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Mrs. Nora Bhatia
Compensation : concept and context
± ± ± ± ± ± Rewards that motivate employees to perform Help foster the values, culture, behavior required Achievement of business objectives Attract and retain talent Sense of commitment to the orgn Acquire a competitive advantage
DA. sick leave 4 . incentives etc Indirect compensation : benefits like PF. Shift allowance. medical. bonus. Basic.Compensation Direct compensation : financial remuneration. Pension. usually cash. health insurance.
Corresponds to the difference in the evaluated contents of the job External equity : wage rate in an orgn is commensurate with wage rate for similar jobs in the industry.Compensation Internal equity : wage differentials reflect the degree of difficultly. region 5 .
Functions & responsibilities of a compensation program Formulate compensation plans Job evaluation system Ascertain going rates for jobs across the industry Make policy recommendations Supervise and maintain records pertaining to all matters of compensation Framing a compensation policy aligned to business goals and objectives Promote team and unit performance 6 .
Corporate compensation policy Strategy of wage increase : productivity linked / cost reduction factor Rationality and hygiene factors : linked to job outcome Internal equity External equity Review : evolutionary process Managerial compensation 7 .
D. multi-skilled 8 . MBAs) Team pay plans Coping with change : increasing expectations. skills and competency (Ph.Issues and current trends Broad banding : greater flexibility Pay for knowledge.
Wage Theories Subsistence theory : ± David Ricardo ± Price of labour depends on the subsistence of labour ± Price equals to the amount of commodities required to feed. fewer children. clothe a worker and to subsist and perpetuate his race ± Labor like any commodity can be bought and sold ± Supply less : higher than subsistence wage. back to subsistence wage 9 . more children. back to subsistence wage ± Supply high : lower than subsistence wage.
Wage Theories Surplus value theory : ± Karl Marx ± Tendency of the capitalist. chronic unemployment and existence of industrial reserve army that kept wages at subsistence level ± Supply of labor always tended to be kept in excess ± Worker did not get full compensation for work done ± Rate of surplus labor which is the ratio of surplus labor to necessary labor is called µrate of exploitation¶ 10 .
Wage Theories Wage fund theory : ± Adam smith ± Wage fund assumed to be fixed ± Any change in wages was due to the number of workers seeking employment Bargaining Theory : ± John Davidson ± Upper limit (beyond which employer will incur losses) 11 .
fall in demand will affect employment and output 12 .Wage Theories Purchasing power theory : ± High wage rate : more purchasing power. increase in demand and thus higher output ± Low wage rate : less purchasing power.
Behavioral theories What motivate people to work ? A satisfied need is not a motivator 13 .
Behavioral Theories Hierarchy of needs : Abraham Maslow 1 .14 .
Behavioral Theories Two factor theory ± Friedrich Herzberg ± Hygiene factors company policy and administration supervision ± technical salary working conditions If absent will lead to employee dissatisfaction 15 .
Behavioral Theories Two factor theory ± Friedrich Herzberg ± Motivating factors ± ± ± ± recognition work itself responsibility advancement If present can lead to employee satisfaction and motivation 16 .
Wage Theories ERG theory ± ± ± ± Clayton Alderfer Existence (survival or physical being Relatedness (interpersonal) Growth (personal development) 17 .
unmarried. travel concessions ± Senior employees : retiral benefits. health benefits. 18 . lesser need for children¶s education. health insurance.Process theories Motivation and effort : the relation Expectancy theory : Victor Vroom ± An individual¶s preference for a particular outcome ± Youngsters : single.
Persons outcomes Persons inputs Other¶s outcomes <=> Other¶s inputs 19 .Equity theory Inequity occurs when a person perceives that the ratio of his/her outcomes to inputs and the ratio of a relevant other¶s outcomes to inputs are unequal.
Key considerations : public policy Fix statutory minimum wages Equal pay for equal work Compensate for rise in cost of living Capacity to pay : Supreme court ³an employer who cannot pay minimum wages has no right to exist´ 20 .
not his greed ± Labour cost and productivity : ITC cost per cigarette at the same level for a 5-year period ± Merit and seniority progression : time bound promotions ? ± Motivation : ³money may not be everything but everything else is way behind´ ± Integrity : compensate them adequately enough to keep them out of temptation 21 .Key considerations : public policy Practical problems : ± Minimum wage : organized and unorganized sector ± Possible to pay for one¶s need.
Legal framework of wage and salary administration 22 .
education. productivity of labour. requirements of essential social heads. Between these two the actual wage depends on : prevailing wage rate. etc Fair wage : Lower limit is minimum wage and upper limit is the capacity of the industry to pay. place of the industry in the national economy 23 . Minimum wage : not only for bare subsistence but also for preservation of efficiency and providing some measure of medical. insurance against some future misfortune. etc Living wage : protection against ill-health.
1976 Payment of Gratuity Act 1972 24 . Payment of wages Act : 1936 Payment of bonus Act 1965 Minimum Wages Act 1948 Equal remuneration Act.
1936 Purpose : To ensure regular and prompt payment of wages To prevent exploitation of wage earners by prohibiting arbitrary fines and deductions from wages Application Applies to : persons employed in any factory. 25 .PAYMENT OF WAGES ACT. and to persons employed in an industrial or other establishment specified in sub-clauses (a) to (g) of clause (ii) of section 2. either directly or through a sub-contractor. persons employed (otherwise than in a factory) upon any railway by a railway administration or. by a person fulfilling a contract with a railway administration.
if the employer is the railway administration and the railway administration has nominated a person in this behalf for the local area concerned. if a person has been named as the manager of the factory under the Factories Act. (2) No wage-period shall exceed one month. 26 . 1936 Responsibility for payment of wages Every employer shall be responsible for the payment to persons employed by him of all wages required to be paid under this Act: in factories. a person responsible to the employer for the supervision and control of the industrial or other establishments upon railways (otherwise than in factories). Fixation of wage-periods (1) Every person responsible for the payment of wages under section 3 shall fix periods (in this Act referred to as wage-periods) in respect of which such wages shall be payable.PAYMENT OF WAGES ACT. 1948 in industrial or other establishments.
PAYMENT OF WAGES ACT. after obtaining the written authorisation of the employed person. the balance of wages found due on completion of the final tonnage account of the ship or wagons loaded or unloaded. shall be paid before the expiry of the tenth day. after the last day of the wage-period in respect of which the wages are payable: [PROVIDED that in the case of persons employed on a dock. pay him the wages either by cheque or by crediting the wages in his bank account. shall be paid before the expiry of the seventh day from the day of such completion. wharf or jetty or in a mine. Time of payment of wages (1) The wages of every person employed upon or in(a) any railway. 1936 Wages to be paid in current coin or currency notes All wages shall be paid in current coin or currency notes or in both: PROVIDED that the employer may. 5. shall be paid before the expiry of the seventh day. factory or industrial or other establishment.] 27 . (b) any other railway. factory or industrial or other establishment upon or in which less than one thousand persons are employed. as the case may be.
1936 Deductions which may be made from wages Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act. authorise. namely: (a) fines. by general or special order.accommodation which may be specified in this behalf by the State Government by notification in the Official Gazette.PAYMENT OF WAGES ACT. where such damage or loss is directly attributable to his neglect or default. and may be of the following kinds only. [(d) deductions for house-accommodation supplied by the employer or by government or any housing board set up under any law for the time being in force (whether the government or the board is the employer or not) or any other authority engaged in the business of subsidising house. (c) deductions for damage to or loss of goods expressly entrusted to the employed person for custody. 28 . (b) deductions for absence from duty.] (e) deductions for such amenities and services supplied by the employer as the State Government 15[or any officer specified by it in this behalf] may. or for loss of money for which he is required to account.
and (ii) in any other case. as the case may be.PAYMENT OF WAGES ACT. 1936 Limits on the total amount of deductions : Notwithstanding anything contained in this Act. fifty per cent of such wages PROVIDED that where the total deductions authorised under sub-section (2) exceed seventy five per cent or. 29 . the total amount of deductions which may be made under sub-section (2) in any wage-period from the wages of any employed person shall not exceed(i) in cases where such deductions are wholly or partly made for payments to co-operative societies under clause (j) of sub-section (2). the excess may be recovered in such manner as may be prescribed. fifty per cent of the wages. seventy-five per cent of such wages.
with the previous approval of the State Government or of the prescribed authority. and all such realisations shall be applied only to such purposes beneficial to the persons employed in the factory or establishment as are approved by the prescribed authority. 30 . (2) A notice specifying such acts and omissions shall be exhibited in the prescribed manner on the premises in which the employment is carried on or in the case of persons employed upon a railway (otherwise than in a factory). may have specified by notice under subsection (2). (5) No fine shall be imposed on any employed person who is under the age of fifteen years. (3) No fine shall be imposed on any employed person until he has been given an opportunity of showing cause against the fine.PAYMENT OF WAGES ACT. or otherwise than in accordance with such procedure as may be prescribed for the imposition of fines. . (6) All fines and all realisations thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under section 3 in such form as may be prescribed. 1936 Fines (1) No fine shall be imposed on any employed person save in respect of such acts and omissions on his part as the employer. at the prescribed place or places. (4) The total amount of fine which may be imposed in any one wage-period on any employed person shall not exceed an amount equal to three per cent of the wages payable to him in respect of that wage-period.
Deductions for payment to Prime Minister¶s National Relief Fund or any other Fund Subject to a written authorization of the employed person is obtained 31 .PAYMENT OF WAGES ACT. Deductions for payment to Post Office Savings Bank Subject to the following conditions : a written authorization of the employed person is obtained such conditions as may be specified by the State Govt. Deductions for payment of Life Insurance Premium Subject to the following conditions : a written authorization of the employed person is obtained such conditions as may be specified by the State Govt. 1936 Deductions for payments to co-operative societies and insurance schemes Deductions under clause (j) 27[and clause (k)] of sub-section (2) of section 7 shall be subject to such conditions as the State Government may impose.
nature of work.Minimum Wages Act 1948 The need Purpose Procedure for fixing and revising minimum wages Committee method Notification method (2 months ± Advisory Board Maintenance of records and display of notices : Name. wages paid. receipts by employees Claims and procedure : Time for making the claim (within 6 months) Procedure for deciding the claims 32 .
technical or clerical work drawing a salary or wage not exceeding Rs 10. The act covers a probationer but not an apprentice. Application. administrative. 33 . skilled.THE PAYMENT OF BONUS ACT. 1965 The Scheme : To impose statutory obligation upon the employer of every establishment covered by the Act to pay bonus to employees in that establishment To define the principle of payment of bonus as per prescribed formula To provide for payment of minimum and maximum bonus and link the payment of bonus with the scheme of ³set-off´ and ³set-on´ To provide for enforcement of the liability for payment of bonus. shall apply to ± every factory. manual.000/. Scope : The act covers all persons who are employed for hire or reward to do any work. managerial. supervisory. and every other establishment in which twenty or more persons are employed on any day during an accounting year.per month in any factory or establishment employing 20 or more persons.
in respect of an amount equal to the gross profits of the employer for such preceding accounting year after deducting therefrom the amount of bonus which the employer has paid or is liable to pay to his employees in accordance with the provisions of this Act for that year. The available surplus in respect of any accounting year shall be the gross profits for that year after deducting therefrom the sums referred to in section 6. 34 . in respect of an amount equal to the gross profits of the employer for the immediately preceding accounting year. calculated in accordance with the provisions of section 7. an amount equal to the difference between - (i) the direct tax.THE PAYMENT OF BONUS ACT. calculated in accordance with the provisions of section 7. 1965 Computation of available surplus. and (ii) the direct tax.
profits and gains during that year.²The following sums shall be deducted from the gross profits as prior charges. namely:Depreciation : any amount by way of depreciation admissible in accordance with the provisions of subsection (1) of section 32 of the Income-tax Act.THE PAYMENT OF BONUS ACT. 1965 Sums deductible from gross profits. direct taxes subject to the provisions of section 7. 35 . such further sums as are specified in respect of the employer in the 2[Third Schedule]. or in accordance with the provisions of the agricultural income-tax law. as the case may be Development rebate : any amount by way of 1[development rebate or investment allowance or development allowance] which the employer is entitled to deduct from his income under the income-tax Act. any direct tax which the employer is liable to pay for the accounting year in respect of his income.
²Every employee shall be entitled to be paid by his employer in an accounting year. misappropriation or sabotage of any property of the establishment. bonus.THE PAYMENT OF BONUS ACT. an employee shall be disqualified from receiving bonus under this Act. if he is dismissed from service for - (a) fraud. or (b) riotous or violent behaviour while on the premises of the establishment.²Notwithstanding anything contained in this Act. 1965 Eligibility for bonus. or (c) theft. provided he has worked in the establishment for not less than thirty working days in that year. Disqualification for bonus. in accordance with the provisions of this Act. 36 .
every employer shall be bound to pay to every employee in respect of the accounting year commencing on any day in the year 1979 and in respect of every subsequent accounting year. year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent. the employer shall. the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section. in lieu of such minimum bonus. 37 . 1965 Payment of minimum bonus.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees. be bound to pay to every employee in respect of that accounting.²Subject to the other provisions of this Act. a minimum bonus which shall be 8. of such salary or wage. whether or not the employer has any allocable surplus in the accounting year: Payment of maximum bonus. whichever is higher.²(1) Where in respect of any accounting year referred to in section 10.THE PAYMENT OF BONUS ACT.
(2) Where for any accounting year. subject to a limit of twenty per cent. shall be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule. then. and there is no amount of sufficient amount carried forward and set on under sub-section (1) which could be utilized for the purpose of payment of the minimum bonus. as the case may be. 38 . the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment under section 11. the excess shall. be carried forward for being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilized for the purpose of payment of bonus in the manner illustrated in the Fourth Schedule. 1965 Set on and set off of allocable surplus (1) Where for any accounting year. there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under section 10. then.THE PAYMENT OF BONUS ACT. of the total salary or wage of the employees employed in the establishment in that accounting year. such minimum amount or the deficiency.
THE PAYMENT OF BONUS ACT, 1965
Time-limit for payment of bonus. [All amounts] payable to an employee by way of bonus under this Act shall be paid in cash by his employer -(a) where there is a dispute regarding payment of bonus pending before any authority under section 22, within a month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute; (b) in any other case, within a period of eight months from the close of the accounting year: Provided that the appropriate Government or such authority as the appropriate Government may specify in this behalf may, upon an application made 2 subs. by Act 23 of 1976, sec. 13, for ³(1) subject to the provisions of this section, all amounts to it by the employer and for sufficient reasons, by order, extended the said period of eight months to such further period or periods as it thinks fit; so, however, that the total period so extended shall not in any case exceed two years.
Equal Remuneration Act, 1976
Object / Purpose Details : No discrimination while recruiting
Payment of Gratuity Act, 1972
Purpose : Rate of gratuity : Piece rate employee : average of total wages received for a period of 3 months immediately preceding the termination of employment. Seasonable employee : Ceiling of gratuity : Forfeiture of gratuity : Recovery of Gratuity :
Compensation structure and differentials 42 .
Incentive payments : ± Individual payment by result ± Group payment by result scheme ± Enterprise level schemes Managerial Incentive Plans ± Percentage of profit ± Shares on concessional rates ± Bonuses in cash or kind (discount coupons. paid holidays. etc) 43 .
paternity. PF. interest free loans. loans at concessional rates Utilization of leisure time : holiday homes. Security : Gratuity. health. subsidized picnics 44 . rest sheds. guest houses Inculcating a sense of involvement : concessional lunch. crèche. Pension. maternity. Medical Hazard of industrial life : ESIC. housing Statutory : canteens. Hospitals Tax considerations : transport. foreign trips.Fringe benefits Humanistic consideration : education.
Long term settlements Banks. something for something.Collective bargaining Levels of bargaining : ± Sectoral bargaining at national level : govt is a long term player. ports ± Industry cum region wide agreements : Cotton. tea ± Decentralized firm/plant level agreements Duration : 3-4 years Trends : µsomething for nothing¶. nothing for nothing¶ 45 . µsomething for anything¶. coal. jute. textile.
Job evaluation Right man for the right job Right pay for the right job Method to determine the relative worth of a job 46 .
processes. functions.Job evaluation Job analysis : breaking down to tasks. operation and elements Job Description : description of a job based on job analysis Person / job specification : statement of content of job based on JD Job grading : ranking of a job based on JA Job classification : grouping jobs according to their worth Job assessment : monetary value on the basis on job grading 47 .
Job evaluation Objectives : ± Primary : Establish wage level of a plant Bring new jobs in parity with existing jobs Facilitate wage negotiations ± Secondary : Criteria for merit rating and promotion Scope for automation and improvement Analyse wage rates 48 .
responsibilities) Committee of raters / evaluate Group / classify the jobs Convert job grades to money value Obtain approval from union and management Establish a grievance procedure 49 .Job evaluation Procedure : ± ± ± ± ± ± ± ± ± Select the group of jobs Study the job ± job analysis Prepare the job description Device an evaluation plan (education. experience.
responsibility and demands on respective employees ± Made easier by identifying those at the two extreme ends and then the middle region ± Ranking more than once ± arrive at final ranking ± Simplest method and less time consuming 50 .Job evaluation ± methods Ranking method : ± All jobs are ranked in order of complexity.
Job evaluation ± methods Classification method : ± Grades are established ± JD¶s ± description and nature of the job ± Jobs are classified into one of the other grades ± Less time consuming. comparatively easier. ± Irrational in the absence of logic and sometimes similar (nearby) jobs are put in different classes 51 .
Outcome in hard numbers ± Time consuming ± Plan for clerical employees is not suitable for factory operators (physical effort is not essential as against a sedentary job) ± In a sophisticated process plant. skill. the factor of mental/visual effect will have a higher weightage as against physical effort 52 . responsibility and working conditions) ± Given points which total out as the overall position of the job ± Not scientific but systematic.Job evaluation ± methods Point rating method : ± Job is analysed through 5-8 factors and 20-30 sub factors (eg. effort.
Mental requirement. responsibility and working conditions ± Internal / external comparision of job are considered ± Conflict may arise on the valuation of each factor 53 . skill. physical requirement.Job evaluation ± methods Factor comparision method : ± Factors or elements of a job are evaluated in terms of monetary value. eg.
where) ± semi skilled workmen ± Band O ± Defined decisions by unskilled workmen 54 .few hours Marketing manager ± 1-2 years Board of director ± 4-5 yrs Decision band method : type of decision ± ± ± ± ± Band E ± policy making decisions ± top mgmt Band D ± programing decisions ± sr managers Band C ± interpretive decisions ± middle managers Band B ± routine decisions ± skilled operators Band A ± automatic decisions (when. how.Job evaluation ± other methods Time span of discretion methods ± Effect of decisions is felt after a period of time ± A decision by : Unskilled worker .
Compensation Survey Informal surveys External surveys Commissioned surveys External survey method : ± Job title method ± Job Description method Process : ± Selection of jobs for wage survey ± Organizations to be included ± Information to be collected 55 .
Compensation Survey Benefits : ± Compare pay structure ± Entry level pay scales ± Pay differentials in select jobs ± Info on employee benefits ± Trends in compensation 56 .
incentives and pay restructuring 57 .Reward systems.
Incentive schemes ± ± ± ± ± Select the objective Determine the parameters of performance Determine the performance-reward relationship Determine the maximum payable incentive amount Formulating a communication and review scheme Group incentive and productivity sharing Long term incentive (ESOP) Competency based pay 58 .
Incentives Merits : ± Motivation ± Enhanced earnings ± Productivity improves ± Reduced supervision ± Better utilization on equipment ± Reduced scrap ± Reduced absenteeism and turnover 59 .
Incentives Demerits : ± Maintenance of quality ± checking and inspection ± Jealousies ± some earn more than others ± May oppose introduction of new machinery / processes 60 .
reducing labor.Steps in designing incentive schemes Custom ± tailored Objectives (short ± long term) Selection of performance measures ± behaviors considered important for organizational performance (increasing output. outputs) Distribution ± avoid absenteeism ± varied with number of days/hours worked Equity ± equal opportunity for all to earn Involvement and communication Union participation Review 61 . other costs. prices of inputs. product mix. improving quality) External influences (changes in production methods.
publicity in newsletter 62 .Incentive schemes ± Issues and Trends Levels of education ± which scheme will be easily understood and motivate them Trade union Organizational culture ± team spirit and involvement Monetary and non monetary incentives Rewarding good performance ± enriched role.
Group incentives Advantages : ± Better co-operation ± Less supervision ± Reduced incidence of absenteeism ± Shorter training time Disadvantages : ± Efficient worker may be penalized for the inefficiency of other members ± Incentive may not be strong enough ± Rivalry amongst group members. defeats the purpose 63 .
store keepers should also be covered Need for greater planning 64 . like crane operators. helpers.Incentives ± pre-requisites Co-operation of workers in the implementation Scientific work measurement Indirect workers.
Incentives ± systems The Halsey system ± standard time to complete a task ± Minimum wage is guaranteed ± Time saved in completion of a task ± Usually @50% Taylor differential piece rate system ± Expected to do certain units within a certain period of time ± Encourages the efficient worker with a higher wage rage ± Penalizes the inefficient with a lower rate of payment ± Seldom used now 65 .
Incentives ± systems Premium and task bonuses : ± Workers who complete the task in std time or less receive wages for the std time plus a bonus ± When a worker fails to turn out the required quantity he simply gets the wage rate and no bonus 66 .
Incentives ± systems Scanlon Plan : ± Developed by Joseph Scanlon of United steel workers of USA ± Adopting a measure for increased productivity ± Sharing the gain from that increased productivity ± Promotes teamwork ± High flexibility in generation of decisions and execution of the plan 67 .
Stock Options Merits ± Attraction ± Retention ± Motivation ± Financial participation of employees in wealth created through joint efforts ± Commitment ± Develop a common purpose / ideology between employees and employers 68 .
Dearness allowance Not linked to CPI ± Flat rate : payment is a method under which a fixed amount is paid to employees irrespective of their categories and wage scales ± Graduated scale : DA increase which each scale of salary increase but after a limit there is no increase in the amount of DA. A minimum amount of DA is also set for workers in each scale below which DA is not allowed to fall 69 .
Dearness allowance Linked to CPI ± Flat rate : rate per point with variations in points of CPI ± As a percentage of pay : DA is expressed as a fixed percentage of pay and equated to a scale of points of the CPI 70 .
Other allowances HRA LTA/LTC Washing allowance Conveyance Shift allowance Cash handling allowance Lunch / dinner allowance City compensatory allowance OT allowance 71 .
Downsizing External reasons : ± Structural and other changes in the economy ± Changes in technology ± Changes in ownership and control ± Business process re-engineering Internal reasons : ± Improper / inadequate HR planning ± Wrong selection / recruitment ± Inadequate training ± Substitution of labour with capital 72 .
Approaches to deal with worker redundancy Worker flexibility with employment security ± multi-skilled Review job specifications at regular intervals ± skill requirements Employment practices perpetuate obsolescence ± heirs 73 .
Measures to avoid downsizing or minimize job losses Restrictions on hiring for a limited period Spreading reductions over time Training and retraining VRS Counselling and outplacement 74 .
less motivated under-performers may not leave as they may not get better opportunities elsewhere Cost and benefits to employees ± Golden parachute : secure investment ± Family obligations ± substantial amount spent in repaying debt 75 .VRS Cost and benefits to company : ± Relative health of the enterprise ± something is better than nothing ± Real cost to the company ± less skilled.
who will not Awareness.How to go about a VRS ? Should be the last option rather than first ± traumatic experience Identify who will be covered. who will opt. Share the info with employees. union. who not. Cash flow effect 76 . communication channels Communication and counselling Phased manner to avoid massive reduction in manpower.
VRS should cover the following aspects Applicability Eligibility Effective date of the scheme Duration of the scheme Compensation and benefits Procedure for application. acceptance and withdrawal Mode of payment Due date for payments Procedure for redressal of grievances/settlement of disputes 77 .
Emerging issues and trends 78 .
Tax planning A conscious well thought out process of arranging one¶s financial affairs Taking advantage of deductions. exemptions. rebates Minimizing tax liability Without infringing on any provision ± tax avoidance 79 .
Composition of compensation package Salary ± payment for services rendered Relationship ± employer / employee (power on selection. supervision. kind of work. 80 . dismissal Salary v/s wage Allowances : payments by employer by way of allowances for personal benefit of the latter ± chargeable to IT. payment.
Attached to an office or employment Payable only on continuance of employment / service Ceases when employment comes to an end 81 .Composition of compensation package Perquisites : gain / profit incidental from employment in addition to regular salary / wages.
Tax implications of compensation Salary Allowances : ± HRA ± Conveyance. etc Perquisites : ± ± ± ± ± Rent free accomodation Company owned car Furniture LTC / LTA Medical 82 .
in office premises ± Subsidized lunch in canteen ± Goods manufactured ± sold to employees at a discount ± Subsidized transport ± office : residence ± Premium : Group insurance / Personal Accident Insurance 83 .Tax implications of compensation Non taxable perquisites : ± Refreshments provided ± during office hours.
Allows risk of business to be shared with employees 84 .Emerging Trends Comparative international compensation Job content related compensation : link annual increment to performance Performance related compensation : performance based annual increment and periodic incentive linked to individual / group performance.
Emerging Trends Competency based compensation ± Job holder¶s competencies not the worth of the job ± Predictor of superior performance ± Acquisition of competencies : improvement in results significantly Stock options Profit linked bonus 85 .
though no evidence that poor performers have left the organization Fairness Clear linkage between effort and performance and performance and reward 86 .Paradox of performance related compensation Motivates those with high performance ratings May help retain high performances.
360 degree feedback ± ± ± ± ± Select the feedback tool Select the raters Use the feedback Review the feedback Integrate the process into a larger PMS 87 .
which means to be suitable. The concept was orginally developed in Psychology denoting Individual¶s ability to respond to demand placed on them by the environment.Competency It is derived from the Latin word µCompetere¶. .
traits. etc. skills. that enables us to successfully complete a given task. motivation.e. behaviour. Skills Knowledge SelfSelf-concept (Attitude) . knowledge and selfconcept.Competencies defined A collection of characteristics (i.).
Iceberg Model of Competencies .
attitudes. skills.Competency based compensation Knowledge. personal traits that drive superior performance Describes what makes people effective in a given role Behaviors associated with superior performance 91 .
Concept of career stages Stage 1 (Dependency) ± ± ± ± ± ± ± ± Willingly accepts supervision Competent at detailed and routine tasks Able to perform well under time / budget pressures Learns µhow¶ of doing things Assumes responsibility for definable projects Relies less on supervision. works independently Develops credibility and a reputation Develops as an innovator 92 Stage 2 (Independence) .
Concept of career stages Stage 3 (Contribution through others) ± Stimulates others through ideas and knowledge ± Mentor in developing others ± Leader in team performance Stage 4 (Leadership through vision) ± Provides direction to the orgn ± Represents the orgn on critical strategic issues ± Champions significant technology and product 93 .
Communication : levels of achievement
Under some supervision and / or guidance effectively uses written and verbal communication
Independently maintains excellent communication with all appropriate parties. Has strong technical credibility within the group
Communicates effectively across functional boundaries to add value to the business and gain support for recommendations
Uses communication skills and personal credibility to shape long term technical direction and other significant business decisions
Linking pay to achievement
Traditional v/s competency based model
Reward component Traditional system competency based system
Based on internal job evaluation and Based on competency level demonstrated by market survey employee greater width and depth employee adds to core business
Progression - basic pay
one more year of service
share of the employee as a partner in the privilege of membership of the group success of the business company decides as a matter of policy Does what is told. Labour is important, not ideas Job for loyalty Employees share for undertaking risk and accountability
Quality of work life Career opportunity
Empowered Mutually responsible, employability
Compensation issues :
Employers : productivity Employees : cost of living Youngsters : µnow¶ Senior employees : retiral benefits Take-home pay Net pay Pay comparison with co-workers / other industries
Thank you ! All the best for the exams ! 97 .
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