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Performance Management
(Topic:Innovative ways of compensation)
UILMS, GGN
Compensation
Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for his work performed. Compensation in other terms also called as Employee Remuneration. Remuneration is the compensation; an employee receives in return for his or her contribution to the organization. Total compensation = Direct + Indirect Compensation
Direct compensation:
Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization Basic Salary House Rent Allowance Conveyance Leave Travel Allowance Medical Reimbursement Bonus Special Allowance (overtime, mobile allowances, meals, commissions, travel expenses etc.)
Indirect compensation:
Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization.
Leave Policy Overtime Policy Hospitalization Insurance Leave Travel Retirement Benefits Holiday Homes Flexible Timings
Components of compensation:
Job analysis:
Job analysis is a systematic approach to defining the job role, description, requirements, responsibilities, evaluation, etc It also depicts the job worth i.e. measurable effectiveness of the job and contribution of job to the organization. Thus, it effectively contributes to setting up the compensation package for the job position.
Pay structures:
Pay structures are the strong determinant of employees value in the organization. It helps in analyzing the employees role and status in the organization. It provides for fair treatment to all employees. Pay structures also include the estimation of incentives.
Salary surveys:
The Salary survey is the research done to analyze the industry standards to set up the compensation strategy for the organization.
Employee Stock Ownership Plan (ESOP) Employee Stock Ownership Plan (ESOP) is an employee benefit plan. The scheme provides employees the ownership of stocks in the company. It is one of the profit sharing plans. Employers have the benefit to use the ESOPs as a tool to fetch loans from a financial institute. It also provides for tax benefits to the employers. Executive Incentives Organizations offer heavy incentives to executives to retain the talented workforce. The immense competition in the market has forced the organizations to offer lucrative compensation packages. Performance based incentives comes out to be the only solution for the demand-supply disparity. Who works- receives the appreciation and who does not works- lacks behind. Incentive plans Organizations can opt for an effective incentive plans from the various alternatives available. The organizations usually opt for that incentive plans which suits its requirement the most.
The various incentives plans available are: Piece Rate Commissions Standard Hour Pay Maturity Curves Profit Sharing Merit Raises etc.
Strategic incentive plans In todays competitive business world of globalization organizations should formulate compensation strategies keeping in mind their employees interest. With more and more players entering the market and high attrition rate, it is a challenge for organizations to retain their talented human resource. The organizations should follow a systematic process to formulate the incentive plans.
Some new innovative ways of compensation are as following: Performance based programs:
Time off Surprise: Give Supervisors a bank of days and/or afternoons off that they can reward to staff on the spot for meritorious service. Behind-The-Scenes: Recognize employees yearly or periodically who are not usually in the limelight. An alternative, the Good Tries program, involves recognizing employees who take risks, regardless of whether those risks result in failure or success.
Cash for Ideas: Periodically hand out index cards and ask employees to record ways the company could save money. Pay a nominal amount if the idea is implemented, pay an additional.
Relationship-Building Programs:
Executive Coffee Breaks: Institute a program where the CEO and/or other top executives meet with all or small groups of staff for an hour or so over coffee. Orient the Family Program: Sponsor a family orientation program for new staff which includes refreshments, office tours, a slide or video introduction to the organization and dialogues with top executives. Follow up with family socials throughout the year. Special Dress Days: Plan special dress days to promote a sense of humor. Examples might include Ugly Tie/Earrings, Crazy Sweater, Silly Socks, Hawaiian etc.
Core Benefits (Traditional) Health Insurance Prescription Drugs Basic Life Insurance Vacation Holidays Sick Pay Disability