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therefore. organizations are competing with each other to attract .INTRODUCTION Executive Compensation or managerial remuneration is how top executives of business corporations are paid Managers are very short in supply . retain and motivate leader managers for their strategic requirement .
Elements of executive compensation Higher managerial post like presidents. directors. They are – 1)Salary 2) Bonus 3) Long Term Incentive 4) perquisites . visepresidents. general manager etc The managerial remuneration of such positions comprises of 4 elements .
rather than only job demands .SALARY Salary is basically determined through job evaluation and serves as the basic for other types of benefits . This is the reason why the norms of wages and salary fixation are generally not observed while fixing the salary of the manager . but in managerial compensation job evaluation plays only a part and not represents the whole truth A manager is paid for his capabilities and for the job he performs .
Salary of the managers varies by the type of job . region of the country and type of industry . as it is subject to deduction at source and is also kept by government regulation . managers are offered incentives and attractive perks . Salary makes up of about 40 to 60 % of top managers annual compensation but it is not significant . In order to avoid such deductions and sealing . size of organization.
BONUS or PROFIT SHARING BONUS This type of incentive is shortened (annual ) and is based on performance or profit sharing There are many bonus system as there are companies using this form of managerial remuneration In some system the annual bonus is tied by the formula to share returns on investments . Other bonus plans are based on the subjective judgments of the board of directors and Ceo’s Managers deserve bonus because they have much more stakes to influence organizational success than non-managerial staff .
stock options are long term benefits offered to managers Companies allow managers to purchase their shares at fixed position but Stock options are valuable as long as price of the share keeps increasing .LONG TERM INCENTIVES/STOCK OPTIONS If bonus are short term benefits . .
personal car service. personal computers and cell phones etc.. financial planning assistance etc . automobiles and leases. first class airfare or use of the corporate jet. executive health plans. For example: companies provide health club memberships with personal trainers.Perquisites Special benefits for executives that are usually noncash items. entertainment. country club memberships. discounted company products.
BENEFITS FOR EXECUTIVES As with benefits for non-executive employees . including traditional retirement . health insurance vacations and others . Executive compensation may include other benefits which other employee do not receive Executive health plans with no co-payments and with no limitations on deductible or physical choice are popular among small and middle sized business Trust of various kinds may be designed by the help the executive’s to deal with estate issues Differed compensation offers another possible means of helping executives with tax liabilities caused by incentives compensation plans . executive benefits may take several forms .
Unique feature of Managerial Remuneration Managerial remuneration cannot be compared to wage and salary schemes meant for non-managerial employees in organization . contributions. Managerial are denied the privilege of having unions and collective bargaining . This is done because no two managers in the private sectors. Factors and variable are more numerous in managerial jobs and simple comparisons and ratings are not possible . in the same grade receive the same pay. Compensation and reward depends upon such factors as competence . and loyalty to the company . Their competence and contribution are the strengths for determining their pay package . Secrecy is maintained in respect of managerial remuneration . . length of service .
This is because a managers own performance is assumed to be directly reflected in measure of units of corporate performance Managers compensation is subjected to statutory sealing.But in practice norms seem to have thrown to winds and exorbitant amounts are paid to decision makers in organizations.000 to 87.500 subject to an overall limit fixed per annum including perquisites . As per the latest guidelines . Finally theoretically.Unique feature of managerial remuneration Managerial pay is not supposed to be individual performance measure but rather on the unit of organization performance . The annual salary of Ceo's range from Rs 50 lakhs to few crore . remuneration of managerial personnel is supposed to be guided by job description . monthly salary varies from Rs 40. salary grades with ranges of pay in each grade and salary surveys . job evaluation.
its dignity and its freedom The class of people called manager are always in short supply. The lifestyle that fits his status and job requires considerable amount of money. The best of satisfying greed is to pay well .Why managers should be paid more Managers have intensive worth and hence command hefty premiums . The managers drive himself to success in his or her role is creating the mean by which certain organizational goal is achieved . the manager must be motivated for better performance and it is the money which motivates employees and managers are no exceptions . It is to eliminate or at least minimum corruption . the wage is a mean of living but for a manager financial reward is a symbol of social prestige and position . One must pay heavenly if one has to attract and retain talented and competent individual Having succeeded in retaining them . The financial reward is a symbol of managers role itself . its power . To a worker .scans and scandals cost the organization irreparably .
Being actual in most cases . It is the performance contribution that determines the pay and future revisions. Annual –payments –bonus or commission and leave travel are common features. Allowances may be linked to the salary as a percentage or by slabs . though salary scales are often discarded these days or used only as guides. which vary widely from individual managers . except where tax exemption benefits are available . and that in line to conform to the tax laws .Mythologies-cum Strategies for managerial compensation Salary/basic salary/consolidated salary continues to remain a major component . Grade wise flats allowances are being consolidated . unless it is provided towards personal benefits . Some tax relief applied for the latter . they are not considered as part of compensation . which do not increase automatically and increase at the discretion and therefore controllable Reimbursement of expenses incurred on company's work has been limited . but preferences is for flats amounts .
the relocation and transfer expenses . including admission etc. assistant.. renting employees owned housing . fees for children . furniture or utility items . DA. post retiral medical assistance .HRA etc) to cost of company basis. club entrance fee reimbursement . Most of the companies are now moving away from traditional compensation package (basics. credit card fees. or superannuation and gratuity . drivers . etc . use of company owned or leased vehicle . sales of products or assets at the concessional rate . covering provident fund. pension. phones etc. etc. medical coverage . easy loan scheme or utility items or vehicle . gardening. Benefits generally comprises of furnished or unfurnished company owned or leased accommodation . Minor benefits could be provision of security . Companies are talking in terms of gross salary and asking managers to do their own tax planning .
holiday abroad with family ) continues to be the practice even if these are taxed. . Some of the companies give their managers freedom to design package keeping in view of total cost . club membership . The trend is to move away from seniority and hierarchy system and attach value to performers. The concept of star performers are giving ground. It means giving managers the flexibility to choose lifestyles of their own living within the certain parameters . Lifestyles perks( good accommodation. Performance linked payments+Bonus+generous increments +merit awards are increasing . liberal furnishing .
organization are increasingly linking their variable pay plans to individuals . productivity based business individual /team performance . based gained profit sharing . Some of the variable pay plans ( VPPs) that organizations have successfully implemented include individual/team performance based gain profit sharing . teams and organizational performance.New way of pay Against changing patterns . and ownership and other customized schemes . the extent of linkage and the nature ( short/long term) varies for different levels within the organization . Companies have leveraged the variable pay to aggressively position their top performer at the top end of the market . stock options . productivity based business incentives . The feedback is that organizations with strategically aligned variable compensation have experienced a positive impact on individual as well as organizational performance . While long term incentive plan is a good mechanism to link organizational objectives to individual rewards .
aviation and IT/ITES which have the advantage of no legacy issues and also have younger employee population . companies are experimenting with the “cost to company "concept . with focus on higher rich compensation structure. Increasingly . New and emerging sectors like retail . telecom. Tend to adopt simplified structures at the outset Another concept gaining popularity due to changing tax environment is the flexible salary structures where the employee has the freedom to choose from the defined menu of items of pay and optimize his/her own tax planning . This works in a win-win manner and has increasingly gained acceptance as it provides flexibility to the employee and tax compliance to the organization .
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