INSTITUTE OF MANAGEMENT, NIRMA UNIVERSITY

SEMESTER VII

ACOB &HRM

INDIVIDUAL ASSIGNMENT

Contemporary Practices and Issues in Compensation Management

SUBMITTED TO:

PROF. POONAM CHHANIWAL

SUBMITTED BY:

KIRTAN SINGI (187128)

 ACKNOWLEDGEMENT

I would like to offer our deepest gratitude to all those people who assisted us in completing
this project. I would firstly like to extend our gratitude to Professor Poonam Chhaniwal for
her constant support in terms of providing resources from her side at all the levels of the
assignment and her generosity in clarifying all our doubts and concepts, which not only
helped me in conceptual clarity of the business idea but also proved to be a great aid in
completing the business plan successfully. Moreover, her guidelines also provided a robust
foundation to the completion of this analysis.
 INTRODUCTION

Compensation administration is one of the most significant aspects of human resource

management since effective compensation policies, programmes, and implementation are
required to procure, maintain, and develop the organization's human resources in order to
achieve effective results. It entails choosing, designing, developing, and directing
programmes that use financial incentives to achieve compensation or incentive policies.
Upper Management of the Company

Need:

Compensation management's primary goal is to address the needs of both employees and
employers. To keep their costs low, companies want to pay as little as feasible. Employees
strive to reach the top of the corporate ladder as quickly as feasible.

1. Attracting and Retaining Employees: From the perspective of the organisation, every
company seeks new talent and skills from outside sources. For this reason,
compensation management attempts to attract and retain the right personnel at the
right moment in the organisation.
2. Employee Motivation: The goal of compensation management is to encourage
employees to work harder and produce more. Compensation management can be set
up to incentivize employees using monetary rewards.
3. Compensation Uniformity: When it comes to compensating personnel, compensation
management strives for internal and external consistency. Internal consistency entails
paying employees based on the importance of their jobs and how well they perform
on them. External consistency refers to all organisations paying employees the same
amount for the same job.
 COMPANY A: THE IMPACT ENGINE

Sector: Education

Industry: Consulting Services

"You can acquire anything you want in life if you help enough people get what they want,"
the Impact Engine believes and lives by.

They are cultivating a community of highly driven and ambitious professionals by providing
them with high-quality resources, opportunities to apply skills through real-world projects,
and opportunities to network with like-minded people. They aspire to rewire the learning
process and have an effect in a variety of domains, ultimately empowering as many people as
possible!

Apart from this they have a marketing and strategy division to provide digital marketing and
animation services to corporate clientele for acquiring monetary resources and compensation
for services to run the firm.

1. What are the components of compensation package?

This company is a thriving start-up and hence the compensation package components are
limited even for the CEO (Mr Vishal Bagdi). Currently the basic components include a Base
Pay Structure (different at different designation), Variable Pay Structure (to specific
divisions), Salary (not applicable to new joiners or interns), Rewards and Incentives (to the
individuals bringing in business for the company).

2. Are they different for different levels and Roles?

Yes, they are different for different levels with not a drastic difference as the CEO of the
company, being a start-up founder, believes in the ideology of every employee to be
integrated at the same level in the organisation in order to maximise efficiency, build
informal relations and making sure that every idea is freely expressed, heard and
implemented. For different roles, it differs considerably as per the HR head of the
organisation (Mr Jeneel Rambhia). Executives are compensated majorly from the company
profits which varies as per the revenue generated monthly, employees have a fixed pay
structure as of now and when it comes to interns or part timers, the pay is fixed and can be
reduced as per the revenue fluctuations for the company. Interns get this minimum support
after their one month’s probation is over. Here, interns, if they wish to, are promoted to
become employees once their internship tenure is over. The Business Development team is
rewarded with fixed and variable pay as per their performance.

3. What is the reason for this difference?

From the above two questions, the reason is two folds. First, being the novel working ethics
and motivational ideologies of the CEO, towards every member who is a part of the
organisation in any way possible, to establish the sense equality among formal workings.
Second, is the obvious reason of the firm being a start-up in its initial years, hence, there
exists limited revenue and hence limited resources to be distributed among the organisation.

4. What are their views about the connection of compensation with

employee retention and engagement?

Mr Jeneel is a strong believer of a strong connection between compensation with employee

retention and engagement. For continuous motivation and momentum to be there for every
productive employee, promotions are offered like a good intern being offered a permanent
employment option, employees being promoted to division heads and finally division heads
to executive team. While interaction, he told me the importance of compensation towards
retention by mentioning how he brought the culture of pay a minimum fixed stipend to
interns of a start-up companies when it was not even a year old. Compensation is the key
driver for retention and secondary for engagement after recognition and promotion for him.

5. Are these challenges equal for different levels and different skill sets?

As per the HR head, these challenges are different at different levels and quiet
unconventional for a start-up company in its initial years. As per him, the executive members
and the CEO not getting enough compensation would be fine for a while as they are the
founding team and pillars of the organisation which is yet to succeed. But the major issue
comes at division head and permanent employee level as they are hired individuals who are
not accepting less pay, as they are giving their time and skill towards fulfilling their
responsibilities. Hence, if things go south for a month, which occasionally happens in a start-
up, these are the people who create the biggest of the challenge for the company, followed by
part time or freelancers hired for a particular project.

6. How do they cope with these?

For retention, the company focuses on regular promotion opportunities and extra projects
with variable pay to increase the compensation for some particular outstanding employees
and division head. They also try utmost to create and maintain an inclusive environment for
every member connected with the company where they can build a youth network and
discover a platform to showcase their ideas. For engagement, they have a fixed day (Friday)
for an informal meet where everyone shares their ideas, talent and anything and everything
one wants to do. This creates an atmosphere to release work stress and motivates everyone to
enjoy their weekend and get back with full energy to work again. This also, shapes up the
bonding among every person irrespective of whether they work together or not.
 COMPANY B: Taprootz Tech. Co.

Sector: Recruitment Consulting

Industry: Logistics and Supply Chain

Taprootz is an exclusive platform for logisticians that allows you to grow and succeed by
building your profession. We help with job searches, self-assessments and testing, learning
and growth through e-learning programmes, and networking with other logistics
professionals.

“GO-TO-PLACE for LOGISTICIANS”

1. What are the components of compensation package?

This company is a start-up, initiated in 2011, so the compensation package components are
ample even for the part time employees. Currently the basic components include a Base Pay
Structure (different at different designation), Variable Pay Structure (to specific divisions),
Salary (not applicable to new interns), Rewards and Incentives (to the individuals bringing in
business for the company), Perquisites (provident funds, medical aid) and Non-Monetary
Benefits (employee of the week/month advantages).
 2. Are they different for different levels and Roles?

Yes, they are different for different levels with a drastic difference as the CEO of the
company, being a long term visionary, believes in the ideology of every employee to be
compensated as per the commitment they have put in for the company in order to motivate
new joiners to work diligently to earn promotion and increased compensation with other
benefits and delegated power. For different roles, it differs considerably as per the HR head
of the organisation (Mr Shaji Samuel). Executives are compensated majorly from the
company profits which varies as per the revenue generated monthly, employees have a fixed
pay structure as of now and when it comes to interns or part timers, the pay is fixed and pre-
determined with of clause of delay in payment option with the company. Interns get this
compensation support after their two month’s probation is over. Here, interns, if they wish to,
are promoted to become part time employees once their internship tenure is over. The HR
specialists working in the organisation are rewarded on a big recruitment filling in their
client’s organisation.

3. What is the reason for this difference?

From the above two questions, the reason is two folds. First, being the motivational
ideologies of the CEO, towards every member who is a part of the organisation in any way
possible, to establish a performance benchmark and line for promotion for achieving a
considerable increase in the monetary compensation. Second, is the obvious reason of the
firm being a start-up in its later years, hence, there exists a collective objective of using their
resources towards expansion plans.

4. What are their views about the connection of compensation with

employee retention and engagement?

Mr Shaji is a strong believer of a strong connection between compensation with employee

retention and engagement. For continuous motivation and momentum to be there for every
productive employee, promotions are offered like a good intern being offered a permanent
employment option, employees being promoted to division heads and finally division heads
to executives and then top management. While interaction, he told me the importance of
compensation towards retention by mentioning how he brought the culture of paying a fixed
ample stipend to interns of a start-up companies when there is no such compulsion. Also,
variable incentive towards a client acquisition or a position closing is awarded to the person
irrespective of the designation.

5. Are these challenges equal for different levels and different skill sets?

As per the HR head, these challenges are almost same for different levels and quiet
conventional for a start-up company in its later years. As per him, from the new employees to
the top management, everyone has a need for proper compensation and any discrepancies in
it may and previously have created problems. Some issue comes at the intern role as the
clause of delayed payments if executed may hinder the company’s future prospects to retain
the intern and make him a full-time part of the organisation.

6. How do they cope with these?

For retention, the company focuses on regular promotion and incentives opportunities and
extra projects with additional fixed pay to increase the compensation for some particular
outstanding employees. They also try utmost to create and maintain an inclusive environment
for every member connected with the company where they can build relations. For
engagement, they have a fixed time every day in the morning (around 10 AM) for a division
wise meet as well as a day end division meet in order to increase engagement, creating
synergies and releasing stress. Also, a weekend meet happens of the entire organisation
where everything is discussed apart from work, be it how team India lost yesterday’s match
to what are everyone’s weekend plans.
Based on your perusal of recent reports and articles in business
newspapers and trade magazines e.g. Human Capital, People Matters or
interactions with practicing managers or HR Consultants identify and
describe at least three issues of contemporary nature that are the concerns
of organisations today, in the context of employee compensation and
rewards.

Developing competitive wage scales and assessing the benefits of bonus and incentive
payments are all examples of compensation challenges.

Definition of Compensation:

Compensation refers to monetary payments made to employees, such as wages and salaries.
Bonuses and incentives, as well as raises and company shares, are all part of an employee's
compensation package. Compensation professionals are frequently well-versed in both
compensation and benefits. This is one of the reasons why some HR departments integrate
compensation and benefits into a single departmental role.

Salary and Wage Levels

It may be necessary for your organisation to offer exceptionally competitive wages in order to
attract skilled individuals. Employee benefits are also significant, but most job candidates are
initially interested in the base salary. The reputation of a company is also a factor in whether
or not it can become an employer of choice. Staff of competitors and industry specialists are
likely to network with your employees to share information. Candidates desire a fair
compensation, not necessarily a big wage, especially if the job offer includes a good benefits
package. To develop compensation policy, compensation specialists examine competitors'
pay, labour market trends, and employment levels.

Bonus and Incentive Pay

Annual bonuses or incentive pay based on individual or organisational performance, often
known as variable pay, are offered by some employers. "The largest type of variable-pay
incentive schemes, company-wide pay-for-performance plans, reward employees based on
the overall performance of the organisation." Profit sharing is the most extensively used
scheme of this type." If your company is still young, it's difficult to budget for bonuses and
incentives too far in advance; however, if you have a well-structured incentive programme
that is followed consistently without partiality or bias, you may accurately anticipate budget
demands for bonuses and incentive pay.

Skill based Pay

Within the trades, skill-based frameworks have long been utilised to define jobs. In
characterising roles like an apprentice, increasing skill levels are the decisive element. Other
white-collar positions with skill-based pay systems include those where the corporation offers
a career progression based on gaining technical skill rather than being promoted through
various management levels.
 CONCLUSION AND LEARNINGS

The HR role is evolving everyday with novel industry versions coming and the long term
impact of the COVID 19 pandemic has brought a need for an overturn of this management
function. This particular topic provided me with details on compensation management along
with linking it to contemporary scenario. It gave me an opportunity to know about real world
corporate companies, specially a start-up. Through my interaction with the HR managers, I
got to know a lot of issues or rather crises that they face which are not just related to
compensation management or even their function. The importance of compensation has
evolved over time and is now interlinked to almost every other factor which keeps an
employee align his work towards the company’s success. In short, it has become the make or
break factor for a company’s revenue generation ability at last.

I found how different organisation levels can create issues in the compensation structure, if
your organisation has complicated levels and reporting and delegation responsibilities. Also,
how organisations cope with issues in compensation is unique to each and can only be
experienced and learned as the solutions are customised as per the requirements.
 REFERENCES

 Naik, Ameet. (September, 2019). Top Challenges of Compensation Management.

Retrieved from https://sightsinplus.com/insight/benifits/top-challenges-of-
compensation-management-in-industry-4-0/
 UKEssays. (November 2018). Introduction of Compensation Management. Retrieved
from https://www.ukessays.com/essays/business/the-introduction-to-compensation-
business-essay.php?vref=1