UnitII Compensation Planning

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Compensation Planning

Unit II

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What is Wage ?

Wages may be defined as the aggregate earnings of

an employee for a given period of time, such as a day or aweek or a month.

What is Salary?

The term salary is defined as the remuneration paidto the clerical and managerial personnel employed onmonthly basis.

What is wage & Salary Administration?

Wage & Salary Administration is essentially theapplication of a systematic approach to the problem ofensuring that the employed are paid in logical, equitable andfair manner. The main objective of wage & salary

administration is to establish and maintain an equitable wage& salary system to obtain, retain and motivate people ofrequired skills in an organization.

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Compensation management

Compensation is what employees

receive in exchange for their

contribution to the organisation.

Total compensation =

Direct + Indirect Compensation

Base Pay Incentives Benefits

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Components of Employee Remuneration

Remuneration

Financial Non-financial

Basic wages Incentives,

Individual plansGroup plans

Fringe benefits

P.F.

Medical care

Accident relief

Health and

Group insurance

Perquisites

CarClub membership

Paid holidays

Furnished house

Stock option scheme

Job context

Challenging job

Responsibilities

Growth prospects

Supervision

Working conditionsJob sharing etc

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Concepts of Wages

Minimum Wages

Fair Wages

Living wages

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Objectives of compensation

planning Internal equity

External equity

Individual equity

Attract talent

Retain talent

Ensure equity

New and desired behaviorControl costs

Ease of operation

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Motivation and performance model

Employees set

Goals and

expectations

Performance

Is rewarded

Employee considersEquity of

Performance

rewards

Feedback to

employees

Rewards are

given

Employee sets new goals and

Expectations based on prior experiences

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Wage Fixation

There are 2 system of Wage Payment-

Time Wage System- Under this system the workeris paid for the amount of time spent on the job. Theunit of time may be a day, a week or a month.

Wage = No. of Hours worked * Rate/Hour

Piece Wage System-Under this system, the outputor work is the basis of payment. Worker is paidaccording to the amount of work completed or the

number of pieces produced.Wage=No. of Pieces produced* Rate/Piece

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Systems of Wage Payment

Time Piece Incentive

GroupIndividual

Based onTime

Based onProductivity

PreistmansBonus

ScanlonPlan

Co-Partnership

Taylor

Merricks plan

Halsey

Rowan

Bedeaux

Emerson

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Halsey Plan

In this method bonus paid to a worker is equal to

50% of time saved multiplied by rate per hour. A

standard time is fixed on the basis of previous

performance for the completion of a job. When the

work is completed in less than the standard time,

he is paid at an hourly rate on a percentage (50%)

of the time saved by him.

Total Wages= T * R + 50% ( S - T) * R

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Rowan Plan

This is a modified version of Halsey Plan. Under

this, a minimum time wage is guaranteed to every

worker. Unlike a fixed percentage in case of Halsey

plan, it considers premium on the basis of the

proportion which the time saved bears to the

standard time.

Total Wage = T * R + ( T * R * Time Saved )

Std. Time

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Importance of an ideal remuneration

systemDesire for performancemore pay strikes

grievances

search for options absenteeism

turnoverPay dissatisfaction

lower job psychological

attractiveness dissatisfaction withdrawal

of jobs absenteeism visits to the

Doctor

poor mental

health

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Influencing factors of Remuneration

Remuneration

External Internal

Labour MarketCost of Living

Labour Unions

Govt. Legislations

Society

Economy

Business StrategyJob evaluation &

PA

The Employee

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Devising a remuneration plan

Job Description

Job Evaluation

Job Hierarchy

Pay Survey

Pricing Jobs

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Challenges of remuneration

Remuneration

Skills-based

pay

Employee

participation

Comparable

worth

Pay

secrecy

Salary

reviews

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Wage &Salary Differentials

When wages differ in different industries

firms,jobs,area, skill or geographical region it is

known as wage differential.

Wage differentials perform important economic

functions like labour productivity,attracting potential

candidates to different jobs,maximizing

productivity,development of skills, utilization of

human resources and labor mobility amongdifferent regions.

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Reasons for wage differentials

Occupational Differential.

Inter-firm Differentials.

Inter-area or Regional Differentials.

Inter-industry Differentials. Inter-personal wage Differentials.

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Wages Policy in India

Payment of Wages Act, 1936

Industrial Dispute Act, 1947

Minimum Wages Act, 1948

Equal remuneration Act, 1976

Payment of Bonus Act, 1965

Wage Board

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THANK YOU!!!!