Session 17 and 18 - Compensation, Incentives

8/10/2019 Session 17 and 18 - Compensation, Incentives

1/22

Compensation, Incentives

& Benefits

HRM Sessions 17 & 18


2/22

Profits

Performance

Processes

People Philosophy

The Compensation Ecosystem

Compensation

Philosophy


3/22

To Revise a Few Basics

Area of Satisfaction

Area of Dissatisfaction

Motivators

influence level

of satisfaction.

Hygiene factorsinfluence level

of dissatisfaction.

Motivators

Hygiene Factors

Achievement

Recognition

Responsibility

Work itself

Personal growth

Working conditionsPay and security

Company policies

Supervisors

Interpersonal

relationships

Two-

Factor

Theory


4/22

Compensation System

Direct

Base Pay

Incentive Pay

- Bonus- Commission

- Profit-sharing

- Stock options

Proportion depends on nature of industry, job

level, and type of job


5/22

Compensation System

Indirect

Legally Required

EOBI

Group Life

SESSI

Medical

Union bonus

Elements of Optionaldepend on nature of

industry, job level and type of job

Optional

Loans

Cars

Fuel allowance

Flexi-time

Family medical

Paid vacations


6/22

Job

Evaluations

Comparator

Pool

Job

Matching

Salary

Surveys

Policy

Decision

Performance

Appraisals

PayOutcomes

Components of Annual Pay Process


7/22

Job Evaluations - Why

Relative value and contribution within the organization

Basis for external benchmarking and data collection

Basis for creating salary scales and benefits by levels

Hay System most well-established and commonly used

Know-How Problem Solving Accountability


8/22


9/22

Job Matching - Why

Matches content, size, and contribution, not titles

Takes into consideration a wide variety of factors

Best done with Data Collection

Keep senior management informed

Internal,

External equity

Involve

department

heads

Go for best fit


10/22

Data Gathering

Recommended to use an external consultant

Base pay + Allowances + Bonus + Other cash elements

Benefits

Perquisites

Total

Guaranteed PayTotal Cash

Total

Compensation


11/22

Performance Appraisals

Critical link in reward systems

Clear criteria for Merit and Bonus distribution

Strict deadlines for completion and submission

Employees ranked within their pools

What was

achieved?

How was it

achieved?

Contribution to

company?


12/22

Pricing Jobs

All jobs have a value in relation to other jobs/market

Companies chose a position amongst comparator group

Company philosophy to cap salaries at maximum

A Salary Scale is used to determine the Min/Max base pay

Salary Scales overlap and form a progression to the top


13/22

Base

Pay

Grades/Evaluated Points

Maximum Rate

Minimum Rate

Wage Curve

Wage Structure


14/22

Merit Increment Process

How soon would your wage bill double if you increased pay

by 10% every year?

Resources are limited; how do you distribute?

Merit increments are linked to the Appraisal Process

Some companies combine Merit with Inflation/COLA


15/22

The Infamous Bell Curve


16/22

Equity and Workplace Outcomes

Perceptions ofFairnessExternal Equity

Internal Equity

Individual Equity

Commitment

Motivation

Performance

Strategic question: What

is your positioning

amongst comparators?


17/22

Pay-related

Variable Pay or

Pay-at-Risk or

Performance Bonus

Percentage of salary that

is subject to individual

and company

performance

Greater risk at higher

levels due to greater

impact on results

Incentives


18/22

Allowances

Position-related

Usually fixed as

reimbursements

Usually market-driven

Allowances


19/22

Benefits

Legally Required

Vacation/Sick

Retirement

Group LifeSESSI

Medical

Union bonus

Elements of Optionaldepend on nature of

industry, job level and type of job

Optional

Loans

Cars

Fuel allowanceFlexi-time

Family medical

Paid vacations


20/22

Retirement Benefits

Provident Fund: matching contributions

Gratuity: Defined Benefit paid at end of service

Pension: may be Defined Benefit or D Contribution

Various conditions exist around eligibility/vesting

Medical: some companies provide


21/22

Current Trends

Concept of lifetime employment has disappeared

Monetize benefits to reduce admin costs

New hires want cash not long-term benefits

Funding long-term benefits is a huge liability

Challenge: how to stay competitive and low-cost


22/22

Some Market Practices

Job-related or Perquisite Cars

Fuel or Transport Allowance

Vehicle, Personal or Housing-Assistance Loans

Medical and Hospitalization

Stock Options

Documents

Session 17 and 18 - Compensation, Incentives