Employees are the last weapon of

Competitive Advantage in the global market.

Compensation is the prime source of
attracting and retaining talent .
Compensation is a monetary benefit given to
employees in return for the services provided by
them.
The literal meaning of the term compensation is
something which counterbalances the efforts of
workers .
Milkovich & Newman defined compensation as:
All forms of financial and tangible services and
benefits that an employee receives in his/her
tenure of employment
Total Compensation
Direct Indirect
Bonuses
Gainsharing
Security Plans
Pensions
Employee Services
Educational assistance
Recreational programs
Commissions
Wages / Salaries
Insurance Plans
Medical
Dental
Life
Time Not Worked
Vacations
Breaks
Holidays
Compensation is a broader term which
includes wages ,salary, pay, perquisites
,fringe benefits , performance ,incentives,
commissions, bonus, stock options,
remuneration.
Compensation Management
Compensation management is a system of
compensating individuals for the work they
perform in such a way that the organization
is able to attract , retain and motivate them to
perform well keeping in view organizational
and market factors


Stephen P. Robbins & David A Decenzo
Compensation management is a process of
determining cost effective pay structure,
designed to attract and retain, and provide an
incentive to work hard and structures to
ensure that pay level are perceived as fair.

I.Kessler
Compensation management refers to payment
systems which determine employee wages
/salary ,direct and indirect reward
Organizations
Perspective
Reward for work
Monetary and non
monetary form
Term of
employment
contract
Based on job value
,contributions &
performance
Legal compliance

Employees
Perspective
Livelihood
Motivation
Just and fair
determination
Commitment
towards
achievement of
organizational
goals
Recruit and retain qualified employees.
Increase or maintain morale/satisfaction.
Reward and encourage peak performance.
Achieve internal and external equity.
Reduce turnover and encourage company
loyalty.
Modify (through negotiations) practices of
unions.
To build employer branding


To help employee meet his economic , personal
,material ,social, psychological needs and
aspirations
To encourage employees to develop their skills
and competencies by attaching higher value to
compensation for increased job performance.
To elicit needed and desirable behaviors from
employees .
To comply with legislation.
An organization designs and implements a reward
system to focus worker attention on the specific
behaviors the organization considers necessary
to achieve desired objectives and goals.

Reward management is concerned with the
formulation and implementation of strategies and
policies ,the purposes of which are to reward
people fairly, equitably and consistently in
accordance with their value to the organization
and thus help the organization to achieve its
goals.
To establish a fair and equitable
Remuneration.
To attract competent personnel
To retain the present Employees
Reward people according to what the
organization values and wants to pay for.
Reward the people for the value they create
Develop performance culture
Develop a performance culture
Motivate people
Function consistently
Operate transparently
To improve union management relations


Total rewards is the monetary and non-monetary
return provided to employees in exchange for
their time, talents, efforts and results. It involves
the deliberate integration of five key elements
that effectively attract, motivate and retain the
talent required to achieve desired business
results. The five key rewards elements are:
Compensation
Benefits
Work-life
Performance and Recognition
Development and Career Opportunities

Total reward
Total rewards strategy is the art of combining
these five elements into tailored packages
designed to achieve optimal motivation. For a
total rewards strategy to be successful,
employees must perceive monetary and non-
monetary rewards as valuable.
Total rewards includes all types of rewards
direct as well as indirect, intrinsic as well as
extrinsic.
Total reward combines the impact of the two
major categories of reward Transactional
rewards and Relational rewards.
Greater impact
Enhancing the employment relation ship
Flexibility to meet individual needs
Talent management
Acc to a survey :
64% of employers invest in training and
career development
43% in non cash recognition awards
34% in annual cash incentive
27% to base salary to retain employees
92% who adopted above practices were able
to attract and retain talent
76%said aligning total rewards with business
strategy was difficult
75% found segmenting high performers to
offer rewards was tough

A set of beliefs and guiding principles that
consistent with the values of the organization
and help to enact them.
It covers the following aspects:
The goals of the organizations compensation
system
Whether there is intent to reward employees for
good performance , motivate good performance
and/or create or reinforce a particular type of
organizational climate.


The communication policy of the organization
Process of making decision
The organizations desired market position
Analysis of competitive factors determining
pay strategy
Desired mix between benefits and cash
What does the organization pay for
performance or seniority?
Role of performance appraisal in the
organization
Manage change in the compensation plan
Synchronization of the compensation
philosophy and plan the rest of the
organizational plan

Reward strategy issued to guide the designs of
specific compensation decisions
Reward strategy is the declaration of intent that
defines what the organization wants to do in
the longer term to develop and implement
reward policies ,practices and process that will
further the achievement of business goals and
meet the needs of its stakeholders
Component of effective reward strategies:
They have to have clearly and well defined link
to business objectives
There have to be well designed pay and reward
programmes
There must be effective and supportive HR and
reward processes in place.
The content of reward strategy
Ability to pay
Internal and external equity
Performance orientation
Non discrimination
Legal compliances
Simplicity and flexibility
Foster employ development
External factors:
Demand and supply of labor
Cost of living
Society
Labor unions
Legislation
The economy
Compensation survey
. Compensation policies: it provides general
guidelines for making compensation
decisions. An organization often formally or
informally establishes compensation policies
that determine whether it will be a pay leader,
a pay follower, or strive for an average
position in the labor market.

Pay leaders: they are organizations that pay
higher wages and salaries than the competing
firms
The market rate: these are the average pay
that most employer provide for a similar job
in a particular area or industry , it is also
known as going rate.
Pay followers: these are companies that
choose to pay below the market rate because
of poor financial condition or belief that they
simply do not require highly capable
employees

Integrating employee efforts with organizational goals.
Sound people management
Social implication
Management tool for improving organizational
performance
Generates talent pool
Creates better brand equity
Maintains organizations compensation cost effectively
Job satisfaction
Gov. compliance