HUMAN RESOUCE

MANAGEMENT
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• CHAPTER EIGHT (8)

• COMPENSATION AND INCENTIVE PLAN

 Compensation
• Compensation means something typically
money or award to someone in recognition of
loss, suffering or injuries.

• Incentive means something that motivates or

encourages someone to do something.
 Compensation plan
• Compensation plan means is the payment
package designed to attract and retain the
employees.
• A basic compensation plan package consists
solely of salary or wages.
• Incentive plan is a type of employee
compensation structure that use a certain
rewards to motivate team members to work
harder and achieve specific goals.
 Kinds of compensation

• Kinds of compensation
• Hourly pay
• Salary
• Commission
• Bonus
 1. Hourly pay
• 1. Hourly pay as an employer, you may have
different employee including temporary staff ,
part time worker and entry level team
members.
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• Compensating these employee with an hourly
wage makes sense as strategy without
investing in these employee beyond their
direct performance.
 2. Salary
• 2. Salary salary pay or an agreed upon
amount of annual compensation is usually
reserved for full-time worker. Often with more
responsibilities and skillsets. More technical
positions, leadership positions and staff
typically earn a salary.
 3. Commission
• 3. Commission another form of
compensation is commission-based pay and
it’s the most common in sales. This kind of
pay usually represents a percentage of total
goods and services as incentive for employees
to perform well.
 4. Bonuses
• 4. Bonuses is another form of variable pay
and compensation. Bonuses are typically a
percentage of a sum established as a flat-rate
payout.
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• Additionally some companies offer bonuses
based on departmental performance while
others share bomus pay on timeline of
quarterly or annual result.
Objectives of compensation / incentive plan

• To recruit and retain qualified employees

• To increase or maintain morale
• To increase in productivity
• Reduction in labor cost
• Higher employee motivation
• Rise in work s earning
• Improvement in efficiency
 Types of Compensation

Compensation can take place on

Monetary
Non-Monetary terms
 Monetary
• Monetary forms of compensation include the
following
• 1. Bonus
2.employee rewards and recognition
3. Commission on sales,
4. Sharing of profits,
5. Paying for working overtime etc.
 Non Monetary
• Non Monetary forms of compensation include:
• 1. Internet reimbursement
2. Mobile phone reimbursement,
3. Public recognition
4. Transfer facility
5. Promotion opportunities
6. Paid house for stay by the company, as well as
7. Company car for traveling office.
8. Free scholarship for an online courses.
 Components of Compensation

• Components of Compensation
– 1. Analysis of Job
• Job Analysis comes into the picture when you
do the detailed process of analysis of the job.
It further gives way to formulating the
description of a specific job. Various
techniques are used while analyzing the
position
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• 1. Questionnaires
2. Interviews
3. Observation
 .2. Description of Job
• . Description of Job
. job description – plays a crucial role by being
the most vital component of the entire
selection system of a candidate and their
compensation
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• Some of these elements are mention below:
1. Duties
2. Responsibilities
3. Environmental conditions
4. Requirements
5. Functions
6. Location
 3 .Evaluation of Job

.Evaluation of Job
• Four different techniques used for evaluating
a particular are mentioned below:
1. Factor Comparison
2. Ranking
3. Point Method
4. Classification
 conclusion
• The basic purpose of compensation and
incentive plan is encourages the employees
performance and motivate them to focus on
the success of the organization as whole