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COMPENSATION

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Compensation is a comprehensive term which includes

wages, salary, all other allowance and benefits

The compensation to employees can be determined by job

evaluation and performance appraisal.

JOB EVALUATION:

job evaluation is a systematic and orderly process of

measuring the worth of job in relation to otherjobs-Edwin. B. Flippo

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OBJECTIVES:

To develop a consistent wage policy

Helps in fixing wage rates

To simplify the negotiation between labour union and

management concerned with wage structure

Conduct wage surveys and compare wage structure

Aims to fix wage rates

Helps management for selecting candidates Establish a rational basis for incentives and bonus schemes

Fix same wage for same level of work

Helps to minimize wage discrimination

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Procedure / Process/ Techniques of Job evaluation

1. Acceptance by all

2. Formation of job evaluation committee

3. Selection of jobs for evaluation

4. Job description

5. Job grading

6. Selection of job evaluation methods

7. Consideration of job factors8. Job pricing

9. review

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2. Job Grading / Job Classification Method

Each job is allotted a grade

The committee of executives goes through each jobdescription and carefully weighs it in the light of certain

factors like skill, responsibilities, experience, type of work,

etc

For each grade or class there is a predetermined rate of wages

II. Quantitative Methods

1. Point Method

Fair wages are determined after analyzing jobs in detail

It prepares job description

Most widely used method

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2. Factor Comparison Method

Is a combination of ranking and point methods

Here Few jobs are selected as key jobs and it is

evaluated

These key jobs are taken as standard against which

other jobs compared.

If contents of a job are stabilized over a period, wecan treat is as key job

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Advantages of Job Evaluation

Helps to bring uniformity in wage structure

Helps in keeping down the cost of recruitment and

selection Helps to reduce favoritism

Eliminate inequalities in wage structure

Review job rates when technology, job contents, etc

change Acceptable to management as well as employees

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Limitations

It lacks scientific precision because it based on personnel

judgment

There is no standard list of such factors

It doesnt consider the nature of job and individual merit it introduces an inflexible wage structure

Time consuming and expensive

Adopted only in large concerns

Only presents comparative worth of job& not consider wage

differential with other firms.

Restricts collective bargaining power of trade union.

Unrealistic.

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EMPLOYEES COMPENSATION

Wide range of monetary & non-monetary rewards to employees fortheir services rendered to the organization.

Two categories:

1. Base/Primary compensation.2. Supplementary compensation.

1. BASE/PRIMARY COMENSATION

Basic pay in the form of wages & salaries. Fixed & non-incentive payment of the basis of time spent on the job.

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WAGES & SALARY ADMINISTRATION:

Administration of employee compensation or simplycompensation management.

Includes job evaluation, wage or salary survey, control of payrollcost, etc.,

Objectives:

1. Establish just & equitable remuneration.

2. Attract competent employees.

3. Retain the services of the desirable employees.

4. Improve productivity & control cost.5. Maintain good relationship.

6. Creation of public image.

7. Lower cost of production.

8. To guaranty minimum wage.

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ESSENTIA L FEATURES OF GOOD WAGE &

SALARY STRUCTURE

Should be acceptable by management, laborers &

trade union.

1. Internal equity.

2. External equity.

3. Maintain real wages.

4. Flexibility & stability.

5. Simplicity.

6. Motivation.

7. Link with productivity.

8. Result oriented.

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METHODS OF COMPENSATION

1. TIME WAGE SYSTEM: Worker is paid on basis of time spent by him on job.

No importance to output.

Where quality of goods produced is of extreme

importance.

2. PIECE WAGE SYSTEM:

Wages are paid to employees on basis of goods theyproduce at given time.

Direct relationship between wages & work done.

3. INCENTIVE WAGE SYSTEM.

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COMPONENTS OF PAY STRUCTURE IN INDIA

1. BASIC WAGES:

Price paid to employees for their services. Varies according to mental & physical requirements of

job.

Three concepts:

i. Minimum wages.ii. Fair wages.

iii. Living wages.

2. DEARNESS ALLOWANCE(DA):

Given to protect real wages of workers during inflation.

Cost-of-living allowance.

Offset the rise in prices.

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3. BONUS:

Allowance in addition to what it usual, current orstipulated, a sum given or paid beyond what is

legally required to be paid to the recipient;

something gives in addition to what is ordinarily

received by or strictly due to the recipient.

4. PRODUCTION LINKED INCENTIVE

BONUS:

Plans which to provide extra pay for extra

performance.

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2.SUPPLEMENTARY

COMPENSATION

Addition to base compensation.

Consists of incentive payment or payments by

result.

INCENTIVE WAGES:

Wages incentives are extra financial

motivation, they are designed to stimulatehuman effort by rewarding the person, over &above the time rated remuneration , forimprovement in the present or targeted results.

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5. FRINGE BENEFITS

Wages are often augmented by special cash benefits bythe provision of medical & other services or bypayments in kind that form part of the wage for

expenditure on the goods & services. In addition, workers commonly receive such benefits as

holiday with pay, low cost meals, low rent housing, etc.,

Such addition to the wage proper is sometimes referredto as fringe benefits.

Benefits that have no relation to employment or wagesshould not be regarded as fringe benefits even thoughthey may constitute a significant part of the workerstotal income.

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THANK YOU