PPT Comp Mgt

Compensation ManagementCompensation ManagementWhat is compensation managementWhat is compensation managementIts importanceIts importanceTypes of CompensationTypes of CompensationConstituents of Compensation – CTC, Constituents of Compensation – CTC, headsheadsPurpose of CompensationPurpose of CompensationFactors affecting CompensationFactors affecting CompensationAnatomy of Pay StructureAnatomy of Pay StructureLaws governing and affecting Pay Laws governing and affecting Pay StructureStructureSome interesting comparisonsSome interesting comparisonsRecent trends in Compensation Recent trends in Compensation ManagementManagement

Compensation ManagementCompensation ManagementWhat is compensation managementWhat is compensation managementCompensation Management is designing and Compensation Management is designing and implementing total compensation package implementing total compensation package with a systematic approach to providing with a systematic approach to providing value to employees in exchange for work value to employees in exchange for work performance, performance,

Compensation is a systematic approach to Compensation is a systematic approach to providing monetary value to employees in providing monetary value to employees in exchange for work performed.exchange for work performed.Compensation may achieve several purposes Compensation may achieve several purposes assisting in recruitment, job performance, assisting in recruitment, job performance, and job satisfaction.and job satisfaction.

Compensation ManagementCompensation ManagementIts importanceIts importance

Compensation is an integral part of human Compensation is an integral part of human resource management which helps in resource management which helps in motivating the employees and improving motivating the employees and improving organizational effectiveness. organizational effectiveness.

Effectiveness in terms of:Effectiveness in terms of:

Attracting & Retaining TalentAttracting & Retaining Talent Motivating talent for better Motivating talent for better performanceperformance Cost effectivenessCost effectiveness


Effective Compensation

Motivate & Retain Staff

Attract talent

Image Building

Administratively Efficient

Reward Valued Behavior

Ensure Equity

Institutional effectiveness

Legal Compliance

Employee Management


HIGH COMPENSATION – HIGH COMPENSATION – LOW COMMITMENTLOW COMMITMENT

Hired Guns Hired Guns

HIGH COMPENSATION HIGH COMPENSATION – HIGH COMMITMENT– HIGH COMMITMENTProfessionalsProfessionals

LOW COMPENSATION – LOW COMPENSATION – LOW COMMITMENTLOW COMMITMENT

Workers as Workers as commoditycommodity

LOW COMPENSATION LOW COMPENSATION – HIGH COMMITMENT– HIGH COMMITMENT

Family oriented Family oriented organizationorganization


Elaboration…. And discussionElaboration…. And discussion

Compensation ManagementCompensation ManagementTypes of CompensationTypes of Compensation


Direct compensationDirect compensationIt refers to monetary benefits offered and It refers to monetary benefits offered and provided to employees in return of the provided to employees in return of the services they provide to the organization. services they provide to the organization. The monetary benefits include basic The monetary benefits include basic salary, house rent allowance, conveyance, salary, house rent allowance, conveyance, leave travel allowance, medical leave travel allowance, medical reimbursements, special allowances, reimbursements, special allowances, bonus, PF/Gratuity, etc. They are given at bonus, PF/Gratuity, etc. They are given at a regular interval at a definite time. a regular interval at a definite time.


Indirect compensationIndirect compensationIt refers to non-monetary benefits offered It refers to non-monetary benefits offered and provided to employees in lieu of the and provided to employees in lieu of the services provided by them to the services provided by them to the organization. They include Paid Leave, Car organization. They include Paid Leave, Car / transportation, Medical Aids and / transportation, Medical Aids and assistance, Insurance (for self and family), assistance, Insurance (for self and family), Leave travel Assistance, Retirement Leave travel Assistance, Retirement Benefits, Holiday Homes. Benefits, Holiday Homes.

Compensation ManagementCompensation ManagementConstituents of Compensation – CTC, Constituents of Compensation – CTC, headsheadsWage and Salary:Wage and Salary:

The most important component of compensation and The most important component of compensation and these are essential irrespective of the type of organizationthese are essential irrespective of the type of organization Administered individuallyAdministered individuallyProvides employee stabile income and can plan chores of Provides employee stabile income and can plan chores of daily life, budgetdaily life, budget

Incentives:Incentives:Incentives are the additional payment to employees Incentives are the additional payment to employees besides the payment of wages and salaries. Often these besides the payment of wages and salaries. Often these are linked with productivity, either in terms of higher are linked with productivity, either in terms of higher production or cost saving or both.production or cost saving or both.Can be administered individually and for groupsCan be administered individually and for groupsAdditional compensation having immediate effect and no Additional compensation having immediate effect and no future liability.future liability.

Compensation ManagementCompensation ManagementConstituents of Compensation – CTC, Constituents of Compensation – CTC, headsheadsFringe Benefits:Fringe Benefits:

Fringe benefits include such benefits which are provided to the Fringe benefits include such benefits which are provided to the employees either having long-term impact like provident fund, employees either having long-term impact like provident fund, gratuity, pension; or occurrence of certain events like medical gratuity, pension; or occurrence of certain events like medical benefits, accident relief, health and life insurance; or facilitation in benefits, accident relief, health and life insurance; or facilitation in performance of job like uniforms, Canteens, recreation, etc.performance of job like uniforms, Canteens, recreation, etc.Administered for a group mostlyAdministered for a group mostly

Perquisites:Perquisites:These are normally provided to managerial personnel either to These are normally provided to managerial personnel either to facilitate their job performance or to retain them in the facilitate their job performance or to retain them in the organization. Such perquisites include company car, club organization. Such perquisites include company car, club membership, free residential accommodation, paid holiday trips, membership, free residential accommodation, paid holiday trips, stock options, etc.stock options, etc.Administered individually mostly Administered individually mostly

Compensation ManagementCompensation Management Purpose of CompensationPurpose of Compensation

BUSINESS STRATEGY

PEOPLE REQUIREMENT

Compensation Management

Compensation ManagementCompensation Management Purpose of CompensationPurpose of Compensation

For EmployerFor Employer Brand image (employer of choice) for attracting Brand image (employer of choice) for attracting

candidatescandidates Motivating employees for higher productivity Motivating employees for higher productivity

and performanceand performance Retaining talentRetaining talent Consistency in compensationConsistency in compensation Provoking healthy internal competitionProvoking healthy internal competition

For EmployeeFor Employee Work-life BalanceWork-life Balance Recognition as tool to self esteemRecognition as tool to self esteem Planning for better quality of lifePlanning for better quality of life

Compensation ManagementCompensation Management Factors affecting CompensationFactors affecting Compensation

Mental requirements, Mental requirements, Physical requirements,Physical requirements, Skill requirements,Skill requirements, Responsibility level, and Responsibility level, and Working conditions (risk, time, Working conditions (risk, time,

hazards)hazards)

Compensation ManagementCompensation Management Factors affecting CompensationFactors affecting Compensation

Organizational AffordabilityOrganizational Affordability Man power planningMan power planning Sales – salary ratioSales – salary ratio

Market Rate for TalentMarket Rate for Talent Economic ConditionsEconomic Conditions

Compensation ManagementCompensation Management Inputs in Compensation StructureInputs in Compensation Structure

Job EvaluationJob Evaluation Job SpecificationJob Specification Job DescriptionJob Description Time and Motion StudyTime and Motion Study

Market SurveyMarket Survey Demand and SupplyDemand and Supply Industry wise bench markingIndustry wise bench marking

Compensation ManagementCompensation ManagementLaws governing and affecting Pay Laws governing and affecting Pay StructureStructure

Minimum Wages Act (discuss – minimum Minimum Wages Act (discuss – minimum remuneration, its headsremuneration, its headsIncome Tax Act (discuss – heads which Income Tax Act (discuss – heads which provide tax relief)provide tax relief)Equal Remuneration ActEqual Remuneration ActPayment of Wages Act (discuss – Payment of Wages Act (discuss – permissible deductions)permissible deductions)Acts on social securities (PF, Bonus, Acts on social securities (PF, Bonus, Gratuity, Employee Compensation) Gratuity, Employee Compensation)

Compensation ManagementCompensation ManagementAnatomy of Pay StructureAnatomy of Pay StructureMonthly salary componentsMonthly salary components

Basic SalaryBasic SalaryDearness AllowanceDearness AllowanceHouse Rent AllowanceHouse Rent AllowanceConveyance AllowanceConveyance AllowanceOthers (Shift Allowance, Uniform Others (Shift Allowance, Uniform Allowance, Education Allowance)Allowance, Education Allowance)

Compensation ManagementCompensation ManagementAnatomy of Pay StructureAnatomy of Pay StructureIncentivesIncentives

Time based incentiveTime based incentiveProduction based incentiveProduction based incentiveTask based incentiveTask based incentive

Compensation ManagementCompensation ManagementAnatomy of Pay StructureAnatomy of Pay StructureSocial Security / Statutory paymentsSocial Security / Statutory payments

Contribution towards Provident FundContribution towards Provident FundContribution towards ESIContribution towards ESIPayment of BonusPayment of BonusPayment of Gratuity (not part of wages Payment of Gratuity (not part of wages but considered part of CTC)but considered part of CTC)

Compensation ManagementCompensation ManagementSome interesting comparisonsSome interesting comparisons

The salary of top executives of public sector are The salary of top executives of public sector are miserable compared to private sector .miserable compared to private sector .S B I of India chief is paid 10%of HDFC Bank S B I of India chief is paid 10%of HDFC Bank Managing DirectorManaging Director

BHEL’S chief gets about 10 to 12 lakhs per annum BHEL’S chief gets about 10 to 12 lakhs per annum as as against ABB ‘S MD getting nearly 40 to 50 lakhsagainst ABB ‘S MD getting nearly 40 to 50 lakhs

Compensation ManagementCompensation ManagementRecent trends in Compensation Recent trends in Compensation ManagementManagement

Employees’ Stock Ownership PlanEmployees’ Stock Ownership PlanEmployee Stock Ownership Plan (ESOP) is an employee benefit Employee Stock Ownership Plan (ESOP) is an employee benefit plan. The scheme provides employees the ownership of stocks plan. The scheme provides employees the ownership of stocks in the company. It is one of the profit sharing plans. Employers in the company. It is one of the profit sharing plans. Employers have the benefit to use the ESOPs as a tool to fetch loans from have the benefit to use the ESOPs as a tool to fetch loans from a financial institute. It also provides for tax benefits to the a financial institute. It also provides for tax benefits to the employers.employers.

Organizations strategically plan the ESOPs and make Organizations strategically plan the ESOPs and make arrangements for the purpose. They make annual contributions arrangements for the purpose. They make annual contributions in a special trust set up for ESOPs. An employee is eligible for in a special trust set up for ESOPs. An employee is eligible for the ESOPs only after he/she has completed mutually agreed the ESOPs only after he/she has completed mutually agreed time period within a year of service. After completing 10 years time period within a year of service. After completing 10 years of service in an organization or reaching the age of 55, an of service in an organization or reaching the age of 55, an employee should be given the opportunity to diversify his/her employee should be given the opportunity to diversify his/her share up to 25% of the total value of ESOPs. Law has also share up to 25% of the total value of ESOPs. Law has also provided an amendment for the employees who have attained provided an amendment for the employees who have attained the age of 60 and their ESOP shares are allotted after the age of 60 and their ESOP shares are allotted after December 31, 1986. The amendment provides those December 31, 1986. The amendment provides those employees with an option to diversify their shares up to 50%.employees with an option to diversify their shares up to 50%.


Advantages of ESOPAdvantages of ESOP

OwnershipOwnership Tax-RebateTax-Rebate Retirement benefitsRetirement benefits


Advantages of ESOPAdvantages of ESOP


Long Term Compensation PlanLong Term Compensation Plan

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PPT Comp Mgt