Employee Compensation System
Compensation
• Nothing but the REMUNERATION package offered by the organization to attract the talented person for different position, such as
• For Dy.managers
• For Manager
• For Executive officer
• For lower level officer
• For an organization to attract and retain talent, it is of utmost importance that it is able to provide an attractive compensation package.
• Along with the brand value of the organization, for attracting top talent, a well designed compensation package plays a crucial role
Compensation system
• It is the backbone of HRM• It hold the real power to - attract - retain and - motivate Employees to give outstanding performance
The system may differ from company’s to company
Principles of compensation system
• According to Steven Applebaum of Concordia University, the following principles play’s vital role in determining the better compensation for better employee
market conditions
• If the market is good the companies are ready to pay more
Employee Characteristics
• Based on the
- education
- seniority
- qualifications
- experience
The employee must give preference for good compensation
Industry Characteristics
• Based on the status or standard of the company the wages may vary considerably.
• Ex- Software companies pay good packages when compare with manufacturing wage package
Job Characteristics
• Here the packages may vary according to
- mental requirements
- physical requirement
- skill requirement
- level of public contact
- the effort required to carry out the work
Employee behavior characteristics
• Here, the packages may vary based on
- performance
- absenteeism
- turnover
Problems
• Compensation is a critical issue for organisational effectiveness.
• Dissatisfaction in compensation system can cause number of HR related problems.
- poor employee performance - regular absenteeism - low employee turn over - poor employee involvement
problems
• Unless compensation system is effective, the other interventions such as
- development
- empowerment
- communication
- career planning
Will not produce any positive results for the organisation.
Models of Compensation
• From the above information it could be clearly understand that compensation package is ultimately plays very significant role for the organizational effectiveness as well as the employee effectiveness.
• It is the ultimate task of the HR to design the perfect compensation package for tackling the competitors.
Models of Compensation
• There are two important models of compensation
1. performance based compensation
2. fringe benefits
3. Gain Sharing
4. ESOP
performance based compensation
• It involves rewarding employees as per their performance or results achieved.
fringe benefits
• The fringe benefits have often been described as
- welfare Expenses
- other than wages
- social charges
Gain Sharing
• It is also known as
- production incentives,
- Profit Sharing
- Team Incentives
ESOP
• Employee stock ownership plan is a right granted to an employee to purchase a specified number of shares of stock of the company at a predetermined price during a specified period.
• How does a company go about designing their compensation package?
Compensation Benchmarking
• Compensation Benchmarking is a key element in designing a pay package.
Procedure
• identify similar organization existing in your city.
• check and compare with their salary structure with respect to specific grades and how the fitmentation part is done in their industry.
• Generally other company HR cannot give this info. Some Top officials in your industry or HR Head needs to tackle this.
• Survey for atleast 3 - 4 companies.
Procedure
• Like this you need to do for the 'N' number of positions you need to compare with your salary standards.
• If it is a deviation about 5 % you don’t have to worry about it. Anything above 10 % then a focus required on this.
• While doing the Survey one has to prepare a set of questionnaire and this needs to be circulated to the other companies and do the analysis.
• Also one has to focus on their attrition analysis and then only take a final call on this.