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Master of Business Administration - MBA Semester 4

MU0015 - Compensation and Benefits

Note: Answer all questions must be written within 300 to 400 words each. Each Question carries 10
marks 6 X 10=60.

Q1. (i) What is meant by “compensation management”?

(ii) Organisations design out the employee compensation packages based on some ‘compensation’ and
‘non-compensation’ dimensions. Describe in brief the ‘compensation’ dimensions.

(i) Meaning of compensation management- 2

(ii) Description of compensation’ dimensions- 8

Answer. i) Compensation management is a process of determining cost-effective pay structure designed to
attract and retain the employees, provide an incentive to work hard and structured to ensure that pay
levels are perceived as fair. The components of a compensation management system of

Q2. Explain the concept of Wage?

List down the pre-requisites of effective Incentive schemes?

[Explain wage concept

Pre-requisites of effective Incentive schemes]

Answer. Wage Concept

Wages in its broadest sense implies any kind of economic compensation received by the employee from
the employer under the contract of employment whereby the employee renders some services to the
employer. The term wage is used to define different concepts like wage rate, gross

Q3. What do you understand by VRS (Voluntary Retirement Scheme? Also list down reasons, merits and
demerits of VRS?

Concept of VRS

Reason for adopting VRS by organization, Merits and demerits of VRS

Answer. Concept of Voluntary Retirement Scheme (VRS)
Voluntary Retirement Scheme (VRS) is the most common method which is used by organisations to reduce
excess manpower. It helps the employer not only to compete and survive in this current business scenario
but also improve his/her performance. This scheme also

Q4. Discuss the Organizational and External Factors Affecting Compensation strategies?

Answer. Organisational and External Factors Affecting Compensation Strategies

1. Individual factors: Organisations while designing compensation strategy consider employees’ concern
about compensation worth. In designing the compensation strategy individual skill, knowledge, expertise,
attitude, sex, work environment and experience play an important role in fixing the level of the job. The
personality of an

Q5. Explain the elements of Managerial remuneration?

Elucidate some of the economic determinants of pay?

Elements of Managerial remuneration

Economic determinants of pay

Answer. Elements of managerial remuneration

1. Base salaries: It is the first element of the managerial remuneration which is analysed with the help of
Job Evaluation and also serves as incentives also. While evaluating the salary, Job Evaluation is just a part of
it. An executive is compensated on the basis of his competencies and also the performance of his/her work.
CEO’s base salary is determined with the help of

Q6. Who are ‘Expatriates’? What are the objectives of ‘Expatriate compensation’? Differentiate between
Financial (extrinsic) compensation and Non-financial (intrinsic) compensation.

[Meaning of expatriates- 2

Objectives of expatriate compensation- 3

Difference between Financial compensation & Non-financial compensation- 5]

Answer. Meaning of expatriates

The demand for expatriate talents has increased as a result of rapid growth of international

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