PRESENTATION ON COMPENSATION MANAGEMENT

Presented By

Jibran Ahmed Sheikh 272017

Syed Sadequain Akber 272025

Compensation
Compensation refers to all forms of pay & rewards going to employees and arising from their employment.

Main Components of Compensation

Direct Financial Payments Wages, Salaries, Incentives, Commissions and Bonuses.

Indirect Financial Payments Employerpaid Insurance and Vacations.

Equity & its impact on Pay Rates

Based on

Equity Theory of Motivation

Equity Theory of Motivation

......if a person perceives an inequity, a

tension or drive will develop in the person's mind, and the person will be motivated to reduce or eliminate the tension and perceived inequity.

Forms of Equity

External equity refers to how a job's pay rate in one company compares to the job's pay rate in other companies.

Forms of Equity

Internal equity refers to how fair the

job's pay rate is, when compared to other jobs within the same company.

Forms of Equity
Individual equity refers to the
fairness of an individual's pay as compared with what his or her coworkers are earning for the same or very similar jobs within the company, based on each individual's performance.

Forms of Equity

Procedural equity refers to the

perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay.

Establishing Pay Rates

1)Conduct a Salary Survey 2)Job Evaluation

3)Group similar jobs into Pay Grades

4)Price each pay grade by using wage curves 5)Fine-tune pay rates

Step 1: Salary Survey

A survey aimed at determining prevailing wage rates. A good salary survey provides specific wage rates for specific jobs. Formal written questionnaire surveys are the most comprehensive, but telephone surveys and newspaper ads are also sources of information.

Salary Survey

* Benchmark Job

A job that is used to anchor the employer's pay scale and around which other jobs are arranged in order of relative worth.

Step 2: Job Evaluation

A systematic comparison done in order to determine the worth of one job relative to another

Job Evaluation Methods

1. Ranking Method 2. Job Classification (or grading) method 3. Point Method 4. Factor Comparision

Ranking Method

The simplest method of job evaluation that involves ranking each job relative to all other jobs, usually based on overall difficulty.

Job Classification(or grading) method

A method for categorizing jobs into groups. The groups are called classes, or grades if they contain jobs that are similar in difficulty but otherwise different.

Classes
Group jobs based on a set of rules for each group or class, such as amount of independent judgment, skill, physical efforts, and so forth, required. Classes usually contain similar jobs.

Grades

A job classification system like the class system, although grades often contain dissimilar jobs, such as secretaries, mechanics, and firefighters. Grade descriptions are written based on compensable factors listed in classification systems.

Point Method

The job evaluation method in which a number of compensable factors are identified and then the degree to which each of these factors is present on the job is determined.

Factor Comparison Method

A widely used method of ranking jobs according to a variety of skills and difficulty factors, then adding up these rankings to arrive at an overall numerical rating for each given job.

Step 3: Group similar jobs into Pay Grades

A pay grade is comprised of jobs of approximately equal difficulty.

Step 4: Price each Pay Grade-Wage Curves

The wage curve shows the relationship between the value of the job and the average wage paid for this job.

Step 5: Fine-Tune Pay Rates

A series of steps or levels within a pay grade, usually based upon years of service.

Competency Based Pay

Where the company pays for the employee's range, depth, and types of of skills and knowledge, rather than for the job title he or she holds.

Sample Case Compensation Policies

University of Alabama
The following policies supersede all compensation policies and statements previously issued. These pay policies and practices are to help ensure that The University of Alabama complies with all Federal, State and Local legislature pertaining to pay. All personnel actions that involve the establishment or change in compensation are subject to the review of the Department of Human Resources and the appropriate University of Alabama Vice President and/or President.

Pay Policies and Practices for those in the Staff

1. Pay Structure 2. Hiring Rates 3. Promotional Increases 4. Lateral Transfers 5. Demotions 6. Effective Dates of Reclassifications

Hiring Rates
The hiring official should determine an appropriate starting pay rate based on the candidates experience and skills, existing pay rates for current employees and the availability of funds. For candidates who are current employees, consideration needs to also be given based on whether the hiring action will be a promotion, lateral transfer or demotion for the employee. Specific guidelines related to each of these situations are defined in the next few sections. For recommendations above the 1 st quartile of the appropriate salary range the following factors should be considered: (1) qualifications of the candidate; (2) number of qualified candidates in the pool (3) cost and length of time associated with the recruiting campaign and (4) relevant salaries of other employees with the same job title and/or in positions within the same pay grade who possess similar qualifications as the candidate.

Hiring Rates
Approval Level Supervisor Quartile Director/Dean Midpoint* Vice President Quartile** President Maximum** Starting Pay Minimum to 1st 1st Quartile to

Midpoint - 3rd
3rd Quartile -

Hiring Rates
* For departments in Academic Affairs, approval from the Assistant Academic Vice President for Administration is required to hire above the 1 st quartile of the salary range. For departments in Student Affairs, approval from the Assistant Vice President for Student Affairs is required to hire above the 1 st quartile of the salary range. ** A recommendation from the Department of Human Resources should be obtained prior to obtaining approval from the Vice President or President.

Promotional Increases
All promotions (moving up one or more grades) should result in a salary increase of at least 5%. The appropriate increase should be determined by the hiring manager but it should not exceed the greater of 15% or the top of the first quartile.* Any promotional increase above the recommended guidelines require approval of the appropriate Vice President and/or President with a prior recommendation from the Department of Human Resources. * For departments in Academic Affairs, approval is required above the 1 st quartile from the Assistant Academic Vice President for Administration. For departments in Student Affairs, approval is required above the 1 st quartile from the Assistant Vice President for Student Affairs.

Lateral transfers

No increase in pay is recommended. Requests for salary increases must be approved by the appropriate Vice-President with a prior recommendation from the Department of Human Resources.

Demotions

Demotions are discouraged in normal situations. Consideration for pay as it relates to transfers to a lower pay grade will be handled on an exception basis by the department head, the Department of Human Resources and the appropriate Vice President.

Pay Policies and Practices for those in the Maintenance Pay Plan
1. Hiring Rates

2. Job Movement within the Maintenance Pay Plan

Hiring Rates
Candidates should be hired in at the established Entry Rate or Job Rate (if no entry rate exists) for that job. For those hired in at the established Entry Rate, their rate of pay should be increased after meeting all criteria to qualify for the Job Rate. It should be clearly communicated to the candidate that in certain jobs they may be eligible for a pay increase based on established criteria but it is not a guaranteed pay increase. The hiring official may request to hire a candidate at the Job Rate rather than the Entry Rate based on the qualifications of the candidate but such requests should have prior approval by the Department of Human Resources.

Job Movement within the Maintenance Pay Plan

When an employee moves up the pay hierarchy into a new position, the employee should be paid the established single rate for the new position. Exceptions to this apply to promotions to Level IIIB positions in the skilled trades and promotions to Team Leader promotions in the Custodial and Grounds Career Ladders. In these situations, employees should receive the applicable Level IIIB or Team Leader rate or a 5% increase, whichever is greater. If the individual does not perform satisfactorily in the new position and the decision is made to return the employee to their former position, the employee should be paid the established single rate of the position to which they are demoted.

When an employee moves to a position that is lower in the pay hierarchy, the employee should be paid at the established single rate for the lower level job.

Other Pay Policies and Practices

1. Market Adjustments (no change in duties/responsibilities) 2. Shift Differentials 3. Call-Out Pay 4. Special Event Pay 5. On-Call Pay 6. Timesheets and Record-keeping 7. Other Staff Compensation Related Policies 8. Procedures for Reporting Errors in Pay

Market Adjustments
(no change in duties/responsibilities)
With prior approval from the appropriate Vice President, departments may make recommendations to the Department of Human Resources for market pay rates or ranges to be developed for certain positions. Consideration will be given to market adjustments for the following reasons:

1. Documented recruiting difficulties have been experienced;

2. Market salary fluctuations necessitate an adjusted pay rate or pay range; or 3. Market adjustments necessary to address the retention of qualified individuals.

Shift Differentials
It is the policy of The University of Alabama to pay shift differentials to non-exempt employees who work evening and night shifts on a regularly scheduled basis. Effective September 24, 2006, the appropriate amounts are $.40 per hour for evening shifts and $.55 for night shifts. All eligible employees should be paid a shift differential for the entire shift for work performed on the evening or night shift. Shift differentials for eligible employees are also paid during all periods of paid leave, such as holidays, sick leave or annual leave. For the purpose of applying shift differentials, shifts are defined as follows: a. Day shift (first shift) is the shift where 50% or more of the regularly scheduled hours are worked between 6:00 a.m. and 6:00 p.m. b. Evening shift (second shift) is the shift where 50% or more of the regularly scheduled hours are worked between 6:00 p.m. and 12:00 midnight. c. Night shift (third shift) is the shift where 50% or more of the regularly scheduled hours are worked between midnight and 6:00 a.m.

Call-Out Pay

When overtime has not been scheduled in advance, and non-exempt employees are called back to work after their regularly scheduled hours or on their off days, they should be paid a minimum of four (4) hours at their overtime rate or the actual overtime hours worked, whichever is greater, and will be paid as such for each call-out.

Special Event Pay

When non-exempt employees work a special event which is held outside of their scheduled work hours*, they should be paid at their overtime rate for the time actually worked at the special event. Examples of these events include, but are not limited to, athletic events, events at the Bryant Conference Center and special events for Admissions. *Departmental supervisors and managers may modify employee work schedules in order to meet the business needs of the department.

On-Call Pay
There are situations when non-exempt employees are expected to be available via phone or beeper for work related emergencies. The Department of Human Resources will make the determination based on information provided by the department if this time should be considered hours worked and, therefore, compensable time. If hourly paid employees are required to be on-call but it is not considered to be compensable time (as determined by the Department of Human Resources), the department may, but is not required to, pay the employees a set rate of remuneration as recommended by the department and approved by HR and the appropriate vice president. If hourly paid employees are called into work, the employees should be paid using the guidelines for CallOut Pay as defined above.

Timesheets and Record-keeping

All non-exempt employees are required to complete timesheets and accurately record all time worked and leave taken. Timesheets are the basic source of information for payroll purposes; therefore, time worked must be reflected accurately. Falsification of timesheets is a serious offense and can result in disciplinary action up to and including termination. Timesheets should be checked by supervisors and department heads for accuracy. No changes, corrections, or notations are to be made on the timesheets except with the written approval and signature of a department head or supervisor. Specific questions regarding completion of time records for non-exempt employees should be directed to the Human Resources Service Center. It is the responsibility of the Human Resources Service Center to make the final determination on how to accurately record hours worked.

THANK YOU FOR YOUR ATTENTION