Compensation Management


Payroll involves large sums of money Pays systems are therefore an intergral part of the business strategy The pay debate as to whether the best way of rewarding service is through pay is far from settled.

Objectives of compensation system   

A large sum of money is invested in people Design rests on what must the company achieve. System therefore needs to attract good employees by structuring packages that tempt people to do the job

Achievement of the objectives are determined by :      Labour markets forces Collective bargaining Government legislation Top managements philosophy regarding pay Top managements willingness to recognise ability and effort .

NO Incentives.Designing a compensation system     Traditional way of paying was done by ignoring the interaction of organizational members and buying employees time by the hour. people work hard. . In a rewarding environment . rewards etc Today we value employees.

The rewarding environment includes    How does this benefit practice benefit the organization ? Does the benefit offset the administrative costs? If we discontinued this practice. . would that adversely affect the organization¶s performance?  This gives off a holistic picture of the org.

11. either in the form of a salary or as an hourly wage.3. It includes cash incentives and various share offers from employers. . The defining factor is that it has a cash value.1 Elements of total compensation    Direct compensation is the fixed pay an employee receives on a regular basis.

providen fund.Elements of total compensation     Designed to reward employees for good performance. such as upper ± level managers.UIF. . Can also include medial aid. pension. etc. Can be monetary or non-monetary. Perquisites or perks are a special category of behefits and are only available only to employees with some special status.

Principles of value ±chain compensation        Companies need to look at compensation as a value-creating function. Balances the four major compensation objectives which include: Sustaining management Motivating performance Building employee commitment Encouraging growth in employee¶s skills . It creates value for the organisation and employees.

Principles of Reward Strategy        Pay for performance Links to other levers of organisational change such as providing recognition when deserved Reward measurable competencies Match incentives to the company culture Keep incentives clear and simple Over-communicate the reward strategy for the best results The greatest incentive is the work itself as employees want to be recognised for the work they do and the contributions they make .

Model for compensation system Analyse present compensation structure Formulate salary policies Select compensation system Develop implementation plan Evaluate and monitor .

Based compensation plan route Conduct job analysis Identify compensable factors Develop a job hierarchy Construct job grades Carry out compensation survey Establish final pay policy .Job.

This had to change . Employees were not encouraged to develop skills.Traditional Pay Systems    Traditionally people were paid primarily through base salaries determined by specific job. the need to maintain a certain level of internal pay equity an the need to pay externally competitive salaries.

Useful in µboundaryless¶ organisation.Emerging Pay Systems      Pay for knowledge and skills Pay for competencies Performance based pay Incentive pay systems Broadbanding = rather than climb up through a series of grades. . employees might spend most of their careers in a single band moving laterally and acquiring new knowledge and competence.

Employee Benefits  Items in the total package offered to employees over and above salary which increase their wealth or well-being at some cost to the employer .

Mandatory Benefits   UIF Compensation for injuries and diseases .

social and recreational services .Voluntary Benefits           Most of these benefits have certain legislative mimimums. Canteens. 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.

management and communication Plan how the above will be accomplished Implement the above . of admin. your workforce and your budget Determine what your employees need and want Decide what you will provide and what you will actually spend in total Determine options and costs.Benefit Planning and flexible benefit plans          Establish objectives Collect complete descriptive data on the current workforce Determine how much money is available in the budget Determine what programmes fit your objectives.

Advantages of flexible benefits programme     The company can set the sum total of benefits for each employee The changing needs of the workforce are catered for Employees take ownership for their choice of benefits by satisfying their own unique needs It is less costly for the organisation when an employee adds a new benefit .

Disadvantages of flexible benefits    Without proper assistance employees can make bad choices and find themselves not covered for emergencies Company administrative costs increase The cost of some benefits may increase as a result of a majority of employees choosing the benefit .

Calculating the costs of employee benefits     The total annual costs of benefits for all employees Cost of benefits per employee per annum Percentage of the payroll (total costs of benefits divided by the annual wage) Costs per employee per hour .

or increase employees¶ job satisfaction Costs of employee benefits and services have increased dramatically Employers are required by law to introduce certain programmes So-called voluntary programmes are constantly under pressure from labour unions. competitors and the industry to improve on employee benefits and services .What to consider when considering costs     There is little evidence that benefits really encourage improved performance.

Benefits Strategy    The pace-setter Comparable benefits Minimum benefits .

Remuneration will be linked to teams rather than to individuals .Compensation systems and quality assurance     Compensation benefits will shift towards base rates with top-up incentives based on performance. Remuneration packages will become more taxeffective. such as gain share. Increased flexibility will become evident in remuneration packages.profit share etc.