Compensation New

8/3/2019 Compensation New

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COMPENSATION

BY

DR.PRADNYA MURBADKAR.

ROLL.NO-10PGDHA


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Employees should be managed properlyand motivated by providing best

remuneration and compensation as per theindustry standards.

The lucrative compensation will also servethe need for attracting and retaining thebest employees.


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DEFINATION

Compensation is the remunerationreceived by an employee in return forhis/her contribution to the organization.

It is an organized practice that involvesbalancing the work-employee relationby providing monetary and non-monetary benefits to employees.


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IMPORTANCE OF COMPENSATION Compensation and Reward system plays vital role

in a business organization. Since, among four Ms, i.e. Men, Material,

Machine and money, Men has been mostimportant factor, it is impossible to imagine a

business process without Men. It expects return from the business process such

as rent is the return expected by the landlord,capitalist expects interest and organizer i.e.entrepreneur expects profits.

Similarly the labour expects wages from theprocess.


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An ideal compensation system

It will have positive impact on theefficiency and results produced byemployees.

It will encourage the employees toperform better and achieve thestandards fixed.

It will enhance the process of jobevaluation.


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The system should be simple and flexibleso that every employee would be able to

compute his own compensation receivable. It should be easy to implement, should not

result in exploitation of workers.

It will raise the morale, efficiency andcooperation among the workers. It, being

just and fair would provide satisfaction tothe workers.

Such system should also solve disputesbetween the employee union andmanagement.


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The system should follow the managementprinciple of equal pay.

It should motivate and encourage those whoperform better and should provideopportunities for those who wish to excel.

Sound Compensation/Reward System brings

peace in the relationship of employer andemployees.

It aims at creating a healthy competitionamong them and encourages employees to

work hard and efficiently. The system provides growth and

advancement opportunities to the deservingemployees


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Components of Compensation System

Compensation systems are designedkeeping in minds the strategic goalsand business objectives.

Compensation system is designed onthe basis of certain factors afteranalyzing the job work and

responsibilities.


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Components of a compensation systemare as follows:


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Importance of Job Analysis

. Organizations should conduct the jobanalysis in a systematic way at regularintervals.

Job analysis can be used for setting up thecompensation packages, for reviewingemployees performance with the standardlevel of performance, determining the trainingneeds for employees who are lacking certainskills.


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Salary-Surveys

They cannot provide compensation packagesthat are either less than the industrystandards or are very higher then the marketrates.

For the purpose they undertake the salarysurvey.

The Salary survey is the research done to

analyze the industry standards to set up thecompensation strategy for the organization.


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Objectives of Salary Survey

To gather information regarding the industrystandards

To know more about the market rate i.e.compensation offered by the competitors

To design a fair compensation system

To design and implement most competitivereward strategies

To benchmark the compensation strategies .


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Types of compensation

Direct Compensation

Direct compensation refers to monetary

benefits offered and provided to employees inPf/Gratuity, etc.

They are given at a regular interval at a

definite time, in return of the services they

provide to the organization.

,


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The monetary benefits include

Basic Salary

House Rent Allowance

Conveyance

Medical Reimbursement

Bonus

Special Allowance Leave travel allowance

.


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Direct Compensation


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Basic Salary

Salary is the amount received by theemployee in lieu of the work done byhim/her for a certain period say a day,

a week, a month, etc.

It is the money an employee receives

from his/her employer by renderinghis/her services.


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House Rent Allowance

Organizations either provideaccommodations to its employees whoare from different state or country or

they provide house rent allowances toits employees.

This is done to provide them socialsecurity and motivate them to work.


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Conveyance

Organizations provide for cab facilitiesto their employees.

Few organizations also provide vehiclesand petrol allowances to theiremployees to motivate them.


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Leave Travel Allowance

These allowances are provided to retain thebest talent in the organization.

The employees are given allowances to visitany place they wish with their families.

The allowances are scaled as per the

position of employee in the organization.


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Medical Reimbursement

Organizations also look after the healthconditions of their employees.

The employees are provided with medi-

claims for them and their familymembers.

These medi-claims include health-insurances and treatment billsreimbursements.


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Bonus

Bonus is paid to the employees duringfestive seasons to motivate them andprovide them the social security.

The bonus amount usually amounts toone months salary of the employee.


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Special Allowance

Special allowance such as overtime,mobile allowances, meals, commissions,travel expenses, reduced interest loans;

insurance, club memberships, etc areprovided to employees to provide themsocial security and motivate them,which improve the organizational

productivity.


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Indirect Compensation

Indirect compensation refers to non-monetary benefits offered and provided

to employees in lieu of the servicesprovided by them to the organization.


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Indirect Compensation


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Hospitalization

The employees should be providedallowances to get their regular check-ups, say at an interval of one year.

Even their dependents should beeligible for the medi-claims that provide

them emotional and social security.


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Insurance

Organizations also provide foraccidental insurance and life insurancefor employees.

This gives them the emotional securityand they feel themselves valued in the

organization.


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Leave Travel

The employees are provided with leavesand travel allowances to go for holidaywith their families.

Some organizations arrange for a tourfor the employees of the organization.

This is usually done to make theemployees stress free.


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Overtime Policy

Employees should be provided with theadequate allowances and facilitiesduring their overtime, if they happened

to do so, such as transport facilities,overtime pay, etc.


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Retirement Benefits

Organizations provide for pension plansand other benefits for their employeeswhich benefits them after they retire

from the organization at the prescribedage.


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Holiday Homes

Organizations provide for holiday homes andguest house for their employees at

different locations.

The organizations make sure that the employeesdo not face any kind of difficulties during theirstay in the guest house.


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The most competitive compensation willhelp the organization to attract andsustain the best talent.

The compensation package should beas per industry standards.


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Documents

Compensation New