 1986. The amendment
provides those employees with an option to diversify their shares up toprovides those employees with an option to diversify their shares up to
50%.50%.

Advantages of ESOPAdvantages of ESOP
 OwnershipOwnership
 Tax-RebateTax-Rebate
 Retirement benefitsRetirement benefits

Advantages of ESOPAdvantages of ESOP

Long Term Compensation PlanLong Term Compensation Plan

Comben 1

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (9)

Similar a Comben 1

Similar a Comben 1 (20)

Último

Último (20)

Comben 1