8/6/2019 Employee Compensation and Reward Management

1/4

EMPLOYEE COMPENSATION AND REWARD MANAGEMENT

Compensation is the sum total of all forms of payments and rewards provided to employees for performing tasks to achieve organizational objectives.

Contributions Objectives

Compensation can serve to attract qualified applicants

to the organization

Compensation helps to retain competent employee in

the organization

Compensation serves as an incentive to motivate

employees to put forth their best efforts.

Minimizing the costs of compensation can alsocontribute to organizational effectiveness

To enable the employee to earn a good and reasonable wages or salary

To pay equitable sums to different individuals, avoiding anomalies.

To reward and encourage high quality work and output

To encourage employees to develop better methods of working and their acceptance

To discourage wastage of materials or equipments

To encourage employees to use their initiative and discretion

To discourage overtime working unless it is very essentialTo increase or maintain morale/satisfaction of employees

Align employees effort with achievement of organizational objectives

Enhance co-operation and collaboration among team members

To communicate to the employee his or her worth to the organization.

Total compensation

Financial (Extrinsic Rewards) Non-Financial (Intrinsic Rewards)

Direct Indirect (Benefits)

Base pay

WageSalary

Variable pay

Individual incentivesGroup incentives

Organization-wide

incentives

Mandatory

Provident fund

Gratuity

Maternity leave

Health plans

Medical leave

Voluntary

Paid holidays

Family-friendly

benefits

Retirement

benefits

8/6/2019 Employee Compensation and Reward Management

2/4

8/6/2019 Employee Compensation and Reward Management

3/4

HCL offered loans for PCs to its employees that were to be partly written off every year the employee spent with the organization.Broadbanding

A strategy for salary structures that consolidates a large no of pay grades into a few broad bands

Each band covers a pay range that formerly represented several pay grades. It gives manager greater flexibility to encourage employee to move in a horizontal

direction in their careers by broadbanding their skills and competencies.

Broadening bands can have a positive impact on motivation because it can give managers more flexibility in rewarding employee performance within a very

broad band.

It also encourages employees to focus on developing skills that make them more valuable.

COMPENSATION AND REWARD DETERMINANTS

Fringe Benefits

A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are met. Any employee who receives

taxable fringe benefits will have to include the fair market value of the benefit in their taxable income for the year, which will be subject to tax withholdings,

and social security benefits payments.

Fringe benefits commonly include health insurance, group term life coverage, education reimbursement, childcare and assistance reimbursement, cafeteria

plans, employee discounts, personal use of a company owned vehicle and other similar benefits

Flexible Benefits

PAY

LEVEL

Internal determinants

Compensation policy

of the organization

Employers ability to

payWorth of a job

Employees relative

worth

External determinants

Labour market

conditions

Economic conditions

Area wage ratesGovernment controls

Cost of living

Union influences

8/6/2019 Employee Compensation and Reward Management

4/4

A system whereby employees are presented with a set of benefits and are asked to select, within monetary limits imposed, the benefits they desire.