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STUDY OF COMPENSATION MANAGEMENT

OBJECTIVE

This project attempts to understand the objectives:-

To understand in details how to establish pay rates to different level of employee. To understand the impact of compensation management on performance level. A comparative study of the compensation management strategies followed in different

banks.

LIMITATIONS

Everything has some pros and cons and so certain limitations of this study that we could observe are as follows:

The area of project work is banking sector so, the data or result may be approximate as the conclusion is based on the survey method i.e. primary & secondary source (filling of questionnaire from the employees) may be hypothetical (imaginary) data.

The organizations which have been studied and surveyed are not providing us with full information which has hampered the result and conclusion.

Exact data was not been provided.

SCOPE

The scope of this project is to study of the compensation management strategies & to evaluate the behaviour & performance of employee on their work.

INTRODUCTION OF COMPENSATION MANAGEMENT

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Compensation Management is an integral part of the management of the

organization. Compensation is a systematic approach to providing monetary

value to employees in exchange for work performed. Compensation may achieve

several purposes assisting in recruitment, job performance, and job satisfaction.

To be effective, the managers must appreciate the value of competitive pay, their

human resources, and have an investment view of payroll costs. It is of prime

importance for an organization to maintain pay levels that attract and retain

quality employees while recognizing the need to manage payroll costs.

The literal meaning of compensation is to counter-balance. In the case of human resource management, compensation is referred to as

money and other

Benefits received by an employee for providing services to his employer. Money and benefits received may be in different forms-base

compensation in money and various benefits, which may be associated with employee's service to the employer like provident fund,

gratuity, insurance scheme and any other payment which the employee receives or benefits he enjoys in lieu of such payment.

"Compensation includes direct cash payments, indirect payments in the form of employee benefits and incentives to motivate employees to strive for higher levels of productivity”

Compensation is a tool used by management for a variety of purposes to further the existence and growth of the company.

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Objectives of Compensation management are:

1.Attracting and Retaining Personnel: From organization’s point of view, the compensation management aims at attracting and retaining right personnel in the Organization Not only they require persons who are well qualified but they are also retained in the organization. There is no dirth of personnel at operative levels but the problems come at the managerial and technical levelsParticularly for growing companies. Not only have they required persons who are well qualified but they are also retained in the organization. In the present day context, managerial turnover is a big problem particularly in high knowledgebase Organizations.

2. Motivating Personnel: Compensation management aims at motivating personnel for higher productivity. Monetary compensation has its own limitations in motivating people for superior performance.

3. Optimizing Cost of Compensation: Compensation management aims at optimizing cost of compensation by establishing some kind of linkage with performance and compensation.

4. Consistency in Compensation: Compensation management tries to achieve consistency-both internal and external-in compensating employees. Internal consistency involves payment on the basis of criticality of jobs and employees' performance on jobs.

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SCOPE OF COMPENSATION MANAGEMENT

Compensation management helps to determine the relative worth of a job in an organization in a systematic, consistent and accurate manner. It also helps in estimating the basic pay for each job in accordance with the importance of the job in the organizational hierarchy .once a basic pay is determined , the rewards , incentives and benefits attached worth the pay, positions and performance are also determined . The basic wage, incentives and rewards and benefits, together form the compensation package of an employee.

Direct Compensation

Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization.

Basic Salary

Salary is the amount received by the employee in lieu of the work done by him/her for a certain period say a day, a week, a month, etc. It is the money an employee receives from his/her employer by rendering his/her services

COMPENSATION PACKAGE

MOTIVATION

NEED SATISFACTIONEMPLOYEE RETENTION

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House Rent Allowance

Organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees. This is done to provide them social security and motivate them to work.

Conveyance

Organizations provide for cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them.

Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The employees are given allowances to visit any place they wish with their families. The allowances are scaled as per the position of employee in the organization.

Medical Reimbursement

Organizations also look after the health conditions of their employees. The employees are provided with medi-claims for them and their family members. These medi-claims include health-insurances and treatment bills reimbursements.

Bonus

Bonus is paid to the employees during festive seasons to motivate them and provide them the social security. The bonus amount usually amounts to one month’s salary of the employee.

Special Allowance

Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club memberships, etc are provided to employees to provide them social security and motivate them which improve the organizational productivity.

Indirect Compensation

Benefits contributions may include: Medical Insurance Prescription Drug Insurance Dental Insurance Group Life Insurance Long-Term Disability Insurance Accidental Death Benefits

Tax contributions may include: Disability (Medicare) Worker Compensation Insurance, Unemployment Insurance

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Retirement contributions may include: Severance Award, Voluntary or Involuntary Retirements Benefits such as VRS etc.

Fringe Benefits or Perks

Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Where an employee exchanges (cash) wages for some other form of benefit, this is generally referred to as a 'salary sacrifice' arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree.

Fringe benefits can also include but are not limited to: (employer-provided or employer-paid) housing, group insurance (health, dental, life etc.), income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), social security, profit sharing, funding of education, and other specialized benefits

The purpose of the benefits is to increase the economic security of employees.The term perks is often used colloquially to refer to those benefits of a more discretionary 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 (golf, etc.), stationery, allowances for lunch, and—when multiple choices exist—first choice of such things as job assignments and vacation scheduling They may also be given first chance at job promotions when vacancies exist.

Employee benefits in the United States might include relocation assistance; medical, prescription, vision and dental plans; health and dependent care flexible spending accounts; retirement benefit plans (pension, 401(k), 403(b)); group-term life and long term care insurance plans; legal assistance plans; adoption assistance; child care benefits; and possibly other miscellaneous employee discounts (e.g., movies and theme park tickets, wellness programs, discounted shopping, hotels and resorts, and so on).

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NON FINANCIAL COMPENSATION

Non-financial compensation is different incentives given to employees that are not in the form of direct pay.

Alternative Work Schedules - There are many alternatives to a traditional 5 day, 8-hour work schedule.

On-the-Job Training- Showing workers how to perform tasks by observing others.

Work/Life Balance - When an employer understands the needs employees have to juggle in their lives.

Developmental Opportunities - Training and other opportunities for employees to expand their knowledge and improve their skills.

Casual Dress - Allowing employees to relax their dress code at work.