Compensation Management

Unit-4
Introduction
• Compensation management is the process of managing, analyzing,
and determining the salary, incentives, and benefits each employee
receives.
• Compensation management is a crucial part of any talent
management and retention strategy.
• Compensation management means the specialist HR discipline of
planning and administering everything of financial value that an
employer gives an employee in exchange for their work.
• It includes their salary but also benefits, bonuses and rewards
Introduction
• The fundamental principles that guide compensation management
practices include keeping employees at the focal point of all decisions,
structuring compensation packages based on market wages and job
responsibilities, and promoting internal equity and fairness.
3P concept of compensation management

• 3P Salary is a system designed to pay salaries for employees based on

three basic factors: Pay for position (P1): Pay for the job position.
• Pay for person (P2): Pay for the capacity of the person holding the job
position.
• Pay for performance (P3): Pay for the results achieved by the person
holding the job position.
VARIOUS ACTS

• Employee's Compensation Act, 1923

• Before 2010, Employee’s Compensation Act, 1923 was known as
Workmen’s Compensation Act. It was introduced as a kind of social
security scheme for the employees of India.
• The objective of this Act is to provide compensation by the employers
to their employees for injury caused to them by accident while in
employment (i.e. on duty).
Conti---
• Under Employee’s Compensation Act, 1923, an employee who dies or
suffers disablement (partial or total) due to accident on duty is entitled
to get compensation from employer.
• The employee is also entitled to get compensation from employer, if
he/she contracts an occupational disease while in employment.
• Thus, an employee is entitled to get compensation in case of:
• - Death
• - Permanent Disablement – Both partial and total
• - Temporary Disablement – Both partial and total
• - He/she contracts an occupational disease.
Conti---
• Compensation is payable to dependents of employee in case of death and compensation
• is payable to employee for disablement.
• An employee cannot claim compensation under the Act, if he/she is already entitled to
• receive compensation from ESIC.
• The employer is not liable to pay compensation to an employee in following
• circumstances:-
• 1. If the accident on duty does not result in total or partial disablement of the employee
• for more than 3 days;
• 2. In case the accident was caused when the employee was under the influence of
• alcohol or drugs;
Conti--
• 3. In case of accident caused by the wilful disobedience of the employee to an order
• expressly given, or to a rule expressly framed, for the purpose of securing the safety of
• the employee, or
• 4. In case of accident caused by the wilful removal or disregard by the employee of any
• safety guard or other device which have been provided for the purpose of securing the
• safety of employee.
• If an employee accepts compensation under the Act, he/she cannot file civil suit against
• employer for damage