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8/9/2019 Compensation Mgt Final
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CompensationCompensation
Cash, Bonuses, Insurance,Cash, Bonuses, Insurance,
Vacation, HolidaysVacation, Holidays
Perks, RecognitionPerks, Recognition
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What doesWhat doescompensation (whatcompensation (what
you receive for youryou receive for your
services) mean to you?services) mean to you?
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ADefinition . . .
ADefinition . . .
All forms of
financial return,
tangible services and
benefits
that employees receive as part of their
employment relationship
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Compensation is the remunerationCompensation is the remunerationreceived by an employee in returnreceived by an employee in return
for his/her contribution to thefor his/her contribution to the
organization. It is an organizedorganization. It is an organized
practice that involves balancingpractice that involves balancing
the workthe work--employee relation byemployee relation by
providing monetary and nonproviding monetary and non--
monetary benefits to employeesmonetary benefits to employees
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Components of a TotalComponents of a Total
Compensation ProgramCompensation Program -- 11 FinancialFinancial
Direct
wages, salaries, commissions, bonuses
Indirect insurance plans
life, health, dental, disability
social assistance benefits retirement plans, social security, workers comp
paid absences
vacations, holidays, sick leave
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Components of a TotalComponents of a Total
Compensation ProgramCompensation Program -- 22NonNon--FinancialFinancial
The Job
interesting, challenging, responsible
opportunity for recognition, advancement feeling of achievement
Job Environment
policies, supervision, co-workers, statussymbols, working conditions, flextime,compressed work week, job sharing,telecommuting, flexible benefits programs
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Components of compensationComponents of compensation
Basic wages/SalariesDearness allowance
Bonus
Commissions:-
Mixed plans:
Piece rate wages:-
Profit sharing payments:-
Fringe benefits:-
Reimbursements:-
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Sickness benefits/pregnancy:-
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Need of CompensationNeed of Compensation
ManagementManagement
A good compensation package is important tomotivate the employees to increase theorganizational productivity.
Unless compensation is provided no one will come
and work for the organization.T
hus, compensationhelps in running an organization effectively andaccomplishing its goals.
Salary is just a part of the compensation system, theemployees have other psychological and self-actualization needs to fulfill. Thus, compensation
serves the purpose. The most competitive compensation will help the
organization to attract and sustain the best talent.The compensation package should be as perindustry standards
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Factors that Influence WageFactors that Influence WageLevelsLevels
WAGEMIX
Conditions ofLabor Market
Area WageRates
Cost ofLiving
CollectiveBargaining
LegalRequirements
CompensationPolicy of
Organization
Worth ofJob
EmployeesRelative Worth
EmployersAbility to Pay
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Designing a CompensationDesigning a Compensation
SystemSystem
Steps in the Decision Process
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Step 1Step 1 -- Establish GeneralEstablish General
Wage Level for OrganizationWage Level for Organization Factors to consider:Factors to consider:
Other firms rates
Union demands
Cost-of-living changes
Firms ability to pay
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Job EvaluationJob Evaluation
Job evaluation is the process of systematicallydetermining a relative internal value of a job in anorganization. In all cases the idea is to evaluate the job,not the person doing it. Job evaluation is the process ofdetermining the worth of one job in relation to that ofthe other jobs in a company so that a fair and equitable
wage and salary system can be established defined: the systematic evaluation of job descriptions
outcome: a hierarchy of organizational jobs accordingto their content and value to the organization
Methods:
ranking classification
factor comparison
point method
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Job Ranking SystemJ
ob Ranking System
Simplest and oldest system of job
evaluation by which jobs are arrayed
(classified)
on the basis of their relative worth
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Job Classification SystemJ
ob Classification System
System of job evaluation by which jobs
are classified and grouped according
to a series of predetermined wage grades
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Point SystemPoint System
Quantitative job evaluation procedure
that determines the relative value of a job
by the total points assigned to it
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Factor Comparison SystemF
actor Comparison System
Job evaluation system that permits the
evaluation process to be accomplished
on a factor-by-factor basis by developing
a factor comparison scale
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Hay Profile Met
hod
Hay Profile Met
hod
Job evaluation technique using three
factors knowledge, mental activity,
and accountability to evaluate
executive and managerial positions
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Employee BenefitsEmployee Benefits
Items in the total package offered toemployees over and above salarywhich increase their wealth or well-
being at some cost to the employer
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Mandatory BenefitsMandatory Benefits
Compensation for injuries anddiseases
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Voluntary BenefitsVoluntary Benefits
Most of these benefits have certainlegislative minimums.
Vacation leave
Paid public holidays
Time for personal matters
Sick leave
Maternity leave
Health and life insurance
Medical Aid Schemes Pension Funds
Employee Services e.g.. Canteens, social andrecreational services
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Advantages of flexible benefitsAdvantages of flexible benefits
programmeprogramme The company can set the sum total of
benefits for each employee
The changing needs of the workforce arecatered for
Employees take ownership for their choiceof benefits by satisfying their own unique
needs It is less costly for the organization when an
employee adds a new benefit
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Disadvantages of flexible benefitsDisadvantages of flexible benefits
Without proper assistance employeescan make bad choices and findthemselves not covered for
emergencies Company administrative costs increase
The cost of some benefits may increaseas a result of a majority of employeeschoosing the benefit