Compensation

Cash and non-cash rewards employees receive in exchange for their work Effective compensation management Employees more likely to be satisfied and motivated to contribute Compensation perceived to be inappropriate Performance, motivation and satisfaction may decline dramatically Employee turnover may occur Dissatisfaction with absolute or relative pay

Contd..
Pay is a statement of an employees worth by an employer. Pay is a perception of worth by an employee.

Total Compensation

Direct Wages / Salaries Commissions Bonuses Gainsharing

Indirect Time Not Worked

Vacations Breaks Holidays

Insurance Plans
Medical Dental Life

Security Plans
Pensions

Employee Services

Educational assistance Recreational programs

2007 Thomson/SouthWestern. All rights reserved. 9 4

Compensation Management and Other HRM Functions

Aid or impair recruitment

Recruitment

Supply of applicants affects wage rates Selection standards affect level of pay required

Pay rates affect selectivity

Selection Training and Development Compensation Management Labor Relations

Pay can motivate training Training and development may lead to higher pay Low pay encourages unionization

Increased knowledge leads to higher pay

A basis for determining employees rate of pay Pay rates determined through negotiation

2007 Thomson/SouthWestern. All rights reserved.

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Objectives of Compensation
Administrative efficiency
Acquire personnel

Retain employees

Legal compliance

Effective Compensation

Ensure equity

Control costs

Reward behaviour

Wage Policy In India

A wage policy offers certain guidelines for determining a wage structure. The term wage structure refers to various pay scales showing rages of pay within each grade. Three important elements of wage policy in India need to be elaborated here Minimum wage: Wage sufficient to sustain and preserve the efficiency of the worker and offer basic amenities of life

Fair wage: It is above the minimum wage but below the living wage. It is fixed, taking into account factors such as the productivity of labour, prevailing wage rates, level of national income and its distribution, the employers capacity to pay etc. Living wage: This is the highest amount of wages proposed by the government, offering basic amenities of life and satisfying the social needs of worker

A PAY MODEL

POLICIES

TECHNIQUES

OBJECTIVES

ALIGNMENT

Work Descriptions Evaluation Internal Analysis Certification Structure

EFFICIENCY
MKT Defn Surveys Policy Lines Pay Structure

COMPETITIVENESS

Performance Quality Customer & stockholder Cost FAIRNESS

CONTRIBUTIONS

Seniority based

Perfo Based

Merit Incentives Guidelines Programs

COMPLIANCE MANAGEMENT
Cost Comm . Change Evaluation

INTERNAL ALIGNMENT

 Internal alignment adresses relationships inside the organisations The relationships form a pay structure that should :support the organization strategy, support the workflow and motivate behaviour toward organization objectives.

Contd..
Therefore: Internal alignment, often called internal equity, refers to the
pay relationships among different job/skills/competencies within a single organization
Pay structure refers to the array of pay for different work or skills within a single organization. The number of levels , the differentials in pay between the levels and the criteria used to determine those differentials describe the structure

STRUCTURES VARY AMONG ORGANIZATIONS

An internal pay structure can be defined by:1) The number of levels of work 2) The pay differentials between the levels 3) The criteria or basis used to define those levels & differentials - content and value - use value & exchange value - job & person based structures

What shapes internal structures

External factors Economic pressures Gov Policies,Laws, regulations Stakeholders Cultures & customs

Internal structures Organizational factors Strategy Technology Human capital HR policy Employee acceptance Cost implications Levels Differentials Criteria

JOB EVALUATION

 Internal alignment adresses relationships inside the organisations The relationships form a pay structure that should :support the organization strategy, support the workflow and motivate behaviour toward organization objectives.