Compensation Management

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 Definition

 Compensation of employees is the total

remuneration, in cash or in kind, payable by
an enterprise to an employee in return for
work done by the latter during the
accounting period.

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 Components:

 Wages and salaries payable in cash or in

kind;
 The value of the social contributions payable
by employers

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 Requirement

Competition
Motivation
Retention

Living Wage Competitor

Fair Wage Market Rate
Minimum Wage Set Model

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 Compensation can be viewed
as:
 As a reward system – motivating employees.
 A tool used by organizations to foster values,
culture and behavior they require.
 An instrument that enables the organizations
to achieve their objectives.

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 Objectives of Compensation

-Acquiring qualified professional

-Retaining current employees
-Ensuring Equity
-Internal Equity
-External Equity.

-Reward and Inducing desired behavior

-Control Cost
-Complying with the legal provisions
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 System to achieve

Job Evaluation
Pay Range
Salary Surveys

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 Types of Compensation

Basically of two types :

Direct Compensation
Indirect Compensation

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 Direct Compensation

 Basic Salary
 House Rent Allowance
 Conveyance
 Leave travel Allowance
 Medical reimbursement
 Bonus
 Special Allowance

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 Indirect Compensation

 Leave Policy
 Overtime Policy
 Hospitalization
 Insurance
 Leave Travel
 Retirement benefits
 Holiday homes
 Flexible Timings

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 Compensation Dimensions

 Pay for work and performance

 Pay for time not worked
 Disability Income Continuation
 Deferred Income
 Spouse(Family) Income Continuation
 Health, Accident and Liability protection
 Compensation Policy

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 Compensation Principles

 Plan and policies should be sufficiently flexible and

responsive to changing local and national conditions .
 Job evaluation must be done scientifically.
 Ensuring equal pay for equal work irrespective of
individual considerations.
 Suitable incentive plan to adapt equitable measures for
recognizing individual differences and contributions .
 Provision for handling wage grievances.
 Adequate information to both employees and the union
regarding the procedure.

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 Methods of Payment

 Time rate system-

 Payment by Results system- Straight Piece work,

- Differential piece work

 Measured day work

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 Total Rewards Strategy

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 Compensation
Fixed pay -- Also known as "base pay," fixed pay is non-discretionary
compensation that does not vary according to performance or results
achieved. It usually is determined by the organization's pay philosophy and
structure.
 Variable pay -- Also known as "pay at risk," variable pay changes directly
with the level of performance or results achieved. It is a one-time payment
that must be re-established and re-earned each performance period.
 Short-term incentive pay - A form of variable pay, short-term incentive pay
is designed to focus and reward performance over a period of one-year or
less.
 Long-term incentive pay -- A form of variable pay, long-term incentive pay
is designed to focus and reward performance over a period longer than
one year. Typical forms include stock options, restricted stock,
performance shares, performance units and cash.

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 Benefits

 Social Insurance  Group Insurance

 Workers' compensation
 Medical
 Social Security
 Disability (occupational)  Dental
 Pay for Time Not Worked --  Vision
These programs are designed to
protect the employee's income flow
 Prescription drug
when not actively engaged at work.  Mental health
 At work (breaks, clean-up time,  Life insurance
uniform changing time)
 Away from work (vacation, company  Disability
holidays, personal days  Retirement
 Savings

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 Learning Opportunities

 Tuition assistance
 Corporate universities
 New technology training
 Attendance at outside seminars, conferences
etc.
 Self-development tools and techniques
 On the job learning; rotational assignments at
a progressively higher level

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 Coaching/Mentoring

 Leadership training
 Access to experts/information networks --
association memberships, attendance and/or
presentation at conferences outside of one's
area of expertise
 Exposure to resident experts
 Formal or informal mentoring programs; in or
outside one's own organization.

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 Advancement Opportunities

 Internships
 Apprenticeships with experts
 Overseas assignments
 Internal job postings
 Job advancement/promotion
 Career ladders and pathways
 Succession planning

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