COMPENSATION

Every organization have a compensation philosophy of its own that guides administration of
monetary and non-monetary benefits. It refers to a set of beliefs and guiding principles and
which are consistent with the objective of the organization. It needs to send clear message to
the employees that the organization does not compromise welfare of employees for the sake
of revenue and that organization is best place to work for.

COMPONENTS OF COMPENSATION

Wage and Salary Incentives Allowances Fringe benefits Perquisites

COMPENSATION PLAN OF DELOITTE

Executive compensation is not only a consideration for HR managers but also a topic of
increasing importance to managements and boards. After the 2008 recession, compensation
became more decisive to retaining and motivating critical senior executive talent. CFOs and
CHROs plays a critical role in framing the financial impacts of compensation plans and
influence the public perception of these plans.

Executive compensation generally consists of a mix of four components:

• Annual base salary.

• Annual incentive or bonus plan generally tied to short term performance measures.

• Long-term incentives consisting of stock options and other long-term performance plans.

• Benefits plan.

In Deloitte the base salary constitutes 30% of total compensation, the annual incentive
another 20%, the benefits about 10% and long-term incentives or the wealth creation portion
of the compensation about 40%.
 COMPENSATION AND THE ROLE OF CFO AND CHRO
In Deloitte CFOs and CHROs plays a major role in implementing compensation practices,
especially in four critical areas:

1. Pay for performance:

CFOs plays a vital role in shaping the pay for performance structures by getting to know
shareholders’ expectations through their interactions with analysts and major investors. This
helps organization in shaping short term and long term compensation plans.

2. Financial discipline:

It’s important for top management to focus on what is affordable, by striking a balance with
other potential competitors. At the business unit level, CFOs also establish better financial
discipline and controls, with this they are capable of identifying how units may structure
budgets and the best possible compensation plan will be provided to employees for best
possible performance outcome.

3. Risk and internal controls:

As executive compensation plan plays a very important role for attracting, retaining, and
motivating talent. CFOs and CHROs establish a rigorous process to understand how
incentives influence employees behavior and the important steps or controls that need to put
in place to minimize the attrition . Some examples include proper selection of incentive,
stress testing under various performance scenarios.

4. Bridging the information gap:

The top management spend considerable time with both the audit and compensation
committees to bridge the potential knowledge gap on compensation and financial
performance. The audit committee is likely to have an in-depth understanding of the
expenditure and other financial aspects of the dynamic business environment whereas the
compensation committee fully understands the impact of adjustments made by audit
committee on incentive plans.
 COMPENSATION ROLES AND RESPONSIBILITES.

Decision-making level Primary activities

• Works with senior leadership to establish strategic priorities and

objectives
Global Center of
Expertise • Establishes vision and frameworks for global programs
• Works with regional Center of Expertise to deliver products and
services

• Receives strategies and objectives from global Center of Expertise

Regional Center of
• Responsible for service delivery of products and services
Expertise
• Leverages operational resources for tactical delivery

• Works with regional Center of Expertise to develop plans for

delivery of products and services
Company Operations
• Executes plan to deliver products and services
• Works with other areas in HR to leverage service delivery
• Compensation technology business owners (system design, testing,
implementation support, and ongoing maintenance/updates, Tier 2 and
Tier 3 support)

• Provides service delivery

HR Service Center
• Provides process and standardization improvement in services
• Compensation technology Tier 1 support

Table 1