Compensation Management

Dr. Naveed Akhtar

Ph. D Management Sciences

DESIGNING A STAFF BUDGET PROGRAMME

The goal of the budget process is to make sure the organization has the appropriate-sized staff at the most cost-effective salary level to accomplish its goals of objectives

Five Major reasons for a wage and Salary budget:

1. To make policy decisions in advance2. To encourage organizational Planning3. To foster a bottom-line approach4. T share human resources expertise throughout the

organization5. To provide training opportunities for line managers

To make policy decisions in advance:

Identifying the salary increases and proposalsGet approval of each salary increase

To encourage organizational Planning

Encourage planning for business purposesLink organizational objectives to staff planningBudget give entire overview of the organization(any dept is not planning to increase staff but want to increase ranks)

To foster a bottom-line approach

Ensures design and implementation of staff budget (with salaries and staffing requirements)

Make it clear to HRM – How HR-planning is affecting budget and expenses of the organization

HRM and other department understand the budget language

To share human resources expertise throughout the organization

HR (wage & salary department is working with line managers throughout the organization to help them plan staff allocation effectively

Only variations and changes will need one-on-one approval

To provide training opportunities for line managers

Training element of staff budget should not be overlooked

The budget process provides an opportunity for managers to sharpen their skills on human resources issues

Enable managers to focus their attention on staff size and performance instead of performing only routine activities

Help reveal the number of personnel required

Reveals differences between people and positions

Assignment

An organization’s expense ledger contains four items related to wage and salary:

Payroll expensePayroll-related expensesBenefit expensesPension and retirement expenses

Seven steps to complete the budget process:

a. Accuracy of the data during staff budget processb. After verification data compilation of data takes placec. Compiled forecasts are analyzed to identify any

difference or match with senior management suggestions

d. Determine which budget require additional work or revision. Meet the managers of those functions to find solutions within guidelines given by managers

e. After adjustment of numbers after final adjustment report of final budget is submitted

f. Reporting back to unit heads after approval by sr. managers

g. Throughout the year managers should monitor the budget. Unit heads must report the impact of each section on the staff budget

Few Budget Issues

Impact of “anniversary date of appointment” on salary increases

-Increase will be the subject of only pay the service period in a year (until the following calendar year)-Formula used to calculate the anticipated salary of any period:

X + M (INC) = Budget salary Expense

X = current rate of payM= no. of months from anniversary date to end of budget yearINC= monthly amount of increase (Annual salary X Annual increase /12)

Employee A’s current annual salary = $30,000Anniversary date = AprilIncrease in salary = 8%

$30,000 + 9 (30,000 x 0.08)/12

= $30,000 + 9(200) = $31,800

Impact of staff changes on salary expenses

-Affects only the year in which staff changes take place

Auditing and Reviewing Wage & Salary Programme for

Overall EffectivenessPurpose:

-To review policies & practices within organization relative to wage and salary issue-To interface with the financial planning areas of the organization through budgetary review, and-To recognize issues that may be potential problems, either financial or legal

Performing Wage & Salary Audit

Prime issues to consider during Audit:

-Financial/budgetary aspects of wage and salary decision-External and internal equity factors of the program itself (including legal discrimination based on performance)

Determining if budget guidelines are being met

- Auditing actual payroll performance-month to month-Actual-to-budget