Compensation

Management and
Retention Strategies

Course Facilitator
Pooja Patnaik (PhD)
 JIBS Policy & Class Rules

Externals-Internals
Class Timings– 4:40 – 7:40
Assessments
p.m.
(not later than 4:50 p.m.)

50% 50%

Minimum 75% attendance

mandatory Internal External
Please Know

The r e wi l l be NO I NDI VI DUAL Assessments:

RESEARCH PROJE CT ( I RP)
Class Participation - 5
M ust Re a d t he J I BS Ac a de m i c Pol i c y
Two In class assignment (Individual Level)
Any I s sue or Gr i e va nc e r e l a t e d t o
• Research Paper Analysis -5 Marks
a bs e e nt i s m or a ny i nf or m a t i on t ha t you
ne e d t o know s houl d be done t hr ough • Design Compensation – 5 Marks
J I BS Ac a de m i c Off i c e One group Presentation -10
Any que r y r e l a t e d t o t he Subj e c t / Case Studies / Situation Analysis/Activity
Cour se / Doubt s – you c a n c onne c t wi t h
(5)-5*3=15 – In class submission
m e ove r e m a i l or t a ki ng a ppoi nt m e nt s.
2 Quizzes –10

End Term-50
Assignments Timelines and Tasks [Rubrics]

Class Participation

1. Based on question and answers given every class it will be noted in Excel Sheet
while taking attendance.

Two In class Assignment

2. Task-1: 19 t h Feb 2024, 3 r d Week of the Month). A research paper will be shared
with the students two days prior to the class and the students must come prepared
with it and will be given 1 HR time to critically reflect and share their
understanding about the research paper. It will be a hard copy submission.
Students have to get 3 sheets of A4 Size paper for sharing their review.
Rubrics for evaluation

Criteria / Weightage* (1) (2) (3) (4) (5)

Understanding of concepts Understanding of concepts is Understanding of concepts is Understanding of concepts is Understanding of concepts is Understanding of concepts is
and articulation not properly expressed and very minimally expressed in well expressed with few well expressed with adequate very well expressed by using
(Application of theory, articulation needs the article points in the article points in the article several points in the article
Critically commenting and improvement
Reflecting)

Organization of the None of the facts in the Less than half of the facts in Half of the facts in the article Almost all of the facts in the All the points in the article
content article are accurate and the article are accurate are accurate and relevant article are accurate and are accurate and relevant
relevant relevant

Conclusion and Conclusion and Referencing Conclusion and Referencing Conclusion and Referencing Conclusion and Referencing Conclusion and Referencing
referencing are not properly done, needs are done with very minimal is done properly with few is done properly using is done properly using more
improvement citations citations citations citations
Task 2: April 29, 3 r d Last week (Approx). To design a compensation package
using Excel in class. Time for doing will be 1 Hour. Students will do it
individually and explain the justification of each component in 1-2 lines in
that excel sheet below the sheet designed.

Note: Students must have their own laptop or Tablet for doing this.
Rubrics for evaluation

Criteria / Weightage*
(1) (2) (3) (4) (5)
To illustrate the Is not able to identify Identifying relevant Identifying relevant Identifying relevant Identifying relevant options
financial and non- relevant options to be options to be included in options to be options to be included in to be included in the financial
financial components included in the financial the financial and non- included in the the financial and non- and non-financial rewards
of employee pay and non-financial financial rewards and financial and non- financial rewards and and uses at least 4 under each
structure rewards uses at least 1 under each financial rewards and uses at least 3 under each
uses at least 2 under
each

To propose the pay Not able to apply the Concept applied but not Able to apply and Able to apply the Able to apply the concept
grades across various concept and propose pay able to propose pay propose the concept concept effectively but effectively and was able to
industries grade grades related to the effectively by using could propose few pay propose several pay grades
position allotted the pay grades on grades discussed in the discussed in the class
his/her own class

To design Not able to list the items Lists one item to be Lists two items to be Lists three items to be Lists four items to be
pay/compensation to be included in the pay included in the pay included in the pay included in the pay included in the pay structure
structure through structure and no accurate structure and no accurate structure but no structure along with along with accurate
mathematical calculation calculation accurate calculation accurate calculation calculation
calculations in MS
EXCEL
Group presentation

• Students will be assigned topics and will be given specific time/day to

present. Student’s absent on the date of presentation will be given “0”.

• Presentation code of conduct:

• Proper dress code- Formal

• Topics will be allotted on 4 t h Week

• Rubrics for evaluation: Content, Delivery, integrating theory with

practice/ application of relevant model, Q and A (2.5 Marks Each)
Quizzes

1. Quiz 1: 5 t h Week 4 t h March (In Class)- Full Marks-10 to be converted to 5

2. Quiz-2: 10 t h Week 8 t h April (In Class)- Full Marks-10 to be converted to 5

Question Pattern

1. Number of questions -10

2. All objective types

Books

1. Compensation in a Knowledge Based World- Richard Henderson

2. Compensation – Newman, Milkovich, Gerhart, Ratnam

Why Study this Paper?

Share your reflections

It’s all about Money!
Money in business talks!

Share your reflection!

Synonyms

• Compensation • Perks

• Salary • Incentives

• Rewards • Remuneration

• Pay

• Wage

• Benefits
Subject is of interest to

• Society – Justice

• Stockholders – CEO paid

• Managers – Cost to company and shaping behavior

• Employees – Economic and Social well-being

Choose one

You are interested to make a lot of money;

a. would you prefer to work in an organization that pays employees the

same amount despite the amount to work they do?

b. Will you prefer to work in an organization where pay can be higher or

lower depending on how you perform.
Incentives and Sorting Effects of Pay on
Employee Behavior

• Incentives: Motivation – AMO  Behavior Performance

• Sorting Effect:  Based on your previous slide answer!

• Remember: Balancing the Demand – Supply

Debate

What happens when you get paid for your performance

Meaning of Money
• A reward for work well don e

• A mean s to su pport oneself and one’s family

• A status symbol—the more yo u make, the more status you hav e in the comp any and in society

• Payment for doin g a jo b—never as much as is deserved

• A paych eck and ben efits such as paid vacatio n and h ealth insurance.

• A trap—the more yo u make, the more you sp end, so the more you need

• A symbol of professional achievement

• Payment for doin g a jo b reg ardless of ho w well th e job was done

• A mean s of classifying people (as lo w-income, middle-income, or high income)

• A comp any’s obligation to employees

Compensation

Compensation refers to the monetary and nonmonetary rewards-often referred as

total rewards- that employees receive from their employers in exchange of the
work they perform (Norris, 2019).

Employees harness their skills, knowledge and release effort in lieu of

compensation. Compensation is the labor cost that includes salary and benefits
(Patnaik and Suar, 2019).
Quickly list down the benefits of compensation
for

Employers Employees
How organizations compensate employees?

Acquire

Allocate

Utilize

Evaluate

Compensate
Compensation Management

Compensation management refers to the systematic and strategic process of

designing, implementing, and administering the various components of
employees' total compensation package within an organization.
Mix of Compensation

Adapted
from HBR
 Basic Pay

It lies between 40 to 50% of the total cost

to the company or CTC

Dearness Allowance (DA) is typically

calculated as a percentage of your basic
pay, and the exact percentage can vary
depending on your organization,
government policies, or employment
contract

https://fi.money/blog/posts/demystifying-dearness-allowance-how-to-
calculate-da-in-your-salary
Allowances
Allowances Element Descriptor Tax exemption
Conveyance Paid to cover travel expenses For Whole of India – Rs.3200/- per month. (based on
organization) wrt basic (5% around )
House Rent Allowance (Basic Pay is Paid to meet the cost of rented accommodation • Decided based on
the reference point to calculate HRA) • Metro
• Urban
• Sub Urban
• Rural
WRT cost of Housing/Property
Minimum of the above is exempt
Ex: Central Govt: Metro-30%, Urban-(state/city based)18% of
basic, Sub Urban-(district headquarter)

LTA Reimburse expenses incurred on outstation Exempt twice in a block of 4 years. Actual Expenditure upto
personal travel the limit of entitlement

Ex-Gratia/Supplementary Additional benefit to employees Fully Taxable

allowance/Special allowance
Children Education Allowance Amount paid to cover for child education Rs 2250(Max 2 children)- Not taxable (Produce Bill)
Reimbursements
Reimbursement is the expense made on behalf of the company or the company is paying on your
behalf and hence is not a direct income thereby not taxable up to a certain slab.

Non-Taxable
Instant , Mediclaim

Non-Taxable

Non-Taxable
Benefits

12%- 3.67% goes to EPF and

8.33% goes to EPS

Gratuity Amount = (Last

Drawn Monthly Salary ×
15/26) × (Number of
Completed Years of Service)
In a nutshell

• Base Pay

• Allowances: DA, HRA, Conveyance, Special, Medical

• Short term: Incentives, Bonus, and Commissions

• Long term: PF, Gratuity

• Benefits: Leaves, Maternity/ Paternity, Work-life balance, Medical

Sample Pay Slip
Food for Thought

What are the points the employer must keep in mind while
designing the compensation basket for an employee?

Share your reflections

Factors

1. Globalization inflows economic system

2. De-unionization 6. Merger and acquisition 11. Entry into labor force,

females, dual-carrier
3. Changes in 7. Aggregation and
families, part-timer, flexi-
macroeconomic segregation of jobs
timer
scenario
8. Work-life balance
12. Increasing contingent
4. Increased privatization
9. Quality of Work life
workforce
5. Improved foreign
10. Change in social, political,
direct investments
Thus, its important to focus on Reward
Management
The Components of Total Reward
…in detail
◦ Financial Rewards Non- Financial
 Base pay Rewards
Recognition
 Contingent pay (for Responsibility
performance, Total Meaningful work Total
Remuneration Rewards
 Competence or Autonomy
contribution) Opportunity to use
and develop skills
 Variable pay (cash
Career
bonuses)
opportunities
 Share ownership Quality of work life
 Benefits Work/life balance

Transactional Rewards Relational Rewards

Financial Rewards

• Financial rewards need to be considered from three points of view:

 the effectiveness of money as a motivator;

 the reasons why people are satisfied or dissatisfied with their rewards;
process of determining their pay, in accordance to their contribution,
knowledge, skills and value, other aspects of employment.

 the criteria which should be used when developing a financial reward

system: internal vs external parity, pay for performance, understanding of
financial reward system.
Non-Financial Rewards
Total Reward framework (Towers Perrin
Model)
Transactional

PAY/REWARD BENEFITS
• Base pay • Pensions
• Contribution pay • Health care
• Shares/profit sharing • Perks

COMMUNAL
INDIVIDUAL

• Recognition • Flexible benefits

LEARNING AND DEVELOPMENT WORK ENVIRONMENT

• Workplace learning • Core values
• Training • Leadership
• Performance management • Employee voice
• Career development • Job/work design

Relational
Transactional Vs Relational Rewards

• This distinguishes between transactional rewards , which are financial in

nature and are essential to recruiting and retaining staff but can be easily
copied by competitors, and relational rewards, which are concerned with
learning and development and the work experience and are essential to
enhancing the value of transactional rewards

Ultimate Objective: Attract, Motivate, Retain & Satisfy Employees

Compensation varies wrt

Industry

Sector

Organization

State

Paying power

Employee Level
So, all these that we do are they
“EFFECTIVE”?
Check on the three dimensions

Objective of Compensation/reward management

• Employee Motivation

• Employee Commitment

• Employee Engagement

Reward system  motivation, behavior

modification  performance
The basic compensation objectives are

• Ensuring Efficiency –

• Ensuring Fairness –

• Ensuring Compliance –

• Ensuring Ethics –
Sample Pay Objectives

MEDTRONIC WHOLE FOOD

• Support Medtronic mission and • We a r e c o m m i t t e d t o i n c r e a s e l o n g t e r m

increased complexity of business shareholders value

• Minimize increases in FC • Profits are earned everyday through voluntary

• A t t r a c t a n d E n g a g e To p Ta l e n t exchange with our customers

• Emphasize in personal, team, and • Profits are essential to create capital for growth,

Medtronic performance p r o s p e r i t y, o p p o r t u n i t y, j o b s a t i s f a c t i o n , a n d j o b
s e c u r i t y.
• Recognize personal and family total
well-being • Support team member happiness and excellence

• E n s u r e F a i r Tr e a t m e n t • We s h a r e t o g e t h e r i n o u r c o l l e c t i v e f a t e
Compensation policy choices

• Internal Alignment

• External Competitiveness

• Employee Contribution

• Management
More Specifically
Recent Research by SHRM society

4 ways to raise retention rates :

• Revaluate compensation

• Expand professional development

opportunities

• Make employee-well being and work life

priorities

• Rethink your organization’s culture in the

new world at work
Please reflect #1

Jorge, a supervisor for a large luxury hotel, compared his salary to other
supervisors in the same organization. He found that his base pay was about
25% less than other individuals in similar supervisory jobs.

Why is Jorge experiencing this difference?

Please reflect#2

One of the largest consulting firms in the world prefers to hire many entry
level consultants and then retain only about 10 percent by the third year.
This strategy allows them to become acquainted with many workers and keep
only the best. On the basis of this strategy, the firm pays below – market
salaries.

What are the likely outcome of such a strategy?

Do you think it is a good strategy? Why or Why not?

Happy Learning!