Que:1. (I) What is meant by “compensation management”?

(ii) Organizations design out the employee compensation packages based on some ‘compensation’ and ‘non-compensation’
Describe in brief the ‘compensation’ dimensions.
Compensation management is a general policy, implemented in conjunction with specialized software, designed to help an organisation maximize
the returns on available talent. The ultimate goal is to reward the right person to the greatest extent for the most relevant reasons. The ideal
compensation management policy ensures that the best talent will remain with the organisation while attracting new talent and minimizing
turnover. Compensation management is a general policy, implemented in conjunction with specialized software, designed to help an organization
maximize the returns on available talent. The ultimate goal is to reward the right people to the greatest extent for the most relevant
reasons.Compensation management software can optimize salary, bonus, stock option, and benefits budgets to yield the maximum profit per
employee or per work hour. However, any organization or business requires a competent and sensitive human management team at least as
much as it needs effective computer programs.The ideal compensation management policy ensures that the best talent will remain with the
organization while attracting new talent and minimizing turnover. In conjunction with benefits administration and workforce analytics, an effective
compensation management policy steers employees toward behaviors that enhance personal well-being and minimize the risk of burnout.
Payment for work and performance
Payment for work and performance includes the disbursement of money within a short term period (weekly, monthly and bonus/annual awards)
that will allow an employee to pay or make an agreement to pay for products and services requested. The total amount of payment will depend on
the followings:
Needs for the specified job.
Results that meet or exceed the standards of quantity, quality or time.
Innovations that lead to increase in productivity ,loyalty, trustworthiness and a combination of some or all of these features.
The components that are usually included in the payment for work and performance are basic pay, premium and premium differences, short-term
bonus, merit payment and certain allowances.
Payment for non working days

The past few years have seen a reduction in working hours. In addition, employees today enjoy more official non-working days and
longer paid leave. Components of payment for non-working days raise labour costs. On the other hand, such payment allows for
lifestyle change and enhancement of the quality of life.

Loss of Job Income Continuation Benefit
Job security has always been an important aspect of employment. Employees need to be assured of their job and economic security.
Accidents, personal problems, work performances are some of the reasons that will cause a temporary cessation of employment or a
permanent termination.
The change in the current technological and economic climate will limit, and at times eliminate, the need and demand for certain
products and services. This will lead to the reduction or disintegration of an organisation. Various components, like unemployment
insurance, unemployment added-benefits and salary during the severance period, have been generated to assist affected employees
who have neither been offered any alternative position by the organisation, nor found other work.

Disability Income Continuation Benefit
When an employee suffers from a disability due to an illness or accident, he is unable to execute his tasks effectively. In addition to
paying for daily
living expenses, the employee also has to pay for the hospital bills.
Employee compensation, in the form of medical leave and short-term and long-term disability plans, exists to assist an employee who
is incapable of working due to poor health.

Deferred Income
Most employees depend on programmes provided by their employers to ensure a continuous income after retirement. There are two
main reasons why such programmes exist. First, most people do not have enough savings upon retirement to enable them to continue
enjoying the comfortable lifestyle they were accustomed to when they were working. Therefore, programmes like the retirement
allocation planning programme, savings and thrifty plans, annuities and additional income plans are drawn up by organisations to
provide employees an ongoing income after their retirement. Secondly, the laws and tax regulations make the deferred income plans
more attractive to the employees.

Spouse/Family Income Continuation Benefit
Employees with families worry that they will not be able to provide and care for and support their dependants in the event of their
death or disability. To this end, certain plans have been created to provide the dependants with the financial means to go on if an
employee dies or is incapacitated due to temporary or permanent disability.

Health, Accident and Liability Protection
Apart from income to sustain a comfortable lifestyle, income for products and services to heal an illness or disability is also of great
concern to employees. Therefore, an organisation offers various insurance plans to assist employees in paying for their medical care
and treatment.
Income Equivalent Payments
Income equivalent payments are also known as perquisites or perks. Some of these special benefits are exempted from tax, and this
is advantageous for employers and employees. Examples of special benefits are provision of credit cards, allowance to attend official
meetings, subsidised food and childcare services.

Que:2. Explain the concept of Wage?
List down the pre-requisites of effective Incentive schemes

"wages" means all remuneration (whether by way of salary allowances or otherwise) expressed in terms of money or capable of being so
expressed which would if the terms of employment express or implied were fulfilled by payable to a person employed in respect of his
employment or of work done in such employment and includes (a) any remuneration payable under any award or settlement between the parties or order of a court;
(b) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period;
(c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name);
(d) any sum which by reason of the termination of employment of the person employed is payable under any law contract or instrument which
provides for the payment of such sum whether with or without deductions but does not provide for the time within which the payment is to be
(e) any sum to which the person employed is entitled under any scheme framed under any law for the time being in force but does not include:1. any bonus which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or
settlement between the parties or order of a court;
2. the values of any house accommodation or of the supply of light water medical attendance or other amenity or of any service excluded from the
computation of wages by a general or special order of the state government;
3. any contribution paid by the employer to any pension or provident fund and the interest which may have accrued thereon
4 Any travelling allownance or the value of any travelling concession;
5 any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or
6 any gratuity payable on the termination of employment in cases other that those specified in sub- clause
Meaning and Definition of wage
In the ordinary language the term wages implies ‘reward’ to the labourers for the services rendered by them. It may be paid, weekly, fortnightly,
monthly, per hour or per unit. Services rendered by the labourer include both physical and mental services.
There are different types of wages
Subsistence wage: The wage that can meet only bare physical needs of a worker and his family is called subsistence wage.
Minimum wage: Minimum wage is the wage that is able to provide not only for bare physical needs but also for preservation of efficiency of worker
plus some measure of education, health and other things.
Fair wage: Fair wages is an adjustable step that moves up according to the capacity of the industry to pay, and the prevailing rates of wages in
the area of industry.
Living Wage; Living wage is that which workers can maintain the health and decency, a measure of comfort and some insurance against the more
important misfortune of lie.

In any even the minimum wage must be paid irrespective of the extent of profits, the financial condition of the establishment or the availability of
workmen at lower wage. The wages must be fair, i.e. sufficiently high to provide standard family with, food, shelter, clothing, medical care and
education of children appropriate to the workmen. A fair wage lies between the minimum wage and the living wage which is the goal. Wages must
be paid on an industry wise and region basis having due regards to the financial capacity of the unit.
Pre-requisites of Effective Incentives Schemes
The workers’ co-operation is mandatory in execution of incentive schemes. The co-operation is required in respect of methods adopted for
analysis of result on basis of which payment is done, the setting wage rate methods for different work categories and pre-requisites relating to job
security, earnings and dispute settlement regarding work standards.
The incentive scheme must be influenced by scientific work measurement like the standards set must be practical and inspiring. In addition, the
employees must be provided with necessary resources to meet these standards.

All indirect staff like foreman, helpers, supervisors and canteen staff charge hands etc. should also be roofed under incentive schemes.

A management commitment to oversee the outlay and schedule the proper administration of plans should be formed.

An incentive plan should be first planned properly and then implemented carefully to achieve desired results.


All things considered, it may be concluded that in many industries or undertakings and for a large group of operations, well-designed systems of
payment by results shall yield advantages to all concerned. Many of these advantages will be realized provided sufficient safeguards are
provided. Such p re-requisites are:
1. The co-operation of workers in the implementation of an incentive scheme is essential because the employees somehow devise, if they do not
like a scheme, ingenious ways of evading or sabotaging the plan, often with the tacit connivance of the foreman or supervisor,'' Workers' cooperation may be secured through proper discussion with their representatives. In particular, workers' co-operation is necessary in:
(i) The methods followed in measuring the results or output upon which payment is based;
(ii) The methods followed in setting wage rates for different classes of work; and
(iii) Appropriate safeguards concerning earnings, job security and settlement of disputes over piece-work rates and allotted time.
2. The scheme must be based on scientific work measurement. The standards set must be realistic and must motivate workers to put in better
performance. Workers must be provided with necessary tools, equipment and materials so as to enable them reach their standards.
3. Indirect workers, such as supervisors, foremen, charge hands, helpers, crane operators, canteen staff, store keepers, and clerical staff should
also be covered by incentive schemes.
4. There should be management commitment to the cost and time necessary to administer incentive schemes properly, and these must be
carefully assessed before embarking on an incentive programme. There are many situations in which the potential gains are just not worth the
cost and effort involved.
5. There is greater need for planning. Many incentive schemes, started hurriedly, planned carelessly, and implemented indifferently have failed
and have created more problems for the organisation than they have tried to solve.
6. The other safeguards are:
(i) The incentive scheme should be appropriate to the type of work carried out and the workers employed.
(ii) The reward should be clearly and closely linked 10 the efforts of the individual or group.
(iii) Individuals or groups should be able to calculate the reward they get at each of the levels of output they are capable of achieving.
(iv) Individuals or groups should have a reasonable amount of control over their efforts and therefore their rewards.
(v) The scheme should operate by means of a well-defined and easily- understood formula.
(vi) The scheme should be properly installed and maintained,
(vii) Provisions should be made for controlling the amounts paid, to en- sure that they are proportionate to effort.
(viii) Provisions should be made for amending rates in defined circumstances

(ix) Create incentives for performance and disincentives for non-performance.
(x) Set and review specific objectives for each employee periodically.
Que:3. What do you understand by VRS (Voluntary Retirement Scheme? Also list
Down reasons, merits and demerits of VRS?
Definition: Voluntary retirement scheme is a method used by companies to reduce surplus staff. This mode has come about in India as labour
laws do not permit direct retrenchment of unionized employees.
Description: VRS applies to an employee who has completed 10 years of service or is above 40 years of age. ? It should apply to all employees
(by whatever name called), including workers and executives of a company or of an authority or of a co-operative society, excepting directors of a
company or a co-operative society.
It has to result in an overall reduction in the existing strength of employees. ? The vacancy caused by voluntary retirement is not to be filled up.
The retiring employee shall not be employed in another company or concern belonging to the same management. The amount receivable on
account of voluntary retirement of the employee does not exceed the amount equivalent to three months' salary for each completed year of
service, or salary at the time of retirement multiplied by the balance months of service left before the date of retirement on superannuation of the
employee. It is the last salary drawn which is to form the basis for computing the amount of payment.
Most large public and private sector companies have implemented VRS in recent years.
Time, Health and Activities
Normal retirement requires you to work for more years than a voluntary retirement--that is, you're older when you take a normal retirement than
you are when you take a voluntary retirement. When you retire early, you thus probably will be more physically able to pursue activities you enjoy
such as travel or volunteering, especially if your job is physically demanding. You also will have more years in which to do those activities.
Extra Work and Income
Although taking a voluntary retirement effectively terminates your employment with one company, it doesn't prevent you from working elsewhere.
By the time you qualify for voluntary retirement, you will have a wealth of on-the-job experience. You may use this expertise to find a different
position in the same field or freelance as a consultant. This means you may be able to draw not one, but two pay checks, especially if you are in
good health. You may use this income to compensate for the lower voluntary retirement benefits. Alternately, if the benefits are sufficient to
sustain you, you may use it to pursue interests or make purchases.
Decreased Stress
If your work environment is stressful, voluntary retirement may get you out of the difficult situation and reduce your stress level. The ability to
spend time with family and friends you love and pursue your own interests may decrease anxiety even if your previous work environment was
positive. This decreased stress may have numerous additional benefits to your health, such as decreased blood pressure.

Que:4.Discuss the Organizational and External Factors Affecting Compensation
Internal Factors Internal factors affecting wage rates include the employer’s compensation strategy, worth of job, the value of the employee to the
organization, and the employer’s ability to grant compensation increases.1.Employer’s Compensation Strategy the wages and salaries
received by employees will be determined, in part, by the employer’s compensation policy. Some employers may wish to be a wage
leader in the read or industry, while others may desire to pay average wages or to be a wage follower. Employers should set pay policies
reflecting (1) the internal wage relationship among jobs, (2) a pay policy based on competitors’ wages, and (3) various areas such as
overtime pay, holiday pay, or different incentives.2.Worth of a Job some jobs are worth more to the organization than other jobs. For example, the
job of marketing analyst probably has more impact on the success of the organization than the job of a janitor. Therefore, most persons would
argue that the more important jobs should be paid more than the less important jobs. Organizations will use the formal process of job evaluation
to determine the relative worth of jobs to the organizational current approach to determining the worth of a job is to judge the job’s total value tithe
organization. The total value approach goes beyond the market pricing or an internal job evaluation system of pricing jobs. Using the total value
approach to job pricing simply recognizes that home jobs are more important to organizational success regardless of how they are internally or
externally valued.3.Employee’s Relative worth Employees can improve their worth to the organization by working smarter or harder orb acquiring
advanced skills or job knowledge. When this occurs, they receive merit raises based on their performance appraisals. More and more
employers are linking pay increases to the performance of the employee.4.Employer’s Ability to Pay National or regional economic conditions,
competition from domestic or foreign competitors, and strong or poor managerial policies and practices can influence the employer’s ability to
grant pay increases. Identify specific organizations and industries in which employers have a large or small ability to grant pay increases’.
External Factors the following are the external factors affecting wage rates: 1.Labor Market Conditions The forces of supply and demand for
employees having specific skills, abilities, or educational levels influence the wage rate for the job. The wages paid to an electrical engineer will
depend on how prevalent these individuals are in the labour market. While supply and demand are factors in determining wage rates, government
regulations or union bargaining power can serve to reduce the full impact of supply and demand considerations

Internal Factors
These factors include the following:
Ability to pay
this is one of the most significant factors influencing employee compensation. Generally, a firm, which is prosperous and successful, has the
ability to pay more than the competitive rate. This way it can attract a superior caliber of personnel. Often the labour unions also demand an
increase in compensation on the grounds that the organisation is prosperous and is able to pay more.
Numerous employees related factors also influence his or her compensation. These include rhe following:

Performance—It is always rewarded wirh pay increase and as a result it motivates the workers to do better in future.
Experience—This makes a person perfect by providing valuable insights and thus rewarded also. Today companies are demanding for 10 to 20
years experience candidates especially for the executive positions. The companies presume that experience candidate posses leadership skills
which influence the other behavior and performance. Generally experience candidate perform the job without need of training which is time
consuming and deals with matter of cost to company. Hence the experience candidates demand more pay than an unexperienced candidate.
Seniority—In today's environment seniority of employee making difference in payment of compensation compared to Jr employees. Naturally
senior employees demands for more salary than fresher because of their hold on related job and its functions. Today many companies are
demanding senior employees for key positions by offering fat pay and even sometimes retired employees are offered with handsome salary for
key positions which deals with multitasking in organisation. Trade unions always prefer this objective criterion for pay rises.
Potential—Firms also pay their employees, especially young ones on the basis of their potential. software companies are very good example for
this, IT graduate just who completed his education having potential in the subject can gain a good job with high payment anywhere in the world.
Good example, student of Indian Information Technology (IIT) from Delhi had bagged job of payment 7 million (70 lakhs) Indian rupees per year
in Twitter Inc famous social networking website

A Brazilian firm, Semco,( best known for its radical form of industrial democracy and corporate re-engineering.) has 3,000 employees, a turnover
of over $200 million and has been growing at 20-30% every year.
Semco does have managers but employees have more freedom than elsewhere. They can choose their hours of work, decide their salaries and
pick their bosses. Managers are anonymously evaluated every six months by their subordinates. Semco has practised this philosophy for 25
years now.

Job requirements
Wages arc also influenced by the requirements of a job such as physical and mental requirement. Jobs, which demand more skill, responsibility,
efforts and are of hazardous in nature, will carry high wage tag with them.
Job evaluation
Job evaluation establishes a consistent and systematic relationship among base compensation rates for all jobs. In other words, it establishes the
satisfactory wage differentials.
Organisation's strategy
The organisation's strategy regarding wages also influences employee compensation. For example, an organisation, which wants rapid growth,
will set higher wages than competitors. On the other hand, organisations that want smooth going and just maintain the current earning will pay
average or below average.
Que. 5 Explain the elements of Managerial remuneration?
Elucidate some of the economic determinants of pay?
Elements of remuneration
The principal elements of WPP executive remuneration currently comprise the following:
base salaries (fixed);
annual cash incentives (variable); and
share plans (variable).
Pension contributions, life assurance, health and disability, and other benefits are also provided.

Base salary
The Compensation Committee believes that base salary is only one element of compensation and therefore should only be reviewed in the
context of the total compensation being provided to an executive.
As noted in last year's Report and Accounts Sir Martin Sorrell's base salary was increased from £840,000 to £1,000,000 on 1 January 2007. This
is the first increase to Sir Martin's base salary since September 1999.
With effect from 1 July 2007 Paul Richardson's base salary was increased from £450,000 to £500,000. Paul Richardson's base salary was last
increased in May 2003.
Annual cash incentives
The annual cash bonus is paid under plans established for each operating company as well as the parent company. Challenging performance
goals are established and these must be achieved before any bonus becomes payable. Each executive's annual incentive opportunity is defined
at a 'target' level for the full achievement of objectives. Awards in excess of the target level may be paid up to a prescribed maximum for superior
In the case of the Group chief executive and other parent company directors, the annual cash bonus is based on Group and individual
one-third is based on Group financial results;
one-third is based on individual strategic objectives determined prospectively by the committee at the commencement of each year; and
one-third is based on the achievement by the individual director of key business objectives assessed by the committee at the end of each year.
Base pay
Do your homework by talking to an executive recruiter in your industry and finding out what competitors similar in size to your company pay for
the same position. Find out the expectations of the individual you’re hiring before putting a number forward. Think about what your company can
truly afford. Consider the open market value of the person’s talent; if they are high profile in your industry, this will impact their expectations. Many
companies include an annual cost-of-living adjustment as part of their base pay offer.
Tailor the benefit section of your executive compensation packages to meet the needs of those you’re hiring. For example, someone with a large
family might prefer a robust health/dental/life insurance plan over extra vacation time. A younger executive might want a flexible health savings
account and extra vacation time. Be open and flexible in structuring this area.
Short-term incentive compensation
This might be in the form of stock options or cash; in most executive compensation packages, it is linked to some short-term, measurable
objective that can be attained within a one-year time frame. Make sure these objectives are reasonable, important to the company, measurable
and time-constrained so there is no uncertainty on the part of the company, the executive or the board of directors as to whether the goals have
been achieved.
Long-term incentive compensation
This is the most important part of executive compensation packages for most execs. Top executives look for a long-term compensation package
that is generous and provides them with a powerful incentive to put in the long hours needed to make the company successful so they ultimately
earn that long-term reward. For the company, this part of the compensation package should be structured as the “golden handcuff” to keep the
executive from getting the itch to look elsewhere; a generous long-term incentive plan helps improve the chance for a stable and committed
executive team. This compensation form is typically stock options with vesting requirements and/or performance objectives, or for private
companies, the opportunity to earn an ownership position.
Executive perks
You have to be a little careful with this category, given the media’s recent scrutiny over executive “sweeteners”. However, these special incentives
can be the difference-maker for an executive who’s being pursued by multiple companies. Put on your creative thinking caps. What will be almost
irresistible to this person? Maybe it’s a premium country club membership, access to the company plane, or a Paris apartment. Whatever it is,
including it in the offer sends the message that you understand the person’s specific interests and have put a package together customized just
for him or her. What executive wouldn’t be flattered?
Unemployment Levels
During periods of high unemployment, companies often hesitate to hire new workers, in addition to asking employees who remain on the payroll
to work longer and harder. In addition, high unemployment often depresses wages, especially raises, because of the abundance of workers in
comparison to available openings. Non-executive employees received an average pay increase of 2.6 percent in 2010 and 2011, with pay
increases of 2.8 percent expected in 2012, according to Bloomberg, reporting results from a survey by Towers Watson & Co.
Globalization frequently enables employers to ship jobs that would ordinarily be filled with domestic workers overseas to low-wage countries,
eliminating many high-wage jobs in manufacturing and information technology as well as low-wage jobs in customer service. As a result, many
displaced workers who do not have the skills to compete for higher-wage jobs turn to lower-paid service sector and other positions. This can
create a cycle that further depresses wages in those areas because of an oversupply of workers, even when the overall unemployment rate is

Industry Conditions
In the aftermath of the global financial crisis and resulting worldwide recession, the banking and investment sectors were widely criticized for
offering hefty bonuses to high-level employees. Companies in these industries justified these bonuses and generous salaries by claiming that this
was the only way to attract and keep the best talent for their companies. In 2010, Swiss bank giant UBS reported significant employee defections
as a result of pay cutbacks, according to The Economist, summarizing a report from The Financial Times.
Cost of Living
Workers who must maintain a home and car and educate their children in an upscale suburban area often endure a much higher cost of living
than workers who reside in small towns and rural areas. As a result, companies must offer higher salaries to workers in areas with a high cost of
living to attract and keep talented employees. This effect often extends to service sector jobs and other typically low-wage positions, although
salaries in these jobs remain low in comparison with other wages in the same area.
he wage-rates depend on various social, political, ethical, behavioural and economic factors. Hence, there are differences in wage rates. The
relative difference in wage levels is called wage varieties.
There are three types of variations in wage rates.
(1) Time Variations—Wage rates differ from time to time according to economic conditions of the country. In slump period, the wage rates are
lower whereas the inflationary pressures may hike in wage rates.
(2) Regional Variations—There are different wage rates in difficult regions for the same work in the same industry. This may be because of
several reasons such as economic development of the region, demand and supply of the workers, cost of living index and standard of living etc.
(3) Industrial Variations—Wage rates may differ from industry to industry. One industry may pay more its workers in the same region for similar
work. Various factors such as demand and supply of skilled labour, nature of work and working conditions in the industry, place of industry in the
national economy etc., influence the wage rates.
Factors Affecting Wage Rates
(1) Demand and Supply of Workers—The demand and supply of workers in the labour market affects wage rates. If the labour is in short-supply,
the workers shall be paid well. If the labour is available in plenty, wages rates will be lower.
(2) Bargaining Power-Wage rates also depend to a large extent on the relative bargaining power of the trade unions or workers and employers.
Where labour unions are strong enough to force the hand of employers, the wages will be determined at a higher level in comparison to other
units where unions are weak.
(3) Cost of living-Progressive employers do not leave the wages to be determined by the blind forces of demand and supply. They take due notice
of the cost of living for the workers at that place and try to fix the wages as to ensure a decent living wage to the workers. Cost of living varies
under inflationary and deflationary pressures, where employers do not show enough awareness, labour unions, if strong, come out with a demand
of wage adjustment according to the cost of living index number.
(4) Condition of product Market—The wage levels will be influenced by the degree of competitions prevailing in the market for the product of the
industry. If it is a perfect competitive market the wage level may be at par with the value of the net additions made by the workers to the total
output. But in any given industry or occupation, wages may not reach this level if imperfect competition exists in the product market.
(5) Comparative wages-Wages paid by other firms in the same market for similar work also influence the wage levels. Wage rates must also be in
consistent with the wages paid by other firms in the same industry. The comparative wages will increase the job satisfaction among the workers.
(6) Ability to pay-Wage rates are influenced by the ability of industry or firm to pay its workers. Those firms which are earning huge profits may
naturally afford much belter wage rates and more facilities to its workers in comparison to those firms which are earning only marginal profits.
(7) Productivity of labour—Productivity is considered to be the main basis of wage-determination. In firms, where productivity of labour is high,
higher wages are paid as compared to other jobs which do not require the same degree of skill, responsibility or risk.
(8) Job requirements—A worker is compensated according to the job requirements. If a job requires higher skill, greater responsibility and risk, the
worker placed on that job will naturally get higher wages in comparison to other jobs which do not require the same degree of skill, responsibility
or risk.
(9) Government policy—Since the bargaining power of the workers is not enough to ensure fair wages in all industries, the Government has to
interfere in regulating wage rates to guarantee minimum wage rates in order to cover the essentials of a decent living.
(10) Goodwill of the company—A few employers want to establish themselves as good employer in the society and fix higher wages for their
workers. It attracts qualified employees
Que 6. Who are ‘Expatriates’? What are the objectives of ‘Expatriate
compensation’? Differentiate between Financial (extrinsic)
compensation and Non-financial (intrinsic) compensation.
Ans 6.
An expatriate (often shortened to expat) is a person temporarily or permanently residing, as an immigrant, in a country other than that of their
citizenship. The word comes from the Latin terms ex ("out of") and patria ("country, fatherland").
In common usage, the term is often used in the context of professionals or skilled workers sent abroad by their companies. [1]
Expatriation may also mean exile or denaturalization or renunciation of allegiance. The U.S. Expatriation Act of 1868 said in its preamble, 'the
right of expatriation is a natural and inherent right of all people, indispensable to the enjoyment of the rights of life, liberty and the pursuit of
happiness.'[2] Early Nazi Germany deprived many opponents of their citizenship, such as Albert Einstein, Oskar Maria Graf, Willy
Brandt and Thomas Mann, often expatriating entire families.[3][4]

A person who has citizenship in at least one country, but who is living in another country. Most expatriates only stay in the foreign country for a
certain period of time, and plan to return to their home country eventually, although there are some who never return to their country of

Major objectives on which most of the expatriate compensation plans are designed are mentioned below:
The whole area of international compensation presents some tricky problems. On the one hand, there is logic in maintaining uniformity in
companywide pay scales and policies so that the employees in the same cadre are paid within the same narrow range.
This reduces the risk of perceived inequalities and dramatically simplifies the job of keeping track of disparate country-by-country wage rates. But
not adopting pay scales according to local markets can produce more problems than it solves.
It can be extremely expensive to live in some countries. Therefore determining equitable wage rates in many countries is not a simple matter of
equality in pay. Most expatriate compensation plans are designed to achieve four major objectives:
1. Attract employees who are qualified and interested in international assignments. Thus the compensation policy works to attract and retain staff
in the areas where the multinational has the greatest needs and opportunities.
2. Facilitate the movement of expatriates from one subsidiary to another, from home to subsidiaries, and from subsidiaries back home. To achieve
this policy must be competitive and recognise factors such as incentives for Foreign Service, tax equalisation, and reimbursement for reasonable
3. Provide a consistent and reasonable relationship between the pay levels of employees at headquarters, domestic affiliates, and foreign
subsidiaries and
4. The policy must be made cost-effective by reducing unnecessary expenses. It must give due consideration to equity and ease of
Besides the above major objectives, the international employee will also have a number of objectives that need to be achieved from the firm’s
compensation policy:
1. The employee will expect that the policy offers financial protection in terms of benefits, social security, and living costs in the foreign location.
2. The employee will expect that a foreign assignment will offer opportunities for financial advancement through income and/or savings.
3. The employees will expect that issues such as housing, education of children and recreation will be addressed in the policy.
Determining equitable wage rates in many countries is no simple matter. One of the greatest difficulties in managing total compensation on a
multinational level is establishing a consistent compensation measure between countries that builds credibility both at home and abroad. There
are four basic approaches to compensation:
1. HQ-based model: Expatriates are paid according to the headquarters compensation structure.
2. Modified home-country model: Expatriates are paid according to their home- country salary structures, and their living standard is protected so
as to be comparable to the home country or some other chosen standard.
3. Better of home or host model: Expatriates receive the higher of the home-country system or the host-country system.
4. Host-country/local-market package: Expatriates are paid according to the host- country compensation structure.
Besides the above, some multinational companies conduct their own local annual compensation survey. The survey covers all forms of
compensation including cash, short and long term incentives, retirement plans, medical benefits, and pre-requisites. The information collected
from the survey becomes the basis for annual salary increases and proposed changes in the benefits package.
Advantages of using expatriate employees
There are several advantages of using expatriate employees to staff international company subsidiaries. Advantages include permitting closer
control and coordination of international subsidiaries and providing a broader global perspective. Employers may also want to exercise greater
corporate control upon the management and daily functions of subsidiary employees, so expatriates provide the extra supervision. Furthermore,
expatriates may provide better expertise in other foreign markets of existing subsidiaries. Expats have increased understanding of the companies
global operations and can help the local employees identify and meet company objectives. Expatriates also play a critical role in the training and
development of new management. Essentially, expatriates serve as the means through which strategic control of the subsidiary is accomplished
Division of rewards into two types was recognized for the the first time after Herzberg’s Two-Factors Theory. According to this theory the reasons
for employees getting satisfied is one set of factors whereas the reasons for getting employees getting dissatisfied is just another set of factors.
Herzberg called the reasons that contribute towards employee satisfaction thus putting him in a frame of mind to exert more effort are
called motivators. Whereas the reasons that keep the employee from getting into a dissatisfaction phase and leaving the job as hygiene factors.
In simple words only motivators can motivate employees and not the hygiene factors.
If we study the theory deeply we will understand that motivators or the factors that motivate employee are such factors which directly relates to
the job itself i.e. what he actually do as part of his job or what his responsibility is etc or if we sum it up in a more sophisticated manner then we
can say that motivators are factors connected directly with the job contentand are thus called intrinsic factors as they are connected with the job
or they are “inside” the job.

On the other hand hygiene factors are those factors that are not related to the job itself rather the things that are “around the job” i.e. the
environment in which he is working, the people with whom he interacts etc. or summed up in better words hygiene factors are related with job
context and are thus called extrinsic factors as they are not connected with the job directly but are “outside” the job.
Understanding these two factors and implementing it in a reward system we get two different kinds of rewards i.e.:
Intrinsic rewards actually fulfills employee’s intrinsic factors or motivators and thus motivates him. Examples include; giving challenging task,
involving in decision making process, giving a higher rank in hierarchy etc all these rewards do not required to have increased salary as well and
employee may be working at higher management rank without an increase in the salary and still more motivated.
Extrinsic rewards actually fulfills employees extrinsic factors or hygiene factors and thus do not let him start thinking about leaving the
company. Examples include; pay rise, bonuses, paid leaves, annual recreational plans etc.
Another fact that can be observed from the above discussion and examples is that intrinsic rewards are mostly qualitative in nature and cannot be
quantified for example more respect, recognition etc. Whereas extrinsic rewards are more of a quantitative in nature.
ntrinsic vs. Extrinsic Rewards
An intrinsic reward is an intangible award of recognition, a sense of achievement, or a conscious satisfaction. For example, it is the knowledge
that you did something right, or you helped someone and made their day better. Because intrinsic rewards are intangible, they usually arise from
within the person who is doing the activity or behavior. So “intrinsic” in this case means the reward is intrinsic to the person doing the activity or

An extrinsic reward is an award that is tangible or physically given to you for accomplishing something. It is a tangible recognition of ones
endeavor. For example, it’s a certificate of accomplishment, a trophy or medal for winning the race, a badge or points for doing something right, or
even a monetary reward for doing your job. Because extrinsic rewards are tangible, they are usually given to the person doing the activity; as
such, they are typically not from within the person. Therefore, extrinsic rewards means the reward is extrinsic to the performer of the activity or
Here is an important distinction that I like to emphasize. When talking about rewards, intrinsic rewards are those that originate from within the
person, and extrinsic rewards are those that originate from something beyond the person.
However—as you might recall the previous post—when talking about motivation, intrinsic and extrinsic has nothing to do with whether the
motivation originates from within the person or outside the person. Instead, it means whether the motivation is intrinsic to the activity or not.
Why People are Confused about Reward vs Motivation
Here is the tricky part, so stay with me. Some people may be driven by rewards. So rewards can sometimes be the reason that drives people to
do things. Thus the rewards we get, can sometimes be the motivation. However, people do thing for many reasons beyond the rewards, so there
are many motivations that are not rewards.
Since rewards can sometimes be a motivation, is it an intrinsic motivation or extrinsic? This is an important question and one that has confused
many in the gamification industry. You see, I said it was tricky!
It’s not difficult to see that doing something for the rewards is just the opposite—at least in spirit—of doing something simply for the love of doing
it (i.e. intrinsic motivation). So when an activity or behavior is motivated by rewards, it is always extrinsically motivated. In other words, when
rewards become the reason that drives someone to do some activity or behavior, they won’t be doing it purely for its own sake anymore.
Therefore all rewards—both intrinsic rewards and extrinsic rewards—are by definition extrinsic motivations (i.e. extrinsic to the activity or

Just because we happen to use the same set of words (i.e. “intrinsic” and “extrinsic”) to describe two different concepts (i.e. rewards and
motivation), it doesn’t mean those words mean the same thing. This is an unfortunate consequence of the fact that human language is simply not
precise enough compared to mathematics and computer science. This is compounded by the fact that academic research tends to be very
narrowly focused, and disparate disciplines often do not have enough communication with each other. When speaking about motivation, the terms
“intrinsic” or “extrinsic” means intrinsic/extrinsic with respect to the behavior—whether or not the reason for doing something is simply the love of
doing that very thing. But when speaking about rewards, these same terms mean intrinsic/extrinsic with respect to the person—whether or not the
reward originates from within the person doing the activity. Next time you talk to a person or company claiming to be experts in gamification, ask
them about the difference between intrinsic/extrinsic rewards vs. intrinsic/extrinsic motivation. I guarantee you will be able to spot the fakes from
the professionals. I hope the last two posts have removed some of the confusion/fog on this topic. Please let me know your comments or any
other clarifications you would like.