Compensation & Benefits

HRM NIFT Rajyalakshmi

 Contents
 Meaning
 Functions
 Planning goals
 Objective determinants
 Compensation laws
 Compensation strategy
 Compensation structure
 Fringe benefits

HRM NIFT Rajyalakshmi

Compensation …..

• An HRM function that deals

with every type of reward
individual received in
exchange for performing
organizational tasks.

• It is the chief reason why

people seek employment
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 Organization
My ability ,skill will compensate
,knowledge &loyalties with Financial &
from today are with non- financial
organization. benefits.

It is an exchange relationship
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Salary Vs. Wages

 Salary is best associated with

employee compensation
quoted on monthly / annual
basis.

Wages is best associated with

employee compensation based
on the number of hours worked
multiplied by an hourly rate of
pay.
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COMPENSATION FUNCTION
 It serves to attract qualified applicants
to the organization.

 It helps to retain competent employees

in the organization.

 It serves as an incentive to motivate

employees to put forth their best
efforts.

 Minimizing it can also contribute to

organizational effectiveness since it is a
significant cost for most employers.
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 Planning Goals

Develop a program outline.

Designate overseeing designing

Develop a philosophy.

Conduct a job analysis

Evaluate jobs.

Determine grades.
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 Planning Goals Contd….
 Establish grade pricing & salary range.

 Determine appropriate salary structure.

 Develop a salary administration policy.

 Obtain top executives' approval

 Communicate the final program

 Monitor the program.

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 Adequate

Equitable

Balanced

Cost – effective

Secure

Incentive providing

Acceptable
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Compensation Determinants

Product Market Labor Market

pressures competition
may act as an can be seen
upper as placing a
boundary on lower
employee boundary on
compensation
pay level.

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 Compensation laws
 Minimum Wages Act 1948
 Payment of Wages Act 1936
 Payment of Bonus Act 1965
 Equal Remuneration Act 1976

Welfare & Benefits laws

Workers Compensation Act 1923
Employee State Insurance Act 1948
Maternity Benefit Act 1961
Employees Provident Fund &
Miscellaneous Provisions Act 1952
Payment Of Gratuity Act 1972
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 Compensation Strategy
It is an action plan designed to move an
organization toward achievement of its
goal / vision.

Generally at three levels

Pay level decisions

Pay structure decisions

Individual pay determination

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Pay Level Decisions
• High Pay Strategy : Pay higher than
average salaries.
e.g. MNC

• Low Pay Strategy: Pay minimum level

needed to hire enough employees
e.g. Small enterprises

• Comparable Strategy: At the going wage

level modified by cost-of-living or
purchasing power.
e.g. Most of the domestic big league
companies

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Compensation Structure
 Monetary
Base Pay
Variable Pay
Bonus
Incentive
Stock options
 Non-Monetary (Benefits)
Mandatory benefits
Voluntary benefits

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Non-Monetary (Benefits)
• Vacation leave
• Paid public holidays
• Time for personal matters
• Sick leave
• Maternity leave
• Health and life insurance
• Medical Aid Schemes
• Pension Funds
• Employee Services e.g.. Canteens, social
& recreational services

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Factors Determining
Compensation Structure
 The organization's ability to pay
 Supply and demand for labor
 The prevailing market rate
 The cost of living
 Productivity
 Trade union’s bargaining power
 Job requirements
 Managerial attitudes
 Psychological and sociological factors

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WAGE STRUCTURE IN INDIA

 Basic Wage

 Dearness Allowance

 Overtime Payment

 Annual Bonus

 Incentive Systems

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 Fringe Benefits
In addition to the remuneration
certain supplementary benefits
& services known as “fringe
benefits” are also available to
them.
Day Care

Gift vouchers Accommodation & vehicle

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 Characteristics of Fringe Benefits
 These benefits are distinctly additional to
the regular wages
 These benefits are meant primarily to be
of advantage to the employees.
 The advantages accrued to the employees
through the provision of fringe benefits are
as such they cannot be secured through
their own individual efforts.
 Only those benefits fall within the purview
of fringe benefits which are or can be
expressed in cash terms.
 The scope of fringe benefits is different
from that of welfare services.
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Reward system

• One of the important attributes of

work organization is its ability to
give rewards to their members

• Pay, promotions, fringe benefits, &

status symbols are perhaps the
most important rewards.

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Thank you
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