Professional Documents
Culture Documents
COMPENSATION
CONCEPT
Modul 11
CERTIFIED HUMAN RESOURCES
PROFESSIONAL (CHRP)
OBJECTIVES
z
Explain
the
alignment
of
Total
Compensation to Companys Mission,
Vision, Values, and Business Strategy.
JOB DESCRIPTION
SALARY SURVEY
JOB EVALUATION
SALARY STRUCTURE
POLICY / SYSTEM
SALARY ADMINISTRATION
SALARY PROGRAM
TRAINING/COMMUNICATION
EVALUATION
Total Compensation
Compensation Design
Design
Total
The design process begins
with the corporate vision and
Process
Process
mission. The human resources philosophy builds on the
business strategy and serves as a guiding light in the design of
all HR Programs.
Human resources philosophy and strategy is the big picture,
Total Compensation philosophy and strategy narrows this HR
philosophy and strategy specifically to the three facets of total
compensation (compensation, benefits and the work
experience).
The design of any compensation program should maintain
alignment with the other elements in the process. The synergy
created by this alignment will help to ensure program success
Certification on Human Resource Professional (CHRP), AtmaJaya University, Jakarta, 2006
AligningHR
HRStrategy
Strategywith
withOrganizational
OrganizationalVision
Vision&&Mission
Mission
Aligning
Vision
What do we want to be
Mission
What do we want to do
Core Competencies
Internal/ External
Influences
VISION
z
Mission
Definition: An organizations reason for existence or
its purpose for being.
Purpose: To guide Managements planning and
decision making. The mission answers the
question, Where is the organization heading?
Sample Mission Statements:
An Energy Company The aim of our Company is to meet
the energy needs of society, in ways that are economically,
socially and environmentally viable, now and in the future.
A Consumer Products Company Our purpose at our Company is
to meet the everyday needs of people everywhere to anticipate
the aspirations of our customers and to respond creatively and
competitively with branded products and services which raise the
quality of life.
Certification on Human Resource Professional (CHRP), AtmaJaya University, Jakarta, 2006
Business Strategy
Definition: Business Strategy is the Companys broad plan
for competitively positioning its products or services with
the intent to accomplish or support the Companys mission.
Elements of Business Strategy (Key Success Factors):
Production Innovation: Sony, Johnson & Johnson
Customer Intimacy: Singapore Airlines, Garuda
Operational Excellence: Wall Mart, Dell Computer
VISION
Best People
Best Partner
Best Performance
Honesty
Integrity
Excellence
Trust
VALUES
Certification on Human Resource Professional (CHRP), AtmaJaya University, Jakarta, 2006
Best
BestPeople
People
Best
BestPartner
Partner
Best
BestPerformance
Performance
Medical
Medical
Services
Services
Performance
Performance
Management
Management
HR
HR
Processes
Processes
Comp
Comp&&
Benefits
Benefits
People
People
Devt
Devt
(CP/CD)
(CP/CD)
Labor
Labor
Relations
Relations
Employee
Employee
Administrn
Administrn
HRIS
HRIS
z
z
z
z
z
z
Performance Measures
and Objectives
Personnel Selection and
Development Strategy
Total Compensation
TOTAL COMPENSATION
FRAMEWORK
z
Compensation/Cash Compensation:
zCash
zIndirect
Compensation/Benefits:
TOTAL COMPENSATION
PROGRAM
Direct Pay Compensation
Indirect Compensation
Attract
Retain
Motivate
Attract
Retain
Motivate
Total Compensation
Attract
Retain
Motivate
What elements of the program can attract new employees ?
What elements of the program can help an organization keep key employees ?
OBJECTIVES OF TOTAL
COMPENSATION
To
provide
externally
internally
competitive
equitable
and
compensation
OBJECTIVES OF TOTAL
COMPENSATION (continued)
To attract, retain and motivate individuals of the caliber necessary
to achieve the organizations objectives.
To provide a coordinated, cost-effective total compensation
program which is responsive to organizational and employee
needs.
To recognize individual and group performance and contributions
meeting short-and long-term organizational objectives.
To provide equitable pay opportunity and pay levels.
To communicate organizational objectives and align employee
efforts with those objectives.
To provide a competitive benefits package through cost-effective
programs which are responsive to the differing needs of
employees.
To comply with legal/regulatory requirements.
Certification on Human Resource Professional (CHRP), AtmaJaya University, Jakarta, 2006
THE COMPONENTS:
Among others..(1)
Base Pay
Regular & Location Related Allowance
Housing & Transportation Allowance
Vacation Travel Allowance
Annual Leave Allowance
Variable Pay (Cash Incentive, Bonus, etc.)
Share Grant/ Share Option Plan
Savings Plan
Medical Outpatient
Hospitalization
Dental & Optical
Medical Check-up & Maternity
Death & Disability Benefits
No one component can do it all !!
Certification on Human Resource Professional (CHRP), AtmaJaya University, Jakarta, 2006
Education Assistance
Rest & Relaxation Program
Annual Leave & Other Leave
Credit Card
Service Award
Club Membership
Company Car
Company Provided Housing
Cellular Phone
- Base Salary
-Regional Allowance
- Temporary Monetary
Assistance (MAC)
- Overtime Pay
- Excess Working Hours
- Shift Allowance
- Onshore Allow
-Offshore Allow
-Leave Allowance
- THRK
- Vacation Travel Allowance
- AIP
- Coy Tax
Indirect Compensation
- Severance Pay
(Defined Benefits)
- Monthly Pension (Defined
Contribution)
- Old Age Benefit
- Coy Tax on Severance
Pay
- Medical Coverage
- HOP Loan
- VPA
- Educational Loan
- Natural Death Benefit
- Long Term Disability
-Industrial Death Benefit
- JK/JKK (XXVI.B)
-Salary Continuation
- Paid Vacations/Holidays
- Coy Tax
Deferred Compensation/Benefits
Total Compensation looks at all the cash programs, all the non-cash programs, and all the
deferred compensation and benefit programs offered by an organization to its employees.
Base
To be competitive with the
market and meet statutory
requirements
For achievement of
sustained, long-term
financial/operational results
(KPIs)
Annual
Incentive
Plan(s)
Allowance
Long-Term
Incentive
Plan(s)
Benefits/
Perquisites
Cost to
The company
Value
To Employee
To provide basic,
core protection, and
motivational noncash rewards
WHAT IS THE OPTIMUM MIX, LEVEL AND LEVERAGE TO SUPPORT THE BUSINESS
STRATEGY AND BUSINESS CULTURE OF THE COMPANY AND PROTECT THE INTERESTS OF
THE SHAREHOLDERS OF THE COMPANY
REFERENCES
1.
2.
Compensation Theory and Practice, Wallace, M.J., and Fay, C.H., PWSKENT Publishing Company, 1998Creating Corporate Culture, Hampden,
C.T., Addison-Wesley Publishing Company, 1992
3.
4.
DIRECT COMPENSATION
Ones Lebang
MODULE 2
DIRECT COMPENSATION
OBJECTIVES
z
- Base Salary
-Regional Allowance
- Temporary Monetary
Assistance (MAC)
- Overtime Pay
- Excess Working Hours
- Shift Allowance
- Onshore Allow
-Offshore Allow
-Leave Allowance
- THRK
- Vacation Travel Allowance
- AIP
- Coy Tax
Indirect Compensation
- Severance Pay
(Defined Benefits)
- Monthly Pension (Defined
Contribution)
- Old Age Benefit
- Coy Tax on Severance
Pay
- Medical Coverage
- HOP Loan
- VPA
- Educational Loan
- Natural Death Benefit
- Long Term Disability
-Industrial Death Benefit
- JK/JKK (XXVI.B)
-Salary Continuation
- Paid Vacations/Holidays
- Coy Tax
Deferred Compensation/Benefits
Total Compensation looks at all the cash programs, all the non-cash programs, and all the
deferred compensation and benefit programs offered by an organization to its employees.
DEFINITIONS :
z
BASE PAY
What is Base Pay?
The amount of money you receive on an
hourly, monthly, or annual basis that is . .
By position
By geography
Comparison
Individual
OS OO
=
IS I O
O = Outcomes
I = Inputs
= Self
O = Relevant Others
S
BEHAVIORAL THEORIES
Equity Theory
1. If ratios are equal, satisfied
2. If employees ratio is greater than
others, over-rewarded
3. If employees ratio is less than
others,
under-rewarded
and
dissatisfied
Certification on Human Resource Professional (CHRP), AtmaJaya University, Jakarta, 2006
INTERNAL EQUITY
Different job, same
organization
z
z
z
z
Job Analysis
Job Descriptions
Job Evaluation
Salary Structures
EXTERNAL EQUITY
Same job, different
organization
z
z
z
z
Salary Surveys
Benefit Surveys
Market Pricing
Other Benchmarking
INDIVIDUAL EQUITY
Same job, same
organization, different
incumbent
z
z
z
z
Performance
Effort
Seniority
Legitimate (and not so
legitimate) individual
differences
PROCESS EQUITY
Procedural justice
z
z
Fairness of process
Communication
Participation
Appeals
COMPENASATION STRAEGY
AND YOUR ORGANIZATION
z
Is it aligned
programs?
with
other
compensation
Employee Category
Min
Top Management*
Management
Officer/Spv.
Clerical
Non-clerical
151
140
140
100
50
LQ
220
220
136
100
Med.
575
300
222
121
UQ
750
400
300
167
Max
1,000
1,000
750
600
300
Avg.
575
554
358
249
142
ALLOWANCES (CONTINUED)
z
Housing Allow: Rp. 1500,000.Transport Allow: Rp. 1,000,000.Is the above in compliance with the Labor
Law?
ANSWER
PROPORTION OF BASE PAY TO FIXED ALLOWANCES
13%
20%
BASE
HOUSING
TRANSPORT
67%