Special Lecture Session for MHRM students of Rajagiri

School of Social Sciences

T Sasikumar
 Structure of this Session

Content Time

Understanding Expectations 10 minutes

Discussions 30 minutes

Compensation Trends in Market 30 minutes

Q & A Session 30 minutes

What do you want to Learn from this session

or
Your expectations ?
 Let’s Discuss - 1

You have been appointed as Head of HR for a green field project. The project is being set up
to manufacture Auto Components for supply to major Auto OEM’s. The project has a
manpower plan of recruiting 80 management staff across various functions and about 144
workmen. The 80 management staff are spread across functions like Manufacturing, Quality,
Engineering, Finance, HR , Sourcing, IT etc. The workmen required are basically to do
assembling job, maintenance etc . Skill is required for maintenance job whereas assembly
area the skill can be imparted in three months. Though there is a manpower plan,
recruitments are likely to start in two months time. There is no formal compensation policy
in place.

As Head of HR one of your key result area is to develop a Compensation Proposal for the
project.

How would you go about this task ?

 What is Compensation ?

Compensation is the total amount of the monetary and non-

monetary pay provided to an employee by an employer in
return for work performed as required
 What is Compensation ?

Compensation is based on:

• market research about the worth of similar jobs in the marketplace

• employee contributions and accomplishments

• the availability of employees with like skills in the marketplace

• Desire of the employer to attract and retain a particular employee for

the value they are perceived to add to the employment relationship

• Ability of an employer to pay market-rate

 Compensation Model
The Compensation model should be closely knitted with following three elements

• Management Strategy
• Compensation Plan Design
• Performance

Compensation
Administration
Model

Management Strategy Compensation Design Performance

What to Pay For ? How and How Much ? What do we pay for ?

Performance
Job Analysis, Job
Achievement of Standards and
Description, Job
Company’s Goal, Appraisal which
Evaluation, Market
Competitiveness makes impact on
Surveys
bottom line

7
 Management Strategy:
This relates to the basic existence of any organization its objectives and goals
i.e. vision and mission of the enterprise, for which human resources are hired,
and the organization pays to its employees to keep them motivated for
accomplishing those set objectives in a cost effective manner

8
Job Analysis
Job Analysis is a process to identify and determine in detail the particular job
duties and requirements and the relative importance of these duties for a given
job. Job Analysis is a process where judgments are made about data collected
on a job. Job Analysis can be used in compensation to identify or determine:

• skill levels
• compensable job factors
• work environment (e.g., hazards; attention; physical effort)
• responsibilities (e.g., fiscal; supervisory)
• required level of education (indirectly related to salary level)

9
Job Description:
• Output from analysis of a job is used to develop a job description and its
specification

• Summarizes job analysis information in a readable format and identify

individual jobs for employees by providing documentation

• It identifies the tasks, duties and responsibilities of a job

• It describes what is done, why it is done , where it is done, and

briefly, how it is done

10
Job Evaluation:
• The methods and practices of ordering jobs or positions with respect to
their value or worth to the organization
 
Contents:
• Ranking
• Classification
• Factor Comparison
• Point Method 

11
Determining Pay Structure
• The basis for most pay programs is a pay structure - a hierarchy of jobs
with pay ranges and/or rates assigned

• Pay structures are designed so that the greater the worth of a job, the
higher the pay grade and range

• Pay program has certain objectives

• Internal equity
• External equity (or competitiveness)
• Individual equity
• Performance or productivity incentives
• Maximum use of financial resources
• Compliance with laws and regulations and
• Administrative efficiency

12
Roles and Levels

Senior Management
Leadership

Middle Management
Managing

Junior Management
Execution

13
 Role and Levels
< Roles >
Levels

Head of ORG/ Functional Heads Head of Division Lead –Work Transactions

Central Function Centre

President / CEO
L1 GM -Functional
Heads
DGM - Head of
Div
L2
Div -Mgr /Senior
Manager

L3
Manager
Dy Manager
L4 Asst Manager
Sr Officer
Officer
L5

14
Levels Proposed salary Bands ,Experience, Qualifications

Positions Qualifications' Experience years Salary Band Comparison with

INR Lacs (annual) Benchmark

President / CEO BE MBA 25 plus

GM -Functional BE / Professional > 19 35 -48 MG 29
Heads Qualification
L1
DGM -Head of > 13 – 22 28-39 MG 28
Division/Function Degree /Diploma Or 20 – 30 in
L2 case of Dip .

Div Mgr /Senior Degree / Diploma > 10 -15 or 17-24 14- 20 MG 26/25
Manager Dip
L3
Manager Degree / Dip > 4-8 or 11-17 8 -12 MG 24
Deputy Manager Degree / Dip > 3 -5 or 8-13 7-10 MG23

L4 Asst Manager Degree/Diploma > 2 – 4 or 5- 7 5-7 MG 22

Sr officer Degree/Diploma 1-3 or 2- 7 4-6 MG 21
Officer Diploma 3-5
L5

15
 Data - Market scenario
CTC INR ( Current ) (Projected )
Levels 25th 50th 75th 25th 50th 75th

Manager 779664 952801 1117175 843597 1030931 1208783

(Auto Mfg)

(Auto comp) 765302 865116 942666

Average salary 886060
MG 24
Senior 925701 1128645 1322488 1001609 1221194 1430931
Manager

(Auto Comp) 845504 936800 1030408

Average salary 1064534

MG 25
Divisional 1304784 1583678 1853311 1411776 1713540 2005282
Manager

(Autocom) 1220183 1491125 1581296

Average salary 1565281

MG 26

16
 Compensation structure in the Manufacturing industry

Top and Senior Management Middle Management

Basic Other allowances Basic Other allowances
Variable Pay Retirals Variable Pay Retirals
12% 32% 14% 31%

23% 19%

33%
37%

L 1 and L2 L3

Junior Management
Basic Other allowances
Variable Pay Retirals
13% 33%
16%

39%

L4 and L 5

17
 Let’s Discuss -2
You have a different situation now. You are the Head of HR for XYZ corporation. Annual
Compensation Revision is due for the management staff effective October 2011. The
appraisal cycle is from October to September period. Business up to August has been good
with a 1% growth in market share. Bottom lines have remained steady and flat over last year
mainly because of the rise in input costs. Market is projected to grow resulting in all
competitors going in for expansion/increase in capacities thereby resulting in requirement of
additional people. The employees in XYZ corporation are very enthusiastic about the annual
appraisal as they know the company has done well. However from Management perspective
the bottom line has not grown. In this scenario you are having the task of taking an
appropriate decision on compensation revision.

What are the factors you will consider while proposing an increase and what would be the
objective with which the proposal for compensation revision will be framed ?
 Thanks

July 2011 BIM –PGP 2010-12 Batch 19