Compensation policy

Defining Compensation• Compensation (also known as Total Rewards) can be defined as all of

the rewards earned by employees in return for their labour. This includes:

• Direct financial compensation consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals

• Indirect financial compensation including all financial rewards that are not included in direct compensation and understood to form part of the social contract between the employer and employee such as benefits, leaves, retirement plans, education, and employee services

• Non-financial compensation referring to topics such as career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions

• FOUR TYPES OF PAYMENTS AVILABLE IF YOU INJURED AT WORK:-

• Income Replacement• Permanent Impairment• Death Benefits• Medical expenses

OBJECTIVES OF THE COMPENSATION POLICY

• The ultimate objective of any compensation policy is to create a sense of recognition (Indification) and equity (fairness) for current and future employees.

• In addition, a compensation policy should also establish a balance between satisfying employee demands and the organization’s ability to pay.

Employer’s Perspective

• What do you compensate?

Job:

• Responsibility

• Critical function

• Job content

Individual Characteristics:

• Ability

• Training

• Education

STEPS IN THE DEVELOPMENT OF A COMPENSATION POLICY

• STEP1:- DEFINING THE ORGANIZATION’S COMPENSATION ISSUES

• Before even broaching the topic of compensation, the company’s objectives must be clarified. Accordingly, the following questions could be asked:-

• What are our development objectives?• What is our future outlook?• Is our company evolving in a highly-competitive

environment?• How important is labour to our organization?• What is the company’s capacity to pay?• How much does the company want to invest in its human

capital?

• STEP2 IDENTIFYING AND SELECTING THE COMPENSATION ELEMENTS THAT WILL PRODUCE THE ANTICIPATED RESULTS AND ACTIONS

• Company managers must enable them to select the appropriate policy components. The following questions can be helpful in determining what type of compensation to offer:-

• Does the future of the company rely on the research and development conducted by certain employees?

• Does the workforce represent a competitive advantage?• Is there a labour shortage?

STEP3 ANALYZING POSITIONS• Base salaries should be established according

to the responsibilities and tasks associated with each position and not to the individuals working in each position.

• qualifications and experience• responsibilities• intellectual and physical effort• working conditions.

STEP4 :- DETERMINING THE SALARIES TO APPEAR ON THE CHART

• The next step involves identifying the salaries that will appear on the salary chart.

• Accordingly, the minimum and maximum salaries paid on the market for each position must be identified

• Then adjusted to reflect the amounts the company is prepared to pay.

STEP5 :-DETERMINING PAY INCREASES

• The differences between levels are determined by means of measurable and observable criteria such as experience, seniority, and specific skills and knowledge.

• All that remains is to determine benchmarks for increases marking progression from one level to the next.

STEP6:-COMPARING COMPENSATION WITH THAT OFFERED ON THE MARKET

• The final step entails verifying that the salaries offered reflect the realities of the market.

• It is important to conduct this verification, since organizations in a same industry often recruit within the same environment

• which means that current or potential employees are able to compare the different forms of compensation.

Job analysis• The total work to be done is divided and

grouped into packages, we call it a job. Each job has a definite title based upon standardized trade specifications

• job may be defined as a collection or aggregation of tasks, duties and responsibilities which, as a whole, is regarded as a regular assignment to individual employees, and which is different from other assignments.

• After a job has been defined, it is analyzed, i.e., each task is described in detail.

• Job analysis is a procedure and a tool for determining the specified tasks, operations and requirements of each job.

• It is a complete study of a job, including the duties and responsibilities involved in its performance, the conditions under which the performance is carried on, the nature of the task, the qualities required in the workers, and such conditions of employment as pay, hours, opportunities and privileges.

• It also emphasizes the relation of one job to others in the organisations.

PURPOSE OF JOB ANALYSIS

Performance Analysis (Evaluation and appraisal)

Compensation management

Job designing and Redesigning

Training and development Need Analysis

Recruitment and Selection (creating a right fit b/w job

and candidate

Job Analysis

Job Description Job Specification

Job Description• Job description is to identify the job and make

the nature of job and its content known to all concerned.

• It acquaints the new employee with his duties and responsibilities.

• It also helps as a guide and reference for hiring, promotion, redressal of grievances, etc., in the personnel department.

• It is a record of various duties, responsibilities and requirements of a particular job

Job specification• Job specification means emphasizing the

personal characteristics required for the job. • It is a specification to which an employee must

conform which can be better understood as job holders qualification

JOB DESCRIPTION FORM• JOB TITLE

• JOB SUMMARY

• WORK ACTIVITY

• TOOLS AND EQUIPMENTS USED

• JOB CONTEXT

• WORK PERFORMANCE

• JOB COMPETENCIES

• QUALIFICATION

Job evaluation• It is a means of providing an

objective for measuring the value of the jobs within the enterprise and also among the different enterprise.

• Job evaluation provides an objective for determining the relative value of jobs and wage rates. It establishes wage rates and assists in other personnel work like placement, transfer, etc.

Compensation factor Rating CriteriaSkill know how Education Experience KnowledgeEffort Physical effort Mental effortResponsibility Responsibility for independent action Responsibility for machinery equipment Responsibility for Confidential InformationWorking Condition Risk Comfort physical Demand Personal Demand

Compensable factors used in the point factor method of job evaluation

References

• http://www.worldatwork.org/research/html/comppol03.html

• http://www.inc.com/tools/compensation-policy.html

• https://www.google.co.in/?gws_rd=cr&ei=lOtiUu6DFMGXrAeJtYDQDw#q=what+is+compensation+policy