COMPENSATION

BENEFITS
Gracetone Abraham 22AD14
Harish 22AD15
Shwetha 22AD35
Sreeganapathy 22AD38
Gautham 22AD45
REMUNERATION
Remuneration is the total
compensation received by an
employee. It includes not only
base salary but any bonuses,
commission payments, overtime
pay, or other financial benefits that
an employee receives from an
employer.
INCENTIVES
Incentive in simple terms is something that
encourages a person or organization to do or
achieve something. It is something that incites
or has a tendency to incite a determination.
This is usually given in cash or in kind.

In business, the objective of incentive is to

increase employee productivity, improve
industrial and interpersonal relations, and as
result increase the overall profit of the
organization.
REWARDS
Rewards can be monetary in the form of
salary or non monetary in the form of
awards for some special services to the
company or simply giving an employee a
work which he enjoys doing. The primary
objective of organizations in giving
rewards is to attract, maintain and retain
efficient, high performing and motivated
employees.
COMPENSATION
Compensation and Benefits in HRM refer to the
salary, monetary, and as well as non-monetary
privileges provided to the employees at the
workplace by the organization. It is a primary tool
of the Human Resource Managers to bring out
the best potential of the employees in their work.
It works in a way – ‘Better is the compensation &
benefits, better is the performance and retention!’

REMUNERATION + INCENTIVES + REWARDS

COMPENSATION INCLUDES
● Base Pay

● Commissions

● Overtime Pay

● Bonuses, Profit Sharing, Merit Pay

● Stock Options

● Travel/Meal/Housing Allowance

● Benefits including: dental, insurance, medical,

vacation, leaves, retirement, taxes...
PURPOSE / OBJECTIVES
● recruit and retain qualified employees.
To:
● increase or maintain morale/satisfaction.
● reward and encourage peak performance.
● achieve internal and external equity.
● reduce turnover and encourage company loyalty.
● modify (through negotiations) practices of unions.
● control the incurring costs of the organization.
● follow the labor laws or wage system
COMPENSATION PLANNING PROCESS
COMPONENTS

JOB JOB
JOB ANALYSIS
DESCRIPTION EVALUATION

PAY SALARY POLICIES &

STRUCTURE SURVEY REGULATIONS
Principles of Pay Determination
● The basic principle of wage and salary fixation is that it should be based on the
relative contributions of different jobs and not on the basis of who the job holders
are.
● If this principle is adopted, the first requirement is to identify the likely
contributions of different jobs.
● This is what job evaluation precisely does. It provides the information about what
is the worth of a job in terms of its contributions to the achievement of
organizational effectiveness.
PRINCIPLES OF PAY FIXATION
1. Preserving Real Income
2. Labour Productivity
3. The Capacity of Business to Afford Pay Increases
4. The Capacity of the Economy to absorb Wages
5. Supply and Demand of Labour
6. Prevailing Market Rate
7. Living Wage
8. Managerial Attitudes
9. Psychological and Social Factors
TECHNIQUES OF PAY FIXATION
1. Centralised Payments
2. Regulated Payments
3. Institutionalized Payment System
4. Decentralised System of Payments
5. Collective Bargaining
6. Enterprise Bargaining
7. Award System
The government of India provides many regulations for regulating the wages
and salary
administration such as,
➢The minimum wages act 1998
➢The equal remunerations act 1976
➢The companies act 1956
➢The industrial dispute act 1956
➢The payment of wages act 1936 etc
COMPONENTS OF SALARY
STRUCTURE IN INDIA
TYPES OF SALARY STRUCTURE
1. Traditional Structure
2. Broadband Structure
3. Market-based Structure
SALARY STRATEGY
RELATION BETWEEN COMPENSATION
AND JOB EVALUATION
Job Evaluation involves determination of relative worth of each job for
the purpose of establishing wage and salary differentials. Relative worth
is determined mainly on the basis of Job Description and Job
Specification only. Job Evaluation helps to determine wages and salary
grades for all jobs.
JOB EVALUATION
A job evaluation is a systematic way of determining the
value/worth of a job in relation to other jobs in an
organization. It tries to make a systematic comparison
between jobs to assess their relative worth for the
purpose of establishing a rational pay structure. Job
evaluation is Different from job analysis.
Why Perform Job Evaluations?
● Helping you adjust to company growth: Many things happen when your company is
growing. Your budget will change, you’ll have to fill new positions, and you may need
more money to allocate to new jobs. A job evaluation can help prepare for these
changes.
● Keeping your salaries competitive: Job evaluations that use external data will help
you understand how competitive your compensation plans are compared to your
market competitors.
● Ensuring pay equity: Job evaluations can reveal pay inequities, allowing you to
eliminate them before they become problems.
● Executing retention and career development strategies: One of the primary
reasons employees leave a job is to accept a promotional position. Job evaluations
can help you prevent this by finding opportunities to develop employees. For example,
job evaluations can help you create promotion paths or retitle positions to reflect an
employee’s increased responsibilities.
Importance
1. Assist in employee’s selection: This is one of the major advantages provided by
technique of job evaluation. It properly analyses the job specification in line with the
competencies of candidates. Employees are chosen on the basis of their qualification
required in delivering the role effectively. All these factors enable in choosing right
candidates by organization.
2. Specialization: Job evaluation assist in specialization of labor by organization. There are
large number of job positions within an enterprise which requires many employees for
performing them. Therefore, a job evaluation technique does a clear division of labor by
defining them their roles properly which results in specialization of labor.
3. Develop harmonious relations among manager and employees: Every company want to
develop harmonious relations with their staff members. Job evaluation works towards
minimizing controversies among manager and employees by eliminating all wage
differentials within the business enterprise.
4. Avoids inequalities in salary structure: Job evaluation approach focuses on avoiding inequalities in
wage and salary structure of organization. It establishes a scientific basis for fixing remuneration of
workforce by collecting all relevant information about job positions. Proper salary structure is an
important determinant of affecting the efficiency and motivation level of workers.

5. Prevents conflicts within organization: It resolves all conflicts within organization by paying peoples
in a fair manner. All inequalities in wage rate and personal prejudices are eliminated by doing a
standardization of salary and wage rate. Job evaluation collects key information about job positions
which serve as a logical basis for collective bargaining and wage negotiations thereby avoiding any
conflicts in an organization.
Process
Job Evaluation Methods
Ranking System Method
Jobs within the organization are arranged from the most difficult to the simplest or in the
reversed order. It does not measure the value of jobs but establishes their ranks only.

When this method is employed, the job rater compares two jobs, one against another, and
asks which of the two is more difficult.

Once that question has been settled, another job is compared against the first two, and a
similar determination is made. This process is repeated until all jobs have been assigned
relative positions. Jobs are usually ranked in each department, and then the department
rankings are combined to develop an organizational ranking.
Job Classification or Grading Method
Classification, a qualitative method, involves either writing or analyzing job descriptions
and then placing them into separate grade classifications. Grade classifications should
reflect different job characteristics, such as seniority, job responsibilities, and skill level.
Grade classifications might include vice president, director, assistant director, senior
manager, manager and coordinator.

Grades should be created for each job family or department. Once they’re classified, their
relative impact on the company’s success will determine compensation.
Points Rating System
The point factor method is the most commonly used quantitative method. It uses a point
system to determine the appropriate compensation for a given position. This point system
is created by establishing factors that influence compensation (such as skill or effort), and
then assigning points to a position based on these factors. The total number of points
determines compensation.
Factor Comparison Method
The factor comparison method is a complex quantitative method that combines the point
factor method and the ranking method. First, just like the point factor method, factors that
influence compensation must be chosen and assigned.

Then, instead of establishing a point system, benchmark jobs that HR knows are paid
appropriately are used to determine how each factor should be measured. Monetary
values are then used in place of points. These values are then applied to other jobs to
determine compensation.
Incentive Schemes - Nature

● Incentives are variable rewards granted to employees

according to variation their performance.
● Popularly known as “Variable pay”, “Payment by results”
● Incentives vary from individual to individual, period to period
for the same individual.

Advantages
● Motivation and inducement for workers for
higher efficiency and greater output.
● Positive response when incentives included in
remuneration as fixed pay removes the fear of
insecurity.
● Brings down the total and unit cost of
production, Production capacity increases.
● Reduces supervision, better utilisation of
equipment, reduction in scrap, reduced lost
time, reduced Absenteeism and turnover,
increased output
Disadvantages
● Quality of product may deteriorate.
● Difficult to introduce New Machines or methods
& higher labour cost.
● Disregard safety overwork and Jealousy among
workers
● Incentive leads to corruption. Workers would be
happy to attend standard performance but may
not strive to cross them.
● Its unjust to pay employees when they are
already paid with usual wages and salaries
 Scope
The scope for the incentive plan is universal; however, its
application may be restricted to certain specific industries.
They are :

● Industrial units where the productivity of the

individual or group is difficult to measure or is not
possible due to technical and psychological situations.
● Industrial units where quality control is essential or in
specific group of workers where high quality is
extremely important.
● Industrial units where the working conditions are
hazardous for the life of an employee and it is hard to
keep an eye on the use of safety measures.

Incentive schemes are often considered as important and to

be widely used in those manufacturing processes which are
labour-intensive.
Types - Based on Plan/Scheme

Monetary Incentives : Non-Monetary

Incentives :

Monetary incentives are Non-monetary

those incentives which incentives are those
are paid in the form of incentives which are not
money or kind. paid in the form of
money or kind.
 Types - Performance

1. Incentives in the same proportion as performance.

2. Incentives varying proportionately less than performance.

3. Incentives varying proportionately more than performance

4. Incentives varying in proportions that varies with levels of

performance.
Incentives in the same proportion as performance.

i) Straight Piece-Work :

Under this plan, the payment for per unit of production is fixed. The total income of the
employee is determined by multiplying the total units produced by the employee with the rate
of single unit.

ii) Standard Hour Plan :

In this plan, a fixed amount of time is scheduled for the completion of a specific task.
Incentives varying proportionately less than
performance

● There are four different types of plans which come in this group i.e.,.
● These plans motivate the employee to save time and energy by completing the assigned
task within or before the time limit specified for the completion of a task.
● It provides the bonus on the time being saved, by comparing the time actually taken for, the
completion of task and time allotted for that task.
Incentives varying proportionately less than performance
The specific amount of time is allotted for the accomplishment of a particular task.

Halsey Afterwards, the rate per hour is decided. Now, if the employee is completing the allotted
task within the stipulated time period or even after it, the employee will get remunerated
at the time-rate.

It is an upgraded version of the Halsey's Plan, In this plan, premium is determined on

the basis of time spent by the worker and the time saved by him. This type of scheme

Rowan provides additional bonuses to the employees.

Bonus = Time Saved x Time Taken x Hourly Rate
Standard Time or Time Allowed

Pay of worker is calculated by multiplying the standard hour with the number of hours

Barth actually taken to perform the job', taking the square root of the product and multiplying
it by the worker's hourly rate

Each work or activity is articulated in respect of different standard minutes, which are

Bedaux called 'Bedeaux Points' or "B's". Each job has a specific number of B's. The rate per
hour is also calculated.
Incentives varying proportionately more than
performance
This category includes two methods :

i) High Piece-Rate System :

In this scheme, the income of the worker varies in percentage to his or her output, as in straight
piece-work, but the increase in income for each unit of output above the standard is more. For
example, for every one per cent rise in output above the standard, there may be a 4/3 times rise
in income, as compared to one per cent rise in income under the straight piece-rate system.
Once the standards have been reached, higher rates start applying. Same logic is applicable to
the high standard hour system.

ii) High Standard Hour System :

Under this scheme, the rate per unit of time is higher. For example, there may be a 10 per cent
escalation in the time rate earnings of an employee for every one per cent increase in output
above the standard.
Incentives varying in proportions that varies with levels of performance.
Two piece rates are fixed. Low piece rate system is used for those who are unable to
Taylor's Differential
01 Piece-Rate System
achieve the required standard. High piece rate system is applied on those who have
achieved either required standard or more than required standard.

It was developed to overcome the shortcomings of the Taylor's Differential Piece

Merrick's Multiple Rate System. In Merrick's plan, three piece rates are fixed for the job. All the rates
02 Piece-Rate System are fixed at above the normal level.

The percentage of the bonus is multiplied by the value of standard time. Fixed time
Gantt Task and
03 Bonus Plan
rates are guaranteed in this plan. Job performance is associated with output and
time standards. If worker completes a job within a standard fixed time or before that
then he gets the wage for standard time with an additional bonus

A standard time is fixed for each and every job, and the efficiency of each and every
Emerson's
04 Efficiency Plan
worker is determined by dividing the time taken' by 'standard time. The worker is paid
by time rate, up to 67% of efficiency. After that, the worker is paid a graduated bonus.

Accelerating Premium Accelerating premium system of incentive guarantees a minimum wage for output
05 System
which is lower than standard output. Small increment in the salary is given for low or
near to average increase in the output as compared to standard output. Large
increments are given for the above average output.
Group incentive plans

The incentive schemes can be applied on a

group basis also. Group incentive schemes
are appropriate where jobs are
interdependent. It is difficult to
meaningfully measure individual
performance and group pressures affect the
performance of the members of the group.
 Types of Group Incentive Schemes
1) Priestman's Production Bonus Plan
If the level of work more than the expected standard, bonus is
given to workers and if group fails to reach required standard, workers are
paid on time-rate basis and no bonus is offered to them.
2) Cost Efficiency Bonus Plan
According to cost efficiency plan, a previously defined -percentage
of saving is dispersed among employees in the form of bonus.
3) Gainsharing Plan
This plan compares an enhancement (gain) in organisational
performance with certain allocation (sharing) of benefits to employees.
Scanlon Plan, Rucker Plan, Improshare
4) Towne Plan
The cost saved by the labourer by completing the work before the
specified time period is measured and distributed among the labourers. A
part of the savings is also given to supervisors to appreciate their work.
Incentive across Industries/companies

● At Siemens, the incentive scheme is exclusively used for shopfloor workers. Every month, the company awards
two bonuses to its workers based on performance (introduced in 1964) and productivity (since 1991)
● Incentives Plans by Infosys - i) Employees Stock Offer Plan, 1994, Stock Option Plan, 1998, Stock Option Plan,
1999
● TCS wanted to design a mechanism under which incentives are provided for retaining as well as rewarding
talents of their employees. The concept of "Bonus Bank' has also been introduced by TCS. Under this concept,
the company declares a potential bonus for the employee whenever a pre-decided corporate target is
exceeded.
● Incentives Plans by Aditya Birla Group, Assertive growth plans with acquisition of companies has been
developed by Aditya Birla Group. the managers receive long-term incentive plans and the best talent is
retained. This establishes a sense of responsibility and possession among the employees.
Incentive for indirect workers
● Indirect workers are as much essential for production
as direct workers and as such full increase in
production can not be obtained without the full
co-operation of the indirect workers.
● Therefore, incentive may be introduced for indirect
workers either to achieve the efficiency of the services
they provide to direct workers or to induce foremen or
supervisors to increase departmental efficiency and
thus, reduce costs.
● Also payment of bonus to indirect workers, when it is
being paid to direct workers will prevent labour unrest.
 Incentive scheme in Indian industry
● Though incentives are as old as industries themselves, it was only in 1946 that they
were introduced in our country. Even to this day, the incentive schemes are in their
infancy.
● In most industrial establishments, the introduction of incentives schemes has not been
preceded by work studies, consultations with workers representatives and
rationalization of wage structure through job evaluation.
● Incentive schemes differ from industry to industry and from plant or plant within an
industry
● Most incentive schemes in operation fall under one or the other of the four classes
mentioned by the ILO. But the schemes are fine-tuned to suit the requirements of the
organization
● The schemes in public sector plants have an extremely varied coverage, some applying
only to day-rated employees while others are being made applicable right upto the top
management.
● Inflation has reduced the motivational effect of incentives. Hence, incentives have to
be substantial if workers are to be motivated for higher efficiency and greater output.
● In many cases, incentives seem to have achieved their objectives, that is increased
productivity and enhanced earnings
Non-Financial Incentive Schemes

1) Achievement

2) Recognition

3) Responsibility

4) Influence

5) Personal Growth
CURRENT MARKET TRENDS
 Hybrid Work Environment

● A hybrid work environment with the option to work

remotely has emerged as one of the most popular
employee compensation and benefits.
● Remote working has increased the productivity of the
employees because a lot of time is saved due to the
elimination of the need to commute to work and
in-person meetings.
● 70% of companies are adopting a hybrid work
schedule, and many have already implemented a
hybrid work environment.
 Flexible Paid Time Off

● Flexibility in paid time off is a fast-growing trend of

employee compensation and benefits.
● Instead of categorizing time off, employers offer a set
number of paid time off throughout the year.
● The employees are free to take these paid time offs for any
purpose of their choice. Thus, whether the leave is for a
birthday, traditional holiday, outing, or simply to relax, the
employer is not concerned as long as the quota of paid
time off is not exhausted.
 PROFIT SHARING
● Profit sharing is various incentive plans
introduced by businesses that provide
direct or indirect payments to employees
that depend on company's profitability in
addition to employees' regular salary and
bonuses.
● In publicly traded companies these plans
typically amount to allocation of shares to
employees.
STOCK OPTIONS
● Stock options are a form of compensation.
Companies can grant them to employees,
contractors, consultants and investors.
● These options, which are contracts, give an
employee the right to buy, or exercise, a set number
of shares of the company stock at a preset price,
also known as the grant price.
EMPLOYEE STOCK OWNERSHIP PLANS
● An employee stock ownership plan (ESOP)
is an employee benefit plan that gives
workers ownership interest in the company
in the form of shares of stock.
● ESOPs give the sponsoring company the
selling shareholder and participants various
tax benefits, making them qualified plans,
and are often used by employers as a
corporate finance strategy to align the
interests of their employees with those of
their shareholders.
Ratio between CEO and average worker pay in 2018
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