Compensation

Determining Pay Rates

Employee compensation
All forms of pay or rewards going to employees and
arising from their employment.

Direct financial payments

Pay in the form of wages, salaries, incentives,
commissions, and bonuses.

Indirect financial payments

Pay in the form of financial benefits such as
insurance.

Compensation scenario in India

Wage-related legislations
Minimum Wages Act, 1948

Payment of Wages Act, 1936

Equal Remuneration Act, 1976

Other legislations covering bonus, retirement

Benefits and social security legislations

Compensation scenario in India

Government employees - Salaries fixed
according to recommendations of pay
commission
States free to adopt different structure
Wage boards to determine salaries of
specific occupational groups

Compensation scenario in India

Companies Act, 1956
Employee Stock Option Scheme (ESOS)
and Employee Stock Purchase Plan
(ESPP)
Minimum Wage in India

Compensation scenario in India

Social Security and other legislations
Employee Provident Fund Act

Employees State Insurance Act

Payment of Bonus Act

Payment of Gratuity Act

Compensation scenario in India

Unorganized Workers Social Security Act,
2008

Welfare schemes
Rashtriya Swasthya Bima Yojana

Aam Admi Bima Yojana

Indira Gandhi Old Age Pension Scheme

Competitive Strategy, Corporate

Policies and Compensation
Aligned reward strategy
Create a bundle of rewards

Produce employee behaviors that firm

needs to support and achieve its
competitive strategy

The IBM Way

Pay to Market

Fewer, Broadband jobs

Let managers manage
Incentivize employees

Equity and Its impact on pay rate

People are motivated to maintain balance
between what they perceive as their inputs or

contributions and their rewards

in case a person perceives inequity, a tension

will develop and person will be motivated to

reduce or eliminate the tension and perceived

inequity

Equity and Its impact on pay rate

Managers to address four forms of equity
External jobs pay rate in comparison to other
companies Salary Surveys

Internal jobs pay rate in comparison to other jobs within

the company Job Analysis and Job Evaluation
Individual jobs pay rate in comparison to same or similar
jobs performance appraisal and incentive pay
Procedural perceived fairness of processes and
procedures used to make decisions regarding allocation of
pay communications, grievance mechanisms and
employees participation

Addressing equity issues

Salary surveys
Job analysis and job evaluation
Performance appraisal and incentive pay
Employee participation in developing

companys pay plan

Maintain confidentiality over pay rates

Equity and Its impact on pay rate

Overpaying people can backfire too