CONCEPT,ELEMENTS AND PRINCIPLES OF COMPENSATION

Tafakhar Hasnain

METHODS OF PAYMENT

CONTINUE……

1.Use of time rates

2.Problem of installing incentive rates

3.Combined piece and time rates

TYPES OF COMPENSATION

TCOMPENSATION SYSYTEM

DIRECT

BASE PAY/SALARY

INCENTIVE PAY

. BONUS.COMMISIO

N.PROFIT

SHARINGetc

INDIRECT

LEGALLLY REQUIRED. SOCIAL

SECURITIES.EMPLOYEMNT COMPENSATON

.WORKERS COMPENSATION

.FAMILY AND MEDICAL LEAVE

OPTIONAL .HEALTH

INSURANCE.RETIREMENT

PLANS. DISABILITY INSURANCE

.LIFE INSURANCE

etc

ELEMENTS OF COMPENSATION

1. WAGE AND SALAY.2. INCENTIVES 3. FRINGE BENEFITS4. PERQUISITES

WAGE AND SALARY•Wage is refers to as remuneration to workers particularly hourly rated payment.•Salary refer to as remuneration paid to white collar employees including managerial person. They are paid on the basis of fixed period of time.Two types of wages:-Nominal wages:-wages paid in terms of money are called money wages or nominal wages.Real wages:-in addition to nominal wages the extra benefits which the employee gets is real wages.

2. INCENTIVES

Incentives are the additional payment to the employees besides the payment of wages and salary incentives are the gains which motivates the workers to a better performance..

CONTI………CLASSIFICATON OF INCENTIVES:A. Positive and negative:- positives refers to reward for better work and negative refers to penalties.B.Individual and collective:-it is also called direct and indirect incentives. individual incentives benefits the worker individually while collective incentives accrue to the group

C.Monetary and non-monetary incentives:Monetary incentives are paid in terms of monetary and non-monetary incentives includes merit certificates etc

3.FRINGE BENEFITS

Fringe benefits includes which are provided to the employees either having long term impact like: provident fund,gratuty,pension,or occurrence of certain events like medical benefits, canteen ,recreation, accident leave, health and life insurance etc.

4.PERQUISITES

These are generally provided managerial personnel either to facilitate their job performance or to retain them in the organisation.such perquisites includes:Company carClub membershipFree residential accommodationPaid holiday trips.Stock option etc

PRINCIPLES OF COMPENSATIONThere should be definite plan to ensure that differences in pay for jobs are based upon variations in job requirements , such as skill effort , responsibility or job or working conditions, and mental and physical requirements.

The general level of wages and salary should be reasonably in line with that prevailing in the labour market.

The plan should carefully distinguished between jobs and employees-a job caries a certain wage rate, and a person is assigned to fill at the rate. exceptions sometimes occur in very high level jobs in which the job holder may make the job large or small ,depending on his ability and contribution.

Equal pay for equal work.

CONTI…

An equitable practice should be adopted for the recognition of the individual differences in ability and contribution.

There should be clearly established procedure for hearing and adjusting wage complaints.

The employees and the trade union ,,should be informed about the procedure used to establish wage rates.

The wage rate should be sufficient to ensure for the workers and his family reasonable standard of living

The wage and salary structure should be flexible.

CONT….. Prompt and correct payments of the dues of the

employees must be ensured and arrears of payment should not accumulate.

For revision of wages , wage committee should always be preferred to the individual Judgment

The wage and salary payments must fulfill a wide variety of human needs , including the need for self actualization .

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