compensation mgt final

8/9/2019 Compensation Mgt Final

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CompensationCompensation

Cash, Bonuses, Insurance,Cash, Bonuses, Insurance,

Vacation, HolidaysVacation, Holidays

Perks, RecognitionPerks, Recognition


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What doesWhat doescompensation (whatcompensation (what

you receive for youryou receive for your

services) mean to you?services) mean to you?


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ADefinition . . .

ADefinition . . .

All forms of

financial return,

tangible services and

benefits

that employees receive as part of their

employment relationship


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Compensation is the remunerationCompensation is the remunerationreceived by an employee in returnreceived by an employee in return

for his/her contribution to thefor his/her contribution to the

organization. It is an organizedorganization. It is an organized

practice that involves balancingpractice that involves balancing

the workthe work--employee relation byemployee relation by

providing monetary and nonproviding monetary and non--

monetary benefits to employeesmonetary benefits to employees


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Components of a TotalComponents of a Total

Compensation ProgramCompensation Program -- 11 FinancialFinancial

Direct

wages, salaries, commissions, bonuses

Indirect insurance plans

life, health, dental, disability

social assistance benefits retirement plans, social security, workers comp

paid absences

vacations, holidays, sick leave


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Components of a TotalComponents of a Total

Compensation ProgramCompensation Program -- 22NonNon--FinancialFinancial

The Job

interesting, challenging, responsible

opportunity for recognition, advancement feeling of achievement

Job Environment

policies, supervision, co-workers, statussymbols, working conditions, flextime,compressed work week, job sharing,telecommuting, flexible benefits programs


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Components of compensationComponents of compensation

Basic wages/SalariesDearness allowance

Bonus

Commissions:-

Mixed plans:

Piece rate wages:-

Profit sharing payments:-

Fringe benefits:-

Reimbursements:-


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Sickness benefits/pregnancy:-


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Need of CompensationNeed of Compensation

ManagementManagement

A good compensation package is important tomotivate the employees to increase theorganizational productivity.

Unless compensation is provided no one will come

and work for the organization.T

hus, compensationhelps in running an organization effectively andaccomplishing its goals.

Salary is just a part of the compensation system, theemployees have other psychological and self-actualization needs to fulfill. Thus, compensation

serves the purpose. The most competitive compensation will help the

organization to attract and sustain the best talent.The compensation package should be as perindustry standards


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Factors that Influence WageFactors that Influence WageLevelsLevels

WAGEMIX

Conditions ofLabor Market

Area WageRates

Cost ofLiving

CollectiveBargaining

LegalRequirements

CompensationPolicy of

Organization

Worth ofJob

EmployeesRelative Worth

EmployersAbility to Pay


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Designing a CompensationDesigning a Compensation

SystemSystem

Steps in the Decision Process


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Step 1Step 1 -- Establish GeneralEstablish General

Wage Level for OrganizationWage Level for Organization Factors to consider:Factors to consider:

Other firms rates

Union demands

Cost-of-living changes

Firms ability to pay


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Job EvaluationJob Evaluation

Job evaluation is the process of systematicallydetermining a relative internal value of a job in anorganization. In all cases the idea is to evaluate the job,not the person doing it. Job evaluation is the process ofdetermining the worth of one job in relation to that ofthe other jobs in a company so that a fair and equitable

wage and salary system can be established defined: the systematic evaluation of job descriptions

outcome: a hierarchy of organizational jobs accordingto their content and value to the organization

Methods:

ranking classification

factor comparison

point method


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Job Ranking SystemJ

ob Ranking System

Simplest and oldest system of job

evaluation by which jobs are arrayed

(classified)

on the basis of their relative worth


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Job Classification SystemJ

ob Classification System

System of job evaluation by which jobs

are classified and grouped according

to a series of predetermined wage grades


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Point SystemPoint System

Quantitative job evaluation procedure

that determines the relative value of a job

by the total points assigned to it


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Factor Comparison SystemF

actor Comparison System

Job evaluation system that permits the

evaluation process to be accomplished

on a factor-by-factor basis by developing

a factor comparison scale


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Hay Profile Met

hod

Hay Profile Met

hod

Job evaluation technique using three

factors knowledge, mental activity,

and accountability to evaluate

executive and managerial positions


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Employee BenefitsEmployee Benefits

Items in the total package offered toemployees over and above salarywhich increase their wealth or well-

being at some cost to the employer


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Mandatory BenefitsMandatory Benefits

Compensation for injuries anddiseases


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Voluntary BenefitsVoluntary Benefits

Most of these benefits have certainlegislative minimums.

Vacation leave

Paid public holidays

Time for personal matters

Sick leave

Maternity leave

Health and life insurance

Medical Aid Schemes Pension Funds

Employee Services e.g.. Canteens, social andrecreational services


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Advantages of flexible benefitsAdvantages of flexible benefits

programmeprogramme The company can set the sum total of

benefits for each employee

The changing needs of the workforce arecatered for

Employees take ownership for their choiceof benefits by satisfying their own unique

needs It is less costly for the organization when an

employee adds a new benefit


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Disadvantages of flexible benefitsDisadvantages of flexible benefits

Without proper assistance employeescan make bad choices and findthemselves not covered for

emergencies Company administrative costs increase

The cost of some benefits may increaseas a result of a majority of employeeschoosing the benefit

compensation mgt final

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