Compensation Management & Job Evaluation

Group Members

• Agicha Pankaj• Madhura Kadam• Neelam Dalvi• Sheetal Gadhari• Bhagyashree Kotwani• Yash Adukia

Compensation ManagementAn Introduction

• Employees work in the production units for eight hours a day and against such work, they are paid certain amount of money called “wage or Compensation Payment”

• Compensation Management is concerned with compensation payment and other aspects relating to such payment.

• Workers are very much interested in the compensation payment as their welfare is directly linked with such compensation payment.

• There is a Tug- of - War between employer and workers as regards to compensation payment.

• HRM is concerned with fair compensation payment to employees as such payment avoids industrial disputes and ensures cordial industrial relations.

Meaning of Compensation Payment

• Normally, compensation payable to the employees include the following three components: – Basic compensation for the job(Wage/Salary)– Supplementary compensation paid to employees (Fringe

Benefits)– Incentive compensation for the employee on the job.

Definition of Compensation

Compensation may be defined as money received in the performance of work, plus many kinds of benefits and services that organizations provide to their employees.

Compensation Package/ Salary Slip

• An employee is given full details of compensation payment on a printed small slip called Salary Slip.

• The salary slip is given to every worker along with full details of Salary Payment

Some examples of Salary Slip

Fringe Benefits

• In addition to regular wages, allowance, and bonus payment, employees are given other benefits and services called Fringe Benefits.

• They are supplementary to regular wages • They are indirect compensation

Meaning

Definition

According to William. B . Werther and Keith Davis,“Fringes embrace a broad range of benefits and services that employees receive as a part of their total compensation package… Pay or Direct compensation… is based on critical job factors and performance. Benefits and Services, however, are indirect compensation because they are usually extended as a condition of employment and are not directly related to performance.

Features• Different from regular wages.• Useful but avoidable expenditure.• Not directly linked with efforts.• Beneficial to all employees.• Voluntary in character.

Objectives of Fringe Benefits

• To supplement direct remuneration.• Employers prefer fringe benefits.• To retain competent employees.• To develop good corporate image.• To raise employee morale.• To motivate employees.

Types of Fringe Benefits• Payment for Timeout worked by

employees.• Contingent and Deferred Benefits.• Legally required payments.• Miscellaneous Benefits.

Advantages

• Support employee remuneration.• Raise employee efficiency and productivity.• Added employee attraction.• Reduce employee fatigue.• Raise employee morale.• Develop good corporate image.• Act as motivating force.

Disadvantages • Unhealthy competition among

employees in the organization.• Not adequately attractive to employees.• Motivation of employees may not be as

per expectation.

Fringe Benefits in India

•Statutory Fringe Benefits.•Voluntary Fringe Benefits.

Wage Incentive Plans

Definition

According to the National Comission on Labour,‘wage incentives are extra financial motivation. They are designed to stimulate human effort by rewarding the person, over and above the time rated remuneration, for improvements in the present or targeted results’

Types of Incentive Plan

• Individual Incentive Plan• Group Incentive Plan

Halsey Premium Plan

•In this plan, a worker is given gurantee of minimum wage as per the time rate.•For example- Extra payment made for extra production done.

Advantages of Incentive Plan

• Inducement and motivation for higher efficiency.• Enhanced employee earning.• Reduction in Production Cost.• Increased production capacity.• Attraction for management.

Disadvantages

• Quality determination.• Problem in introduction of new machines

or method.• Demand for higher minimum wages.• Jealousy among workers.• Disregard security regulation.• Problem in determining the standard

performance.

Requisites of a Good Incentive Plan

• Simplicity.• Encourages initiatives.• Prompt Payment.• Properly communicate to employees.• Definiteness & Flexibility.• Justice to employer and employee.• Acceptable to workers.

Perquisites

• Perquisites may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. In essence, these are usually non-cash benefits given by an employer to employees in addition to cash salary or wages.

Non Monetary Incentives

Job Evaluation

Definition

According to Edwin. B. Flippo, Job Evaluation is a systematic and orderly process of determining the worth of a job in relation to other jobs.

Features

• Determines the relative worth of the job.

• Based on the analysis of the facts about the job.

• To bring a balanced wage structure.• Needs to be differentiated from Job

Analysis and Performance Analysis.

Objectives

• To establish by impartial judgement.• To establish satisfactory wage.• To select employees more accurately.• To promote employee goodwill.• To provide management with a basis of proper

control.• To determine the rate of pay for each job.• Miscellaneous purpose.

Importance

• Indicates the relative worth of different jobs.• Establishing a hierarchy of jobs.• Useful for introducing a satisfactory, rational & balanced

wage structure.• Promotes employees’ goodwill.• Provides scientific base for promotion and transfers.• Avoids injustice to workers.• Vague feelings and suspicious of unfairness.• Makes promotions and transfers more easily acceptable.• Simplifies wage administration.• Facilitates adjustment of existing job within the existing

wage structure.• Removes grievances and disputes among employees.

METHODS OF JOB EVALUATION

1. Quantitative Method2. Non Quantitative Method.

Quantitative Method

• Point rating method.• Factor comparison method.

Non Quantitative Method

• Ranking or Job comparison method.• Grading or Job classification method.

PROCESS OF JOB EVALUATION1. Securing acceptance from employees.2. Creating/forming job evaluation

committee.3. Finding/ deciding the jobs to be

evaluated.4. Analyzing and preparing job description.5. Selecting the method of evaluation.6. Classifying jobs.7. Installing the program.8. Periodical review.