MODULE 3 COMPENSATION AND REWARD

MANAGEMENT

TOPIC ESSENCE OF

COMPENSATION

PRESENTED BY :-

GANESH DUTTA(PGCM4 1411)

1.Definition:- “Compensation management is a process of determining cost effective pay structure, designed to attract and retain, provide an incentive to work hard, and structured to ensure that pay levels are perceived as fair.”(Stephen P. Robbins, David A DeCenzo, Robin Stuart-Kotze and Eileen B. Stewart)2 Definition:- According to Kressler , “whatever the individual and culture variations, reward along with the strategies and systems related to it, forms a significant part of a business’s personal policy. It can appeal to both the material and immaterial values of employees. Entrepreneurs and manager perceive in reward strategies a unique challenge and opportunity to make the most of what employees can contribute and be offered in return in order to increase the potential of the net product”.

OBJECTIVES OF COMPENTATION MANAGEMENT1. To attract highly capable and efficient employees so

that their efforts produces organizational performance. 2. To increase the motivation and morale of employees.3. To elicit need and desirable behaviors from employee.4. To retain talented employees for continuance of organization performance and attainment of higher levels of work.5. To maintain market competitiveness In order to reduce or control employee attrition which can affect organizational function. 6. To help employee meet his economic, personal, material, social, and psychological needs and aspirations.7. To integrate employee efforts with organizational performance management systems for increased effectiveness. 

PRINCIPLES OF COMPENSATION MANAGEMENT

PRINCIPLES OF COMPENSATION MANAGEMENT

NON-DISCRIMINATORY

EQUITY CONSIDERATIO

NS

PERFORMANCE

ORIENTATION

EMPLOYEE DEVELOPME

NT

SIMPLE FLEXIBLE

LEAGEL COMPLIANC

E

ABILITY TO PAY

1.Ability to pay: when the ability to pay term is arises, two terms are basically used capacity and capability. Organization should pay their employee as per their financial capacity and capability. If an organization pays more than its ability, then the organization may get bankrupt and if organization pays much below its ability to pay, they are not able to attract effective employees who can bring effectiveness of the organization.

2.Internal and external equity: Organizations must compensate their employees according to their qualification, experience, skills, knowledge, job responsibilities and performance. This is called internal equity.Organization must pay their employees a compensation which is at least comparable to their competitors or industry standards. This is called external equity.

3. Performance orientation: Performance orientation is essential for creating a performance driven work culture where every employee willingly assumes responsibility and works with ownership. Therefore compensation should be in commensuration with individual and organizational performance.4. Non-discriminatory: Organizations must pay their employees without any discrimination on the ground of race, religion, gender, nationality, and ethnicity.

5. Legal compliance: Organization must pay as per the relevant laws of the land.For example: In India, the Minimum Wages Act, 1948 stipulates the workers in unskilled, semi-skilled, and skilled jobs must be paid a minimum wage.6. Simplicity and flexibility: compensation systems should be simple to design, understand and administer. Compensation plans and policies must be flexible to adapt with ease to the changing of workforce, needs of the individual employees, organizational goals and objectives and labour market conditions.7. Fosters employee development: Compensation should be such so as to motivate employees to acquire, sharpen and develop their skills and competencies in conjunction with changing technology

QUOTES

“

If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don't have to manage them.”

-(Jack Welch)

Note to salary setters: “Pay your people the least possible and you’ll get from them the same.” -(Malcolm Fobers)