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Compensation Management

Preparing Salary Matrix

Salary Matrix is a chart that can be used to determine the annual salary award & rate of salary progression of an individual Employee. A Salary Matrix allows 2 variables to be taken into account in deciding the level of award The individuals performance rating & The position already attained within the salary range. Ex: An individual with a Fully acceptable performance rating could receive a 5% increase when at the Bottom of the range, a 3% increase at the mid-point & 1% above the mid point.


Salary Position in the Market

If salary is currently below marketmedian range, ASR increase will be in the range

If salary is currently at market- median range, ASR increase will be in the range

If salary is currently above marketmedian range, ASR increase will be in the range

Outstanding Highly- effective Effective Needs improvement Unacceptable

8% to 10% 5% to 7% 3% to 4.5% 0% to 2% 0%

7% to 9% 4% to 6% 2.5% to 3.5% 0% to 1.5% 0%

6% to 7.5% 3% to 4.5% 1% to 2.5% 0% 0%

Steps in preparing a Salary Matrix

Develop a matrix that lists each grade, the positions included in each grade & the no. of levels considered appropriate for each grade. Then determine salary ranges for each level. Each year, salary schedule should be reviewed to see whether it needs adjustment.

A salary matrix can provide a relevant structure by which to assist a human resource department in establishing appropriate pay for both new hires & tenured employees. The employees will know how their pay fits into the schedule as well as their opportunities for future pay hikes. The staff will also see that the managers approach to setting salaries is unbiased. A salary schedule provides essential structure for practices that plan to expand or merge

Government Regulation on compensation

The 3 important laws affecting wages are: Davis- Bacon act.

Walsh- Healey Public Contracts Act

Fair Labor Standards Act

Davis- Bacon act.

The act was passed in 1931. It requires contractors & sub- contractors with contracts in excess of $2000 with the federal government to pay their workers a minimum wage that at least equal to the local prevailing wages & to provide them with the local prevailing benefits

Walsh- Healey Public Contracts act

The act was passed in 1936. It applies to contracts over $10000 who are involved in either manufacturing or providing goods & services to the U.S government. The firms must pay their workers the federal minimum wage for the first 40 hours they work in a particular week & 1.5 times the minimum wage for any additional hours they work during the week.

The objectives of this act involves: Minimum Wage. Child Labor Exempt & Non- Exempt status. Overtime Compensatory Time off Independent Contractor regulations. Equal pay & pay Equity,

Fixing Pay
Wages & Salary incomes in India are fixed through several institutions. They are: Collective Bargaining: It relates to those arrangements under which wages & conditions of employments are generally decided by agreements negotiated between the parties. Unions are concerned with: a. General level of wage rates b. Bonus, incentives & fringe benefits, Administration of wages.

Industrial Wage Boards.

Wage boards are of 2 types a. Statutory Wage Board: It means a body set up by law or with legal authority to establish minimum wages & other standards of employment which are then legally enforceable in particular trade or industry to which boards decision relate b. Tripartite wage Board: It means a voluntary negotiating body set up by discussion between organized employers, workers & government to regulate wages, working hours & related conditions of employment.

Wage board decisions are not final & are subjected to either executive or judicious review.

Pay commissions: 1st: 1946- Conditions of service of central govt employees 2nd:1957-norms for fixing a need based minimum wage setup. 3rd:1973- System in which pay adjustments will occur automatically upon an upward movement in CPI. 4th: 1986-Examine structure of all central govt employees, including those in union territories. 5th: 1996-Recommendations regarding restricting of pay scales. 6th:2006

Adjudication by Courts & Tribunal: Courts & Tribunals were primarily intended to deal with the settlement of industrial disputes, in practice, wage fixation has become an important element in their work & functioning.

Significant Compensation Issues

Issue of Equal pay for Comparable worth Problem of measuring comparability. Issue of low salary budgets. Issue of Wage- Rate Compression

Compensation as Retention Strategy

Salary & Monthly Wage. Bonus. Economic Benefits.

Long term Incentives

Health Insurance. After Retirement.

Thank You