Compensation Management 4nb49

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COMPENSATION/REWARD SYSTEM

Compensation/Reward system • Compensation is a systematic approach to providing

monetary value to employees in exchange for work performed • Different types of compensation include: •

Base Pay

•

Overtime Pay

•

Bonus, Profit Sharing

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Travel/Meal/Housing Allowance

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Benefits including: dental, insurance, medical, vacation, leaves, retirement, taxes...

MAJOR PHASES OF COMPENSATION MANAGEMENT Phase I Identify & study jobs Phase II Internal equity

Job Job ranking ranking Phase III External Equity

Dept.of Dept.of labour labour Phase IV Matching Internal & External worth

Job Job analysis analysis Job Job evaluation evaluation

Job Job grading grading

Factor Factor comparison comparison

Point Point system system

Wage Wage&&salary salary surveys surveys Self-conducted Employer association Professional association Employer association Professional association Self-conducted surveys surveys Pricing Pricing jobs jobs

Job Job evaluation evaluation

Match Match

Labour Labourmarket market worth worth

Rate Raterange range for for each each job job

Wage and salary determination  Job Descriptions  Job Analysis  Job Evaluation  Pay Structures (with each grade containing a

minimum salary/wage)  Salary Surveys  Policies and Regulations

Factors influencing wage and salary 1.

External Factors     

1.

Demand and supply Cost of living Trade unions bargaining power Government legislation Prevailing market rates

Internal Factors    

Ability to pay Job requirements Managerial strategy The employee

Equity compensation  Equity compensation is non-cash compensation that

represents an ownership interest in the company  The two most common forms of equity compensation are 

Stock options (A stock option is a right to purchase shares of a company’s stock at a predetermined price)



Restricted stock (repurchase right that allows the company to repurchase a portion of the founder’s stock if his or her employment is terminated by the company for cause, or if the founder voluntarily resigns within a certain period of time)

 Dearness allowance (D.A.) is part of a person's salary. D.A. is

calculated as a percent of the basic salary  Employee benefits (fringe benefits, perks) are various non-wage

compensations provided to employees in addition to their normal wage and salaries  Fringe benefits can also include but are not limited to: insurance

(health, life etc.), retirement benefits, sick leave, vacation (paid and non-paid), profit sharing and other specialized benefits

 The term perks is often used to refer to those

benefits of a more discretionary (optional) nature. Often, perks are given to employees who are doing notably well and/or have seniority  Common perks are company cars, hotel stays,

free refreshments, leisure activities on work time (Ex. golf ), allowances for lunch etc.

Managerial compensation  Managerial

compensation is not based on individual performance measure but on organizational performance

 It cannot be compared with wage and salary scheme meant

for other employees in the organization  Remuneration received depends on employer’s ability to

pay and employees bargaining strength  It is reviewed annually

Social security Social security is that security which the society

furnishes through appropriate organization against certain risks or contingencies to which its are exposed The contingencies which may impair a persons

ability to himself and his family may include sickness, old age, invalidity, unemployment, death etc.

Social security in India

 Workmen’s compensation Act, 1923  The Employee State Insurance Act, 1948  The Maternity Benefit act, 1961  The employee’s provident fund act, 1952  The Payment of gratuity act, 1972  Group Life Insurance