What Is Compensation?

The term Compensation refers to all form of financial returns and tangible benefits that employees receive as a part of an employment relationship. As the business environment increasingly becomes complex and global, the challenge to create and maintain effective compensation programs, given cost constraints, also requires greater professional expertise, organisational understanding, creativity and vision than ever before. Types of Compensation Compensation typically is divided into two parts, namely Direct Compensation and 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. The monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time. Basic Salary Salary is the amount received by the employee in lieu of the work done by him/her for a certain period say a day, a week, a month, etc. It is the money an employee receives from his/her employer by rendering his/her services. House Rent Allowance Organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees. This is done to provide them social security and motivate them to work. Conveyance Organizations provide for cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them.

Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The employees are given allowances to visit any place they wish with their families. The allowances are scaled as per the position of employee in the organization. Medical Reimbursement Organizations also look after the health conditions of their employees. The employees are provided with medi-claims for them and their family members. These medi-claims include health-insurances and treatment bills reimbursements. Bonus Bonus is paid to the employees during festive seasons to motivate them and provide them the social security. The bonus amount usually amounts to one months salary of the employee. Special Allowance Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club memberships, etc are provided to employees to provide them social security and motivate them which improve the organizational productivity.

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. They include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes. Leave Policy It is the right of employee to get adequate number of leave while working with the organization. The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc. Overtime Policy Employees should be provided with the adequate allowances and facilities during their overtime, if they happened to do so, such as transport facilities, overtime pay, etc. Hospitalization

The employees should be provided allowances to get their regular check-ups, say at an interval of one year. Even their dependents should be eligible for the medi-claims that provide them emotional and social security.

Insurance Organizations also provide for accidental insurance and life insurance for employees. This gives them the emotional security and they feel themselves valued in the organization. Leave Travel The employees are provided with leaves and travel allowances to go for holiday with their families. Some organizations arrange for a tour for the employees of the organization. This is usually done to make the employees stress free. Retirement Benefits Organizations provide for pension plans and other benefits for their employees which benefits them after they retire from the organization at the prescribed age. Holiday Homes Organizations provide for holiday homes and guest house for their employees at different locations. These holiday homes are usually located in hill station and other most wanted holiday spots. The organizations make sure that the employees do not face any kind of difficulties during their stay in the guest house. Flexible Timings Organizations provide for flexible timings to the employees who cannot come to work during normal shifts due to their personal problems and valid reasons.

Graphical Breakup of Monthly Payroll Deductions such as tax and loan/advances taken by the employee from organizations are deducted only where applicable. Dearness Allowance and House rent allowance is provided at a fixed rate stated by the employment law. Provident fund is deducted from the gross salary of employee on the monthly basis as per the employment law, which is provided later to the employee. Organizations also contribute the same amount to the provident fund of the employee. Need of Compensation Unless compensation is provided no one will come and work for the organization. Thus,

compensation helps in running an organization effectively and accomplishing its goals. Salary is just a part of the compensation system, the employees have other

psychological and self-actualization needs to fulfil. Thus, compensation serves the purpose. The most competitive compensation will help the organization to attract and sustain the

best talent. The compensation package should be as per industry standards.

Compensation in Banking Sector

Banking and finance sector is currently experiencing high growth rate nearly all over the world including India. With increased FDI and high inflation rates, finance sector is enjoying high deposits. Financial institutes and commercial banks are expanding their business and going for large scale recruitments. The banks are collaborating with insurance units to provide insurance coverage to their clients. Few of the banks are also dealing in gold and silver. Nationalized banks are preferred more as they provide for job security. Compensation packages in banks have always been lucrative. Incentives, special allowances, travel leaves, concessions, paid vacations, paid leaves, retirement benefits are also offered along with basic salary and other allowances such as house rent allowance, transportation vehicle etc. Compensation package in finance and banking sector depends on the level of knowledge and experience an individual have. Top players in India such as nationalized banks- Bank of India, SBI, Indian Overseas Bank, Bank of Baroda, Punjab National Bank, HDFC, ICICI and other private banks, financial institutes such as Bajaj Capital, Kotak Mahindra, etc, are offering high salary packages with lucrative incentives to attract and retain their talented work force. COMPENSATION ON THE BASIS OF EXPERIENCE In the context of Indian Banking sector, it is seen that as age increases, the compensation also increases proportionally.

ENTRY LEVEL COMPENSATION PACKAGES Indian finance & banking sector offers jobs in various segments. The managerial level jobs are held by management professionals, commerce graduates and finance professionals. Apart from pay packages finance professionals also get high incentives and perks. The industry provides for special allowances such as annual bonus, house rent allowances, mobile allowances, transportations, travel leaves, paid vacations, etc.

* The salary figures provided are for the business development executives and marketing & sales executives Management Level Compensation Finance sector is a promising sector where compensation is considered. The sector has witnessed 17% average increase in the salary packages in the year 2006. The compensation packages offered to managerial level employees are very much lucrative. Besides the basic salary employees are also provided with heavy perks and incentives with special allowances. They are offered club memberships, companys vehicle, travel leaves, paid vacations, other allowances and non-monetary benefits. Organizations also conduct training and development programs for their employees professional growth. Organizations provide for certification courses and online degree courses for the employees. At higher level employees are given employee stock options. Individuals are given equal preferences on the basis of their performance. Nationalized banks offer job security and private financial institutes provide high lucrative packages. With the globalization, liberalization, business expansion, more number of competitors, jobs in the financial sector are also demanding too much hard work. Earlier bank jobs were considered very comfortable ones but now the scenario has been changed. Indian

banking sector is heading for 24*7. Some of the nationalized and private banks have started working 8 to 8.

Dearness Allowance for workmen and officer employees in banks

>> Dearness Allowance for workmen and officer employees in banks

Payable for the Year 2007-08 2007 2006-07 2006-07 2006-07 2006 2006 2002 2002 2002 2002-2003 2003 2003 2003 2003-2004 2004 2004 2004 2004-2005 2005 2005 2005 2005-2006 2006

Payable for the months Nov/Dec/Jan Aug/Sep/Oct May/Jun/Jul Feb/Mar/Apr Nov/Dec/Jan Aug/Sep/Oct May/Jun/Jul Feb/Mar/Apr May/Jun/Jul Aug/Sep/Oct Nov/Dec/Jan Feb/Mar/Apr May/Jun/Jul Aug/Sep/Oct Nov/Dec/Jan Feb/Mar/Apr May/Jun/Jul Aug/Sep/Oct Nov/Dec/Jan Feb/Mar/Apr May/Jun/Jul Aug/Sep/Oct Nov/Dec/Jan Feb/Mar/Apr

Average CPI No. of slabs % of pay 3028 2944 2907.06 2898.84 2836 2768 2716.28 2312.17 2307.23 2346.67 2391.05 2386.11 2400.9 2450.21 2460.07 2474.86 2484.71 2524.15 2578.38 2568.53 2588.25 2604 2672.05 2711.5 185 164 154 152 137 120 107 157 155 161 174 178 177 188 194 198 200 205 220 224 226 79 93 106 33.3 29.52 27.72 27.36 24.66 21.6 19.26 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14.22 16.73 19.08

SBI first one to open ESOP locker for employees

Employees of state-owned banks will soon get rid of their tag of being considered as poor cousins of their counterparts in new-age private and foreign banks in terms of remuneration packages. According to the top official with knowledge of the issue said that the Cabinet has given the approval to a proposal for a stock option plan for staffers of the countrys largest bank, State Bank of India, marking a first in the Indian banking industry and perhaps for any state-owned company. The official said the bank, which is preparing for a rights offering of over Rs 16,000 crore this fiscal, might in a good position now to unveil an employee stock options plan (ESOP) aggregating up to 0.7% of its capital base of Rs 526 crore. Officials had informed ET that the bank will be discussing on the proposal of merging all its associate banks with the parent in January. Till now no official confirmation is available on whether the board of the bank and its associates would consider this proposal. The proposal, which intends to reward value creators for state-owned banks just like their peers in private banks based on a defined performance criterion, has been in the making for long. A couple of years ago the government had discussed the proposal with the banking regulator, though its only now that it has been able to get the proposal off the ground. The government is the leading shareholder in 28 banks in the country with stakes ranging from 100% to 53%. By offering stock options, it is believed that it could bring motivation among the employees which could reflect on the performance of their organizations. However in a stock market, which has posted spectacular gains over the last few years, this can prove to be one of the best tools to both retain and attract talent in state-owned banks given their inability to offer substantial pay packets. A convincing reason now for giving the nod for stock options can be the imminent opening up of the banking sector to foreign investors a year down the line and increased competition in the local markets. Officials are of view that the decision taken to allow SBI to offer stock options will open the way for other state-owned banks and units to come up with similar offers. SBI has over two lakh employees on its rolls spread across over 9,500 branches in India and 84 offices abroad in 32 countries.

UTI AMC, which in a sense is a quasi-government entity, has guided the way by offering shares to all its employees numbering over 1,000. Officials of SBI, however, said the ESOP would be independent of the rights offering. This means that it would be unveiled perhaps in the next fiscal only as the details need to be fleshed out. Last weekend, the government issued a letter to SBI through which it has given signal of its willingness to subscribe to its entitlement of the rights issue. The government has 59.73% of the equity holding in the bank; it will issue securities aggregating Rs 10,000 crore to SBI to fund its subscription. A securities redemption fund which might be created will be built out of the dividends and tax receipts which the government will receive from SBI. The fund will enable the government to cash in the securities on maturity. Officials stated that the SBI chairman had discussions with the finance ministry last week on the modalities of the proposed rights offering. The rights issue is aimed at strengthening the capital of the bank. SBI will require the capital to fulfil the Basel II norms and new accounting standards and to fund credit growth.

Compensation structure in Industrial Development Bank of India Limited (IDBI):COVERAGE Compensation Loan Facilities, etc,

Total Emoluments incl. Reimbursement for the post of Assistant manager Gross Salary Rs.16, 900/- p.m. Reimbursements# Total (approx) Rs. 5400-8300/- p.m. Rs.23, 300 25,200/- p.m.

Annual Gross emolument Rs.2.79 3.02 lakh (approx)

In addition, bank housing/ leased accommodation is provided. (Lease rentals varying between Rs. 2750 8000/- p.m.) # Include Reimbursement towards medical, newspaper, telephone, petrol, LTA, etc. Periodical reimbursement as per policy. Reimbursement (details)
Medical Expenses: Unlimited for self and dependent family members. Additional Rs.2,500/- p.a. on declaration basis. Cleaning Expenses: Rs.1,000/- p.m. Conveyance Expenses: Petrol: Rs.5,280/ 2400 p.m for Four wheeler/Two wheeler and insurance cost. Non-vehicle owners - Rs. 600/- p.m. Newspaper Expenses: Rs.400/- p.m. Telephone Expenses: Rs.1,154/- bi monthly

LTA: Rs.20,000/- once in 2 years on declaration Brief case: Rs.2,000/- once in 3 years

Superannuation & other benefits Provident Fund: 10% contribution by the employee Pension: Eligible as per Rules. Gratuity: Eligible as per Rules.

Loan facilities Housing Loan: -After 3 years of confirmation. (Including probation period) -80 times of basic pay OR 90% of the cost subject to maximum of Rs.15 lakh. - Rate of Interest: 5% p.a. Festival Advance: - Rs.20,000/- after 6 months of service (Interest free) once in a calendar year. - Repayable in 10 monthly instalments. Consumer Advance: Eligible: 2 years of confirmation (including probation period) - Amount: Rs.40,000/- Rate of Interest: Prevailing Bank rate at the time of disbursement. Computer Advance: - 1 year after confirmation - Amount: 90% of cost of PC OR Rs.75,000/- whichever is less. - Rate of Interest: Prevailing Bank rate at the time of disbursement

Vehicle Advance: I) Car:

- 3 years of confirmation. (Including probation period) - 100% of the cost subject to maximum of Rs.3,00,000/-(Rate of Interest : 7% p.a.) II) Two wheeler: - 3 years of confirmation. (Including probation period) - 90% of the cost subject to maximum of Rs.40,000/- (Rate of Interest : 7% p.a.) Advance for Consumer Durables for furnishing residence (Lease facility): - 2 years service - Rs.30, 000/- Recovery of Rs.1020/- p.a. Other facilities (Examples of Indirect Compensation) In addition, Employees are also provided facilities such as: Reimbursement of fees for pursuing professional courses. Holiday home facility at various locations all over the country.

PAYMENT STRUCTURE OF BANK OF INDIA

The monthly remuneration received by each of its officers and employees, including the system of compensation as provided in its regulations The pay scales of employees of the Bank are fixed by IBA in consultation with Government of India, Ministry of Finance, New Delhi. The scale of pay of its employees as of now is given below: Scales of Pay of Officers: Scale I = Rs.10000 - 470/6 - 12820 - 500/3 - 14320 - 560/7 - 18240 Scale II = Rs.13820 - 500/1 - 14320 - 560/10 - 19920 Scale III = Rs.18240 - 560/5 - 21040 - 620/2 - 22280 Scale IV = Rs.20480 - 560/1 - 21040 - 620/5 - 24140 Scale V = Rs.24140 - 620/4 - 26620 Scale VI = Rs.26620 - 680/4 - 29340 Scale VII = Rs.29340 - 680/2 - 30700 - 900/1 - 31600 - 1000/1 - 32600 Scales of Pay of Clerical Staff: Rs.4410 - 215/3 - 5055 - 335/3 - 6060 - 470/4 -7940 - 500/3 - 9440 - 560/4 - 11680 - 970/1 12650 - 560/1 - 13210. Scales of Pay for Subordinate Staff: Rs.4060 - 105/2 - 4270 - 115/2 - 4500 - 135/2 - 4770 - 165/3 - 5265 - 195/4 - 6045 - 235/3 6750 - 270/3 -7560

PAYMENT STRUCTURE OF A PRIVATE SECTOR BANK ICICI BANK

Job title: Head NRI Private & Retail Banking (India) Location: Mumbai, India > Cost to company per year INR 2 million. > Esops: Are given every year in the grade. > Vacation time: 30 days. > Car with 5 years written down value. > Company owned staff quarters at subsidised rates. > Canteen facility at subsidised rates. Job title: AM I, Location: DELHI, India package structure is very different as gross and net amt varies. Make it very clear about take home as gross may sound to be very attractive due to the bonus components. Yearend bonus depends upon the yearly performance and the kind of rating you get at the end of the year. Job title: HR MANAGER (PERSONNEL) Location: CUTTACK, INDIA Approximate date of offer: 9/2004 Submitted on: SEP 17, 2004 GROSS SALARY: RS.14, 500/- PER MONTH, LTA: RS.12, 000/- PER YEAR, MEDICAL REIMB: RS.12, 000/-PER YEAR. The current structure in ICICI -- bottom-up -- consists of assistant manager, manager, chief manager, assistant general manager, deputy general manager, joint general manager, general manager, senior general manager and executive director.

CONCLUSION
Banks play a crucial role in determining the economic wellbeing of an economy and the same is true for India also. In its context, we find the segment differentiated into segments like the public and the private sector. Post liberalization phase has seen a massive change in the working of these institutions. All of them have realized the cut throat competition and for the same, they all are focusing on excellence in performance in all spheres of work. To ensure the same with the workforce, a sea change has been seen in the human resource policies of the banking sector. This becomes the reason why the compensation schemes have been modified. Earlier, basically the direct component on the compensation formed the essential part of the payment. Now also it is so, but the components of direct compensation have been modified. The idea is to drive excellence, and for this, concepts like incentive component, sales based commissions among others are gaining prominence in determining the magnitude of net compensation of a bank staff. Regular and effective performance appraisals help the employers to determine the effectiveness of the bank staff and accordingly fine tune the compensation as the net salary is heavily affected by the performance based payment factor. This is one of the reasons why some private sector banks have seen exponential growth in sales figure in the recent past. The Indian Banks Association, along with the finance ministry and the RBI, which plays a pivotal role when the public sector banks determine compensation strategies, has also taken clue from their counterparts and has thus come up with performance based incentives. It has been accepted that a motivated employee can help create an efficient organization and money in most case becomes the driving force. This becomes relevant for the present competitive banking scenario also. This realization has given rise to the changes in the compensation schemes in this sector. As the market undergoes further modifications directed by the changes in local as well as the global economy, it becomes a challenge for the HR managers to work out more efficient compensation schemes.

Bibliography

www.payroll.naukrihub/compensation in banking and finance On 21/01/08 www.indiatimes.com/news in finance and banking On 21/01/08 www.businessline.com /news in finance On 22/01/08 www.businessworld.com/payroll-compensation on 22/01/08 Ramani V.,March 2007,Executive Compentation-Theory and Practice,H.R.M. ICFAI Press,pg 61-65. http://o3.indiatimes.com/sbicreditcard/archive/2008/01/14/4863531.aspx http://www.idbi.com/ http://www.idbisc.com/ http://www.bankofindia.com/ http://vault.co.in/companies/singlesurvey.jsp? product_id=34610&type=salary&response_id=110358&ebxdk=56&country=India&gs=