Elrida Dsouza

17-H-04
MHRDM
Assignment – Compensation & Benefits

1.0 How do you integrate the factors in the circle to make the organizational compensation management
system successful?

Answer: Compensation system system involves the total rewards that are given to the employees for the labor and
services they provide to the organization. Compensation includes direct monetary benefits as well as indirect monetary
benefits. Wages and salaries form the direct financial benefits that an employee receives from his or her company.
Besides, wages and salaries, bonuses and commissions also form a part of the direct monetary benefits. The indirect
monetary benefits include paid absences and other leave benefits, retirement plans, employee insurance schemes,
health plans, education benefits and other such benefits. A well-defined and balanced compensation system gives the
organization an advantage of maintaining internal as well as external equity.

Organization Culture: The key to a successful organization is to have a culture based on a strongly held and widely
shared set of beliefs that are supported by strategy and structure. When an organization has a strong culture, three
things happen: Employees know how top management wants them to respond to any situation, employees believe that
the expected response is the proper one, and employees know that they will be rewarded for demonstrating the
organization's values. HR has a vital role in perpetuating a strong culture, starting with recruiting and selecting
applicants who will share the organization's beliefs and thrive in that culture. HR also develops orientation, training
and performance management programs that outline and reinforce the organization's core values and ensures that
appropriate rewards and recognition go to employees who truly embody the values. Company leaders play an
instrumental role in shaping and sustaining organizational culture. If the executives themselves do not fit into an
organization's culture, they often fail in their jobs or quit due to poor fit. Consequently, when organizations hire C-
suite executives, these individuals should have both the requisite skills and the ability to fit into the company culture..

Compensation Basket: Compensation and rewards practices define the relationship between the organization and the
individual member by specifying the terms of exchange. Organizational culture expresses values and norms to which
employees must conform and specifies the contributions expected from them as well as the rewards individuals can
expect to receive as a result of their performance. An organization should use its values and beliefs as the foundation
for hiring, managing, rewarding and shaping the behavior of the employees. Once the desired organizational culture
is defined, compensation and rewards systems should be tailored to support and reinforce that culture. Compensation
and rewards plans linked with customer metrics provide employees with an opportunity to focus and share in the
successes (or challenges) of the customer experience. Thus, compensation and rewards systems affect and influence
the organization’s values and beliefs and, ultimately, organization culture.
Pay for value addition : When employees are being paid well and are happy, they're likely to stay with the company.
Proper compensation is one factor why employees remain with employers. Loyalty means that business owners don't
need to continue to spend time, money and energy on recruiting new candidates. Employee retention and low-turnover
rates are great for employers who cultivate a team that knows what to do. That team is also motivated to be part of the
team, and they get the job done well. Happy employees are productive employees. Productivity in relation to
compensation starts with employees feeling valued which increases motivation and loyalty. Not only are employees
more motivated to do a good job, but also, the longer people are with the company, the more they know and the more
efficient they become. All of this leads to increased productivity. Creating the right compensation plan leads to
stronger job satisfaction. The right compensation plan includes benefits, along with all the other bonuses available.
Employees often boast about holiday bonuses or they keenly watch how the company stock performs because they
have stock options. The right compensation program invests employees into the work being done, which gives them
a stronger sense of satisfaction when the company succeeds. They know they will be rewarded for their efforts;
everyone likes tobe appreciated.

Computing investment on employees and computing Employee return : A company is as good as its employees.
We are used to talking about a company as if the organization itself is a person. But an organization does not generate
ideas, does not give service, and by itself is neither efficient nor productive. People make all of those things happen.
Companies are accustomed to paying competitive wages and good benefits to attract talented managers and
professionals. Yet often relatively little attention is paid to creating the best circumstances for each individual in the
organization to perform at his or her best potential. The effectiveness of HR-related technology or programs is
regularly assessed in an isolated manner. A Human Resource Management System (HRMS) is judged by how much
more efficient the HR worker becomes and how the software helps the HR department accomplishes daily tasks. The
Return on Investment (ROI) is measured as a result of the total costs saved or efficiency gained, divided by the Total
Cost of Ownership (TCO). The cost of employee management technology is actually an investment in employees.
These investments will reward the company with a return that will impress any CFO.

Enabling Breakthrough Performance : Performance is understood as achievement of the organization in relation

with its set goals. It includes outcomes achieved, or accomplished through contribution of individuals or teams to the
organization‘s strategic goals. The term performance encompasses economic as well as behavioural outcomes.
Brumbach views performance more comprehensively by encompassing both behaviors and results. He is of the view
that behaviors as ‗outcomes in their own right‘, which ‗can be judged apart from results‘. Performance is an impact.
The roles of any manage can be seen in three parts: Being, Doing and Relating

Being it is concerned with the competencies of the manage that are relevant to his/her performance. It is preparedness
of the mind of the manager. Doing focuses on the manage activities that are variably effective at different levels in the
organization: that affect performance of other roles dependent on the manage output, and the organizational
performance as a whole. As someone said, ‗Ideas are funny little things. They won‘t work unless you do.

Productivity enhancement : There are only so many hours in the day, so making the most of your time is critical.
There are two ways increase your output--either put in more hours or work smarter. Being more productive at work
requires being more deliberate about how you manage your time.

• Track and limit how much time you're spending on tasks

• Take regular breaks.
• Set self-imposed deadlines.
• Just say no to meetings.
• Hold standing meetings.
• Quit multitasking.
• Take advantage of your commute.
• Give up on the illusion of perfection.
• Take exercise breaks.
• Be proactive, not reactive.
• Turn off notifications.
• Work in 90-minute intervals
 • Give yourself something nice to look at.
• Minimize interruptions (to the best of your ability).

Employee cost as a percentage of turnover: It’s helpful to know how to calculate staff turnover. This is because
it works out how many employees leave your business in a certain amount of time and need replacing. Social
responsibility of organization : A well-defined and balanced compensation system gives the organization an advantage
of maintaining internal as well as external equity. It is a powerful tool for attracting employees, motivating them to
work in achieving the strategic organizational goals, and retaining them in the long run. An organization need to have
a clear compensation philosophy which is in line with the strategic goals, objectives and culture of the organization.
Based on the compensation philosophy of the company, the various components of compensation are designed and
chalked down in detail.

The development of compensation philosophy includes the study of various aspects viz:

▪ Impact of compensation strategy in promoting organizational success

▪ Organization’s stand in considering the compensation provided as a tool in attracting and/or retaining
employees
▪ Does the organization intend to lead/lag/match the compensation market for the given geographic area and
in the concerned industrial sector?
▪ How does the organization aims at maintaining internal and/or external equity?
▪ How is the employee’s performance linked in relation to wage or salary increases?
▪ Following the legal formalities, rules and regulations of the land

Compensation detailing comprises of identifying positions and setting up of wage or salary specifications against each
of the position. Also, incentive packages and bonuses, if any, are clearly defined for each of the position while
describing the compensation related details.

Compensation detailing may involve execution of following activities depending upon the requirements of the
organization:

▪ Designing pay scale

▪ Defining bonus and incentive plans
▪ Performing salary surveys
▪ Examining the requirement for wage/salary changes or increase
▪ Defining guidelines for change/increase in wage/salary
▪ Elaborate preparation of compensation policy and compensation strategy

A compensation study carried out in an organization generally involves following important elements:

▪ Analyzing the current situation and requirements of the organization

▪ Conducting salary/wage surveys and interviews within the organization
▪ Studying the various positions or jobs as existing in the organization
▪ Restructuring and redefining the positions, according to needs
▪ Defining the internal worth of the different positions in the organization
▪ Ranking the various positions and jobs in the company
▪ Evaluating the existing base compensation plan of the organization
▪ Identifying and evaluating the market pay structures
▪ Revising the base compensation plan in the organization
▪ Matching the changed compensation package with the current fiscal resources of the organization
▪ Comprehending the impact of pay revisions
▪ Laying down the guidelines for revised pay administration
▪ Preparing an elaborate report on the compensation studies to be submitted to the top management
Depending upon the requirements of the company, the HR Consulting Firm may take up the necessary aspects required
to be considered for development and/or improvement of the compensation system in the organization, thereby,
strengthening the compensation system of the company by making it more equitable and attractive.

Problem solving : ‘Problem Solving’ is "the amount and nature of the thinking required in the job in the form of
analyzing, reasoning, evaluating, creating, using judgment, forming hypotheses, drawing inferences, arriving at
conclusions, etc."

There are two dimensions in problem solving:

1. The environment in which the thinking takes place.

2. The challenge of the thinking to be done; the novelty and complexity of the thinking required.

Problem solving is always expressed as a percentage of know how since it directly relates to how one uses the
knowledge which he or she must have in the job to solve the problems which are encountered as part of that job.

Accountability : ‘Accountability’ is "the answerability for action and its consequences. The measured effect of the
job on end results in the organization."

There are three dimensions in accountability:

1. "Freedom to Act" which is the extent of personal, procedural or systematic guidance and control on the job.
2. "Job Impact on End Results" which is the degree to which the job affects or brings about the results expected
of the unit or function being considered.
3. "Magnitude" is the size of the function or unit measured in the most appropriate fashion.

Working conditions : ‘Working Conditions’ assess the environment in which the job is performed. Working
Conditions are made up of four dimensions:

1. "Physical Effort" - jobs, which may require levels of physical activity, which may produce physical, stress
or fatigue.
2. "Physical Environment" - jobs which may include exposure to unavoidable physical and environmental
factors which increase the risk of accident, ill health or discomfort to the employee.
3. "Sensory Attention" - jobs which may require concentrated levels of sensory attention (i.e. seeing, hearing,
smelling, tasting, touching) during the work process.
4. "Mental Stress" - refers to exposure to factors inherent in the work process or environment, which increase
the risk of such things as tension or anxiety.

Each of these four dimensions is measured according to duration, intensity and frequency.

All of these factors are evaluated in each job evaluation and the cumulative total is a total point factor for the position.
Because jobs have so many different variables it is possible that a job without a high score in Know How but with
severe Working Conditions could result in the same number of points with a job that has the opposite components.

Role expectation and Employee Levels : One has to develop a deeper understanding of employees’ expectations
and the modern business best practices that can address them. Your individual employees may not always be vocal
about their expectations, but several studies have honed in on what employees really want in the modern business
world.

According to SHRM, the top five contributors to job satisfaction in 2017 were:

• Respectful treatment of all employees at all levels

• Compensation/pay, overall
 • Trust between employees and senior management
• Job security
• Opportunity to use your skills and abilities in your work

Modern employees value meaningful work and look for companies that value a healthy work-life balance. Positive
company cultures and mentorship are also high on modern employees’ list of expectations. Let’s dive into each to see
what they’re all about.

Purpose : Modern employees are driven by a sense of purpose, and they demand more from a company than just a
salary.

Culture : Culture is tied closely with purpose, and is typically immediately evident within a company. A company’s
culture is a company’s personality, and it has wide-ranging impact across an organization.

Onboarding : An employee’s first few days at a company send a powerful message about what their experience will
be like going forward. From the messaging of the official welcome meeting, to what they see, hear, and do during
working hours, onboarding experiences can either confirm or undermine the impressions new hires formed during the
hiring process. If an employee feels like they’ve been misled by their interview process, it could severely color their
productivity and engagement going forward, or even push them to leave.

Growth opportunities : Employees who don’t feel supported in their professional development are three times more
likely to search for a new job. Providing opportunities for career development and training goes a long way in both
engaging and retaining employees—and represents a competitive edge for the companies that do so.

Leadership : Managers can make or break their employees’ work experience, so it’s important for every leader in
your organization to continue growing their management skills in order to retain employees. Strong leadership also
has huge implications for company culture. If leaders don’t embody and reinforce company values and beliefs, it’s
hard for employees to believe in a company’s mission. In order to positively influence their employees, leaders have
to talk the talk—and walk the walk.

Autonomy : By resisting the urge to micromanage your employees and giving them the autonomy to do their jobs,
you’ll show them that you trust them—the second most important expectation modern employees have of their
employers. Plus, the more independent work they do, the more opportunities you have to recognize your employees
for the great work they do!

Recognition : You can lower the overhead of recognition even further by implementing a peer recognition program.
Instead of relying on a few people to witness, recognize, and reward every valuable contribution your employees
make, you can empower everyone in your organization to recognize each other. An added benefit of peer recognition
is that it satisfies modern employees’ expectation of autonomy, giving them the freedom to express their own values
and expectations through the praise they give their colleagues.

Explain the following -

2.1 Identify Critical factors for determining Compensation Package for the following levels of
Managerial Employees -

levels of Managerial Employees

Critical factors for determining
Compensation Package
Level 6 - Managing Enterprise
 Level 5 - Managing SBU
Level 4 - Managing Function
Level 3 - Managing Managers
Level 2 - Managing Others
Level 1 - Managing Self

Answer: The Critical Factors for Determining Compensation Packages are as below:

• Years of experience and education level

• Industry: Workers with similar, or even the same job title can expect vastly different wages depending on
what industry they’re in.
• Location: Cost of living, a major factor to consider when determining compensation, is largely dependent
on location and, more specifically, the cost of housing. This is at least partially why salaries in large urban
areas are generally higher than salaries for similar positions in more rural locations.
• In-demand skill sets: When it comes to determining compensation, key skills may be an even more reliable
metric to compare against than job title. After all, different companies may have very different definitions
of the same job title. On top of that, many skill sets can apply to a wide variety of roles – all of which are
effectively competing for the same talent. That’s why it’s important for employers to consider the value of
key skills when determining compensation.
• Supply and demand : It’s crucial to be aware of the availability of relevant talent in the geographic region
where you’re recruiting. If you’re recruiting in an area where the demand for a certain skill sets and
experience outweighs the supply, you should expect to pay more in order to attract talent.

Some of the internal factors affecting employee compensation are:

1. Compensation Policy of the Organization

2. Employer’s Affordability
3. Worth of a Job
4. Employee’s Worth
5. The Organizational Ability to Pay
6. Job Analysis and Job Description and
7. Employee Related Factors.

levels of Managerial Employees

Critical factors for determining Compensation
Package
Level 6 - Managing Enterprise 1. Employee’s Worth
2. The Organizational Ability to Pay
3. Enterprise Turnover Rate

Level 5 - Managing SBU 1. Employee’s Worth

2. The Organizational Ability to Pay
3. Business Turnover

Level 4 - Managing Function 1. Employee’s Worth

2. The Organizational Ability to Pay
3. Job Analysis and Job Description

Level 3 - Managing Managers 1. Employee’s Worth

2. The Organizational Ability to Pay
3. Job Analysis and Job Description
 4. Motivated Team

Level 2 - Managing Others 1. Employee’s Worth

2. Job Analysis and Job Description
3. Motivated Team
4. Years of Experience

Level 1 - Managing Self 1. Employee’s Worth

2. Job Analysis and Job Description
3. Statutory Laws
4. Skill

2.2 Recommend a Compensation basket with many payment options an employee can choose within the limits
of CTC for the above levels