MANAGING COMPENSATION

Job Evaluation Components of Compensation Factors determining compensation Incentives Designing a benefit plan

Job Evaluation
Job evaluation is the process of analyzing and assessing the various jobs systematically to ascertain their relative worth in an organization In a job evaluation programme, the jobs are ranked and not the jobholders. Jobholders are rated through performance appraisal.

Principles of Job Evaluation

1. Rate the job but not the employee. Rate the elements on the basis of the job demands. 2. The elements selected for rating should be easily understood. 3. The elements should be defined clearly and properly selected. 4. Employees concerned and the supervisors concerned should be educated and convinced about the programme. 5. Supervisors should be encouraged to participate in rating the jobs. 6. Secure employee cooperation by encouraging them to participate in the rating programme. 7. Discuss with the supervisors and employees about rating but not about assigning money values to the points.

Job Evaluation Process

Objectives of Job Evaluation Job Analysis Job Description Job Evaluation Programme Wage Survey Job Specification

Employee Classification

Methods of Job Evaluation

Job-evaluation methods are of two categoriesAnalytical and Non Analytical Analytical: 1. Point Method 2.Factor Comparison Method Non-Analytical: 1. Ranking Method 2. Banding Method 3. Job-Grading Method

Analytical methods
Point method This is a quantitative technique involves identifying several compensable factors and the degree to which each of these factors is present in the job. Factor Comparison method Under this method each job is ranked several times-once for each several compensable factors. Eg. On the basis of skill on first instance.

Non-analytical methods
Ranking method Under this method rater categorise jobs into groups and all jobs in each group are of roughly the same value for pay purposes. Banding method An approach to reduce the complexity of a compensation system by consolidating a large number of pay grades into a fewer number of broader grades or bands. Job Grading Under this method jobs with comparable points together to reflect the hierarchy of jobs within the company and establish pay rates

Components of Compensation
External Environment Internal Environment Compensation

Financial Direct Indirect

Non-financial The Job The Env.

Components Contd.,
DirectWages, Salaries, Commissions, Bonuses Indirect- Insurance plans, Social Assistance, Educational Assistance, Paid Absences The Job- Interesting Duties, Challenge, Responsibility, opportunity for recognition, feeling of advancement, achievement opportunity The Environment- Sound policies, Competent supervision, Congenial coworkers, Appropriate status symbol, Comfortable working conditions, flexi-time, Job sharing, Cafeteria

Factors determining pay rates

Employment market Demand for labour Bargaining power of the parties Job conditions

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: (I) Individual incentive schemes, and (ii) Group incentive programs. Individual incentives are applicable to specific employee performance. Where a given task demands group effort for completion, incentives are paid to the group as a whole. The amount is later divided among group members on an equitable basis

Incentives Contd.,
Fringe Benefits: These include such employee benefits as provident fund, gratuity, medical care, hospitalization, accident relief, health and group insurance, canteen, uniform, recreation and the like. Perquisites: These are allowed to executives and include company car, club membership, paid holidays, furnished house, stock option schemes and the like. Perquisites are offered to retain competent executives. Non-monetary benefits: These include challenging job responsibilities, recognition of merit, growth prospects, competent supervision, comfortable working conditions, job sharing, and flextime. Rewards: People join organizations expecting rewards. Firms distribute money and other benefits in exchange for the employees

Compensation & Equity

Compensation affects the behaviour of people. Employing organization desires two things: 1. Attract & keep personnel in the organization. 2. Motivate them to higher level of compensation. Equity is concerned with felt justice according to natural law or right when an employee receives compensation from the employer, perceptions of equity are affected by two factors: 1. The ratio of compensation to ones inputs of effort, education, training, endurance of adverse working condition. 2. The compensation of their ratio with the perceived ratios of significant, other people with whom direct contact is made. Equity only exists when a person perceives that the ratio of outcomes to inputs is in equilibrium with respect of self and in relation to others

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