COMPENSATION ELEMENTS

PRESENTED BY: BHARTI VIRMANI(0121PG030) RAKSHITA SHARMA(0121PG036) AKHILESH INAMUL

INTRODUCTION
The HRM function that deals with reward individuals receive in exchange for performing tasks The major cost of doing business for many organizations The chief reason why most individuals seek employment

Objective of Compensation
The objective of compensation is to create a system of rewards that is equitable to both the employer and the employee The desired outcome is an employee who is attracted to the work and motivated to do a good job

COMPENSATION SYSTEM

ELEMENTS OF COMPENSATION
Base Salary: Base salary is used to provide a reasonable base level of monthly income relative to an Employees job responsibilities and the market for the Employees skills. Bonus: Bonuses are used, primarily at the senior management level to support attraction and retention of the individuals and to reflect the additional time and responsibility associated with their positions. Stock Options: Stock options are used to support retention, as an incentive and reward for achievement of the Companys long-term objectives, and to align the interests of Employees with those of the Companys Shareholders.

 Dearness Allowance. This allowance is given to protect real income against inflation. Generally, dearness allowance (DA) is paid as a percentage of basic pay. House Rent Allowance. Employers who do not provide living accommodation pay house rent allowance (HRA) to employees. This allowance is calculated as a percentage of basic pay (30 per cent of basic pay in case of government employees). City Compensatory Allowance. This allowance is paid generally to employees in metros and other big cities where cost of living is comparatively high. City compensatory allowance (CCA) is generally a foxed amount per month. Transport Allowance/Conveyance Allowance. Some employers pay transport allowance (TA) to their employees. A fixed sum is paid every month to cover a part of traveling charges.

 Fringe Benefits/Perquisites. Several types of benefits are paid particularly to senior managers. Provident funds, pensions, gratuity, encashment of earned leave, company house, company car, leave travel concession (LTC), medical aid, interest free loan, holiday homes, entertainment, stock options, etc. are examples of such benefits.

COMPENSATION STRUCTURE
Pay structure in a company depends upon several factors, E.g., wage settlements, labor market situation, Companys nature and size etc. Pay structure consists of certain grades, Scale and range of pay in each scale. Pay structure in India generally consists of the following components. 1- Basic wage/salary 2- Dearness allowance (D.A.) and other allowances. 3- Bonus and other incentives. 4- Fringe benefits or perquisites.

 Basic Wage : The basic wage provides the foundation of pay pocket. It is a price for services rendered. It varies according to mental and physical requirements of the job as measured through job evaluation. In India, basic wage has been influences by statutory minimum wage, wage settlements, and awards of wage boards tribunals pay commissions, etc. DEARNESS ALLOWANCE AND OTHER ALLOWANCE : This allowance is given to protect the real wages of workers during inflation .Under section 3 of the minimum wages act is as cost of living allowance. Dearness allowance has now become an integral part of the wage system in India.

 In addition to D.A. several types of allowances are in use. These are followings: Acting City Compensatory Allowance Bank Allowance Education Allowance House Rent Allowance Conveyance/ Car Allowance Medical Allowance Tiffin Allowance

 Bonus : According to the bonus commission(1961), bonus is sharing by worker in the prosperity of the concern in which they are employed. In the case of low paid workers such sharing in the prosperity argument earnings and help to bridge the gap between the actual wages and need based wage. Fringe benefit : A broad range of benefit and services are provided by an employer to his employee in addition to wage and salary. These are based on critical job factors and performance. These represent indirect compensation. These are no longer fringe as these constitute a significant part of total compensation package and substantial labor cost for employer.