Compensation & Benefits

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 Contents
{ eaning
{ Functions
{ Planning goals
{ Objective determinants
{ Compensation laws
{ Compensation strategy
{ Compensation structure
{ Fringe benefits

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Compensation «..

‡ An HR 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
y ability ,skill will compensate
,knowledge &loyalties with Financial &
from today are with non- financial
organization. benefits.

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ºalary Vs. Wages

{ º
 is best associated with

employee compensation
quoted on monthly / annual
basis.

{ è  is best associated with

employee compensation based
on the number of hours worked
multiplied by an hourly rate of
pay.
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COMPENSAT|ON
NCT|ON
{ 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.

{ inimizing it can also contribute to

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

{evelop a program outline.

{esignate overseeing designing

{evelop a philosophy.

{Conduct a job analysis

{Evaluate jobs.

{etermine grades.
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 Planning Goals Contd«.
{ Establish grade pricing & salary range.

{ etermine appropriate salary structure.

{ evelop a salary administration policy.

{ Obtain top executives' approval

{ Communicate the final program

{ onitor the program.

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 {Adequate

{Equitable

{Balanced

{Cost ² effective

{ºecure

{Incentive providing

{Acceptable
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Compensation eterminants

Product arket Labor arket

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

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 Compensation laws
{ inimum Wages Act 1948
{ Payment of Wages Act 1936
{ Payment of Bonus Act 1965
{ Equal Remuneration Act 1976

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{Workers Compensation Act 1923
{Employee ºtate Insurance Act 1948
{aternity Benefit Act 1961
{Employees Provident Fund &
iscellaneous Provisions Act 1952
{Payment Of Gratuity Act 1972
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 Compensation ºtrategy
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 ecisions
‡ High Pay ºtrategy : Pay higher than
average salaries.
e.g.  C

‡ Low Pay ºtrategy: Pay minimum level

needed to hire enough employees
e.g. ºmall enterprises

‡ Comparable ºtrategy: At the going wage

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

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Compensation ºtructure
{ onetary
{Base Pay
{Variable Pay
{Bonus
{Incentive
{ºtock options
{ on-onetary (Benefits)
{andatory benefits
{Voluntary benefits

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 on-onetary (Benefits)
‡ Vacation leave
‡ Paid public holidays
‡ Time for personal matters
‡ ºick leave
‡ aternity leave
‡ Health and life insurance
‡ edical Aid ºchemes
‡ Pension Funds
‡ Employee ºervices e.g.. Canteens, social
& recreational services

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Factors etermining
Compensation ºtructure
{ The organization's ability to pay
{ ºupply and demand for labor
{ The prevailing market rate
{ The cost of living
{ Productivity
{ Trade union·s bargaining power
{ Job requirements
{ anagerial attitudes
{ Psychological and sociological factors

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èAGE
STRCTRE
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{ Basic Wage

{ earness Allowance

{ Overtime Payment

{ Annual Bonus

{ Incentive ºystems

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 Fringe Benefits
In addition to the remuneration
certain supplementary benefits
& services known as ´fringe
benefitsµ are also available to
them.
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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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