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Compensation
Management
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What is compensation?
Compensation is what employees receive in
exchange for their contribution to the organisation
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Components of Compensation
Base Pay or fixed componentVariable Pay
Benefits
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Objectives of CompensationPlanning
Internal equity
External equityIndividual equity
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Purpose of Compensation PlanningAttract TalentRetain
TalentEnsure equity
New and desired behaviourControl CostsComply with legal
rulesEase of operations
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Equity and Pay ratesFind worth of each job through job
evaluationConduct a salary survey to find what other
employers are paying for comparable jobs
Group similar pay grade by using wage curvesFine tune pay
rates
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Components of Pay Structure inIndia
WagesDearness AllowanceDearness payHRACCA
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Wage and Salary AdministrationObjectives
To establish a fair and equitable remunerationTo attract
qualified and competent personnelTo retain present employees by
keeping wage levels in
tune with competitorsTo controls costsTo improve motivationTo
project a good image of the company
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Wages
Minimum WageFair WageLiving Wage
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State regulation of Wages
Minimum Wages Act, 1948The Payment of Wages Act, 1936
Wage Boards
Pay Commission
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Types of WagesTime Wage
Piece Wage
Balance or debt method
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Wage Differential
Occupational DifferentialInter-firm DifferentialInter area
differentialInter-industry differentialPersonal Wage
differential
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Incentives
An incentive or reward can be anything that attractattention and
stimulates him to work.
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Types of incentivesDirectIndirect
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Wage IncentivesIt refers to all the plans that provide extrapay
for extra performance in addition toregular wages for a job
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Guidelines for effective incentiveplan 1/2
Insure that efforts and rewards are directlyrelated
The reward must be valuable to the employee
The record must be clearly identifiableMethods and procedures
must be carefully
studiedEffective standards must be set
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Guidelines for effective incentiveplan 2/2
Standards must be guaranteedAn hourly base rate must be
guaranteedRewards must be granted promptly
The Plan must be within the financial andbudgetary capacity of
the organisationAdditional reinforcement must be providedMust
minimise friction between workers
