Compensation & Benefits Mgmt - Equity , pay structure

8/14/2019 Compensation & Benefits Mgmt - Equity , pay structure.

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Presented by

Abhilash Iyyappan

H.R. 2nd Yr. PGDM

ITM B- School

Chennai


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Compensation is the payment to anemployee in return for theircontribution to the organization, that

is, in terms for the job they havedone they are paid or rewarded(monetary/non-monetary). The most

common forms of compensation arewages, salaries and tips.


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Compensation is the remuneration received by an employee in return forhis/her contribution to the organization. It is an organized practice thatinvolves balancing the work-employee relation in the organization.

How does Compensation play a role in H.R Dept:

Compensation is an integral part of human resource management whichhelps in:

Motivating the employees,

Retain the employees

Converting employees to experts in the organization

Converting a employee into a asset in terms of his contribution to the

company Bringing more quality work as the output and building a strong workforce

Helps to increase the Retention level in the organization.

Thus this is very important role today in the competitive market, wherethere are more need of employees who are experts in industries for huge

compensations. Hence the measures adopted by the HR should be effective and

competent when compared to the competitors.


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Types of Compensation

Direct/Monet

ary

Indirect/Non-

Monetary

1. Perks2. Time off

3. Health Insurance4. Maternity Leave5. Dependent Care

Assistance6. Education Assistance

1. Bonus2. Commission

3. Incentive4. Profit Sharing Plans5. Paid Moving Expenses6. Club Membership in

form of Cash7. Travel Perks in form of

Cash

Cost Free

Compensation

1. 1. Appreciation2. Child development

theory

3. Flexi-time4. Telecommutingthrough PDAs,mobiles

5. Comfort work place6. Absence of

traditional workculture


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A good compensation package isimportant to motivate the employeesto increase the organizational

productivity.Unless compensation is provided no

one will come and work for the

organization. Thus, compensation helpsin running an organization effectivelyand accomplishing its goals.


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Salary is just a part of the compensationsystem, the employees have otherpsychological and self-actualization needs

to fulfill. Thus, compensation serves thepurpose.

The most competitive compensation willhelp the organization to attract and sustain

the best talent. The compensation packageshould be as per industry standards.


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MOTIVATION

EMPLOYEE

RETENTION

NEEDSATISFAC

TION

COMPENSATION

PACKAGE


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Today more and more businesses areaffected by global marketplace as regard tocost of labor.

Organization needs to keep up the labor costin line with those of the other countries, whoare been able to produce goods or servicesin their competitive price

This is why global market have gone to showimportance on the determinant of financialcompensation for individuals.


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Managers tend to view financial compensation asboth expense and asset.

It is an expense because it reflects the cost oflabor

In service industry labor costs accounts more than50% of all expenses.

It is an asset when it is used for recruiting and

hiring, good people encouraging them to put theirbest efforts (motivate) and to remain in their job


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Basic SalaryHRA (House Rent Allowance)

CA (Conveyance Allowance)

LTA (Leave Travel Allowance)

Medical Reimbursement

Bonus (Salary Bonus)SA (Special Allowance)


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Indirect compensation refers to non-monetary benefits offered and provided toemployees in lieu of the services providedby them to the organization.

Non-cash benefit (such as an office car)provided to an employee. In some

jurisdictions a certain percentage of theindirect compensation is added to thebeneficiary's income for taxing purposes.


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The compensation equity has formulated atheory based on the

- Input.

Input: Outcome ratio for self

Input: Outcome ratio for referent

Perception of ratios affects futureperformance


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Equity - Fair pay treatment for employees

External equity - Firm's employees are paidcomparably to workers who perform similar jobsin other firms

Internal equity - Exists when employees arepaid according to relative value of their jobswithin same organization

Employee equity - Individuals performingsimilar jobs for same firm are paid according to

factors unique to employee, such asperformance level or seniority Team equity - More productive teams are

rewarded more than less productive groups


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Organization typically use a number offactors to determine individual pay.

This decision was influenced by the

- Labor market- Employee

- Job

- Organization


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Compensation surveys

Expediency

Cost of livingLabor unions

Society

EconomyLegislation


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Performance-based Pay Skilled-based PayCompetency-based Pay Seniority ExperienceMembership in the organization

Potential Political Influence Luck


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The OrganizationCompensation Policies

Organizational Politics

Ability to Pay

The Labor MarketCompensation Surveys

ExpediencyCost of Living

Labor Unions

Society

The Economy

Legislation

The EmployeeJob Performance Merit

Pay Variable PayCompetency-Based Pay

Seniority

Experience

Organization Membership

Potential

Political InfluenceLuck

Job

Pricing

Individual

Financial

Compensation

The JobJob Analysis

Job Descriptions

Job Evaluation

Collective Bargaining


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Merit pay - Pay increase given toemployees based on their level ofperformance as indicated in the appraisal

Variable pay - Compensation based onperformance (bonus)

Piecework Employees paid for each

unit they produce


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Compensates on basis of job-relatedskills and knowledge

Employees and departments benefitwhen employees obtain additional skills

Appropriate where the work tends to beroutine and less varied


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Compensates on basis ofdemonstrated expertiseIts objectives are:-Apply valid and transparent

performance standards- Provide fair, accurate andnondiscriminatoryassessments performance

- Reward high performers andidentify below expectationsperformers- Retain key talented people

-Increase competitive


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Length of time an employee has beenassociated with the company, division,department, or job

Labor unions tend to favor seniority


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Regardless ofnature of job,very few factors

have a moresignificantimpact onperformance

than experience


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Profit sharing distribution ofpredetermined percentage of firms profitsto employees

Gain sharing incentive payment basedupon improved company performance Scanlon plan reward to employees for

savings in labor costs resulting from employees

suggestions


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Executive compensation ishow top executives of businesscorporations are paid. Thisincludes a basic salary, bonuses,shares, options and other

company benefits. Over the pastthree decades, executivecompensation has risendramatically beyond the risinglevels of an average worker'swage Executive compensation isan important part of corporategovernance, and is oftendetermined by a company's

board of directors.


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Firms typicallyprefer to relatesalary growth for the

highest-levelmanagers to overallcorporate

performance


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HR executiveswho know theircompanys

business mustplay key role inassuring

reasonable andethical behavior


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Pay structure refers to the process ofsetting up the pay for a job in anorganization. The process deals with

internal and external analysis toestimate the compensation package fora job profile. Internal equity, External

equity and Individual equity are themost popular pay structures. Jobdescription provides the in depth


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Group jobs with similar value in organizationAssess the groups and determine the no. of

pay ranges

Determine pay for each group with minimumpoint, mid point and maxi. point

Salary ranges also made through companypolicy

According to the levels the pay range shouldbe clearly differentiated


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Number of years of experienceNumber of reporting staff membersPerformance evaluation resultsHazardous working conditionsUndesirable shiftsEducation and degrees

Professional certificationsManagement opinions


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Entry LevelManagement Level


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Entry Level Management Le


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An ideal compensation system willhave positive impact on theefficiency and results produced by

employees. It will encourage theemployees to perform better andachieve the standards fixed whichwill also grow the organization in

the long run. Hence HRprofessionals play a vital role inproviding Compensation and

Benefits to the employees and


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Documents

Compensation & Benefits Mgmt - Equity , pay structure