issues related to compensation
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Managing Manpower andCompensation (MPC)
Project On
Issues Related To Compensation
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Compensation of employees is the total remuneration, in cash, payable by an
enterprise to an employee in return for work done by the latter during the accounting
period.
Compensation of employees has two main components:
(a) Wages and salaries payable in cash;
(b) The value of the social contributions payable by employers: these may be actual
social contributions payable by employers to Social Security schemes or to privatefunded social insurance schemes to secure social benefits for their employees; or
imputed social contributions by employers providing unfunded social benefits.
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Compensating an employee is not simply a process of
settling upon a mutually agreeable salary. There are a
number of regulations and reporting requirements that
need to be met. Here is some information a variety of
issues surrounding compensation that you need to be
aware of.
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Competitive Wages: When deciding pay rates for skilled workers, it may be helpful to keep tabs on the
going rates for your industry and area.
Minimum Wages Requirements:
The Fair Labor Standards Act (FLSA) establishes current minimum wage
requirements for employees.
Exceptions include lower wages for employees under 20 years of age for a defined
period of time, certain full-time students, apprentices, interns and workers with
disabilities.
Overtime Wages:
The rate for all hours worked over a 48 hour workweek are at least double the
wages.
Wage Garnishment:
Wage garnishment occurs when an employer withholds the earnings of an
individual for the a ment of a debt as the result of a court order or other e uitable
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Large sum of money is invested on the people.
Design rests on what must the company achieve. System therefore needs to attract good employees by
structuring packages that tempt people to do the job.
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Traditional way of paying was done by ignoring the
interaction of organizational members and buying employees
time by the hour.
No incentives, no rewards, etc.
Today the employees are valued.
In a rewarding environment, people work hard.
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Collective Bargaining.
Government Legislation.
Top Managements philosophy regarding pay.
Top managements willingness to recognize effort and ability.
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Basic
Allowances Incentives
Benefits
Reimbursements
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JOB ANALYSIS PAY STRUCTURE
SALARY SURVEY
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Companies need to look at compensation as a value-creating
function.
It creates value for the organisation and employees.
Balances the four major compensation objectives whichinclude:
Sustaining management
Motivating performance
Building employee commitment
Encouraging growth in employees skills
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Pay for Performance.
Links to other levers of organisational change such as
providing recognition when deserved. Match incentives to the company culture
Keep incentives clear and simple
Over-communicate the reward strategy for the best results
The greatest incentive is the work itself as employees want to
be recognised for the work they do and the contributions theymake
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Analyze present compensation structure
Formulate salary policies
Select compensation system
Develop implementation plan
Evaluate and monitor
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Conduct job analysis
Identify compensable factors
Develop a job hierarchy
Construct job grades
Carry out compensation survey
Establish final pay policy
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Compensation provided to employees can direct in the form of
monetary benefits and/or indirect in the form of non-monetary
benefits known as perks, time off, etc.
Compensation does not include only salary but it is the sumtotal of all rewards and allowances provided to the employees in
return for their services. If the compensation offered is
effectively managed, it contributes to high organizational
productivity.
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DIRECT COMPENSATION:
Direct compensation refers to monetary benefits offered and provided to
employees in return of the services they provide to the organization.
The monetary benefits include
basic salary,
house rent allowance,conveyance,
leave travel allowance,
medical reimbursements,
special allowances,
bonus,
Pf/Gratuity, etc.They are given at a regular interval at a definite time.
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Indirect Compensation:
Indirect compensation refers to non-monetary benefits offered
and provided to employees in lieu of the services provided by
them to the organization.
They include
Leave Policy,
Overtime Policy,
Car policy,
Hospitalization,
Insurance,
Leave travel Assistance Limits,Retirement Benefits,
Holiday Homes.
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Traditionally people were paid primarily through base salaries
determined by specific job, the need to maintain a certain levelof internal pay equity an the need to pay externally competitive
salaries.
Employees were not encouraged to develop skills.
This had to change
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With the behavioral science theories and evolution of labour
and trade unions, employees started asking for their rights.
Maslow brought in the need hierarchy for the rights of the
employees. He stated that employees do not work only formoney but there are other needs too which they want to satisfy
from there job,
social needs,
psychological needs,
safety needs,self-actualization, etc.
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Their performance was being measured and appraised basedon the organizational and individual performance.
Competition among employees existed.
Employees were expected to work hard to have the job
security.
The compensation system was designed on the basis of job
work and related proficiency of the employee.
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Today the compensation systems are designed aligned to the business
goals and strategies.
Today the compensation systems are designed aligned to the business
goals and strategies. Employees feel secured and valued in the organization.
Organizations offer monetary and non-monetary benefits to attract and
retain the best talents in the competitive environment.
Some of the benefits are special allowances like
mobile,
companys vehicle;House rent allowances;
statutory leaves, etc.
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Pay for knowledge and skills Pay for competencies
Performance based pay
Incentive pay systems
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Items in the total package offered to employees over and above
salary which increase their wealth or well-being at some cost tothe employer
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Compensation for injuries and diseases
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Most of these benefits have certain legislative minimums.Vacation leavePaid public holidaysTime for personal mattersSick leaveMaternity leaveHealth and life insuranceMedical Aid Schemes
Pension FundsEmployee Services e.g.. Canteens, social and recreationalservices
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This is a brief idea of about the payroll compensation of various organizations.
Barista Coffee Company
This is the salary of a Brew Master- 1(fresher):
Basic salary: Rs 2250per month.
HRA: Rs 1125 per month.Conveyance allowance: Rs800 per month.
Uniform(washing)allowance: Rs 327 per month.
Meal allowance : Rs625 per month.
Companies contribution to P.F 12% of basic salary: Rs270 per month.
Employees contribution to P.F 12% of basic salary: Rs270 per month
Companies contribution to ESI:4.75%(basic+hra+conveyance+spl allowance+meal
allowance):Rs228per month.
Companies contribution to ESI:4.75%(basic+hra+conveyance+spl allowance+meal
allowance):Rs84per month.
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