CONCEPT,ELEMENTS AND PRINCIPLES OF COMPENSATION

PRESENTED BY:

PUMMY SINGHANIARENUKA CHANDRAKAR

CONTENTS

1. INTRODUCTION2. MEANING AND DEFINATION3. OBJECTIVES OF COMPENSATION4. FACTORS AFFECTING COMPENSATION5. IMPORTANT COMPENSATION ISSUES6. TYPES OF COMPENSATION7. ELEMENTS OF COMPENSATION8. PRINCIPLES OF COMPENSATION

MEANING & DEFINATION OF COMPENSATION

•The literal meaning of compensation is to counter balance.•In HR management, compensation refers to as money and other benefits received by an employee for providing services to his employer.

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

OBJECTIVES OF COMPENSATION

To acquire qualified competent personnelTo retain the present employeesTo secure internal and external equityTo ensure desired behaviorTo protect in public as progressive employeesTo pay according to the content & difficultyTo facilitate pay roleTo simplify collective bargaining.To promote organization & Goodwill.

FACTORS AFFECTING COMPENSATION

Remuneration in comparable industries.Firms ability to payCost of livingProductivityUnion pressure and strategiesGovt. legislationJob requirementSupply and demand factor

IMPORTANT COMPENSATION ISSUES

1. Amount of compensation:- The manager must be sure that the amount of

compensation paid to employees according to the services they rendered. He must seek to pay a fair wage-fair to the employees, the customer and the investors.

BASIC COMPONENTS IN DECIDING HOW MUCH WORKERS SHOUL BE PAID:

The relation of his wages to those being paid by other workers in the area for the same kind of work.

The difficulty and importance of his job compared with other jobs in the company.

The quality of performance by the individual in this job

THE RELATION OF HIS WAGES TO THOSE BEING PAID BY OTHER WORKERS IN THE AREA FOR THE SAME KIND OF WORK……

Relation of wages with market:-Most companies seek to follow a policy of paying competitive wage rate High wages:-some companies deliberately pay their workers a higher wage level than that prevailing in the industry in an effort to secure the “cream of the crop”.Low wages:-some companies pay comparatively low wages because satisfactory results can be secured from workers.Industry rates:-in some industries,primarily as a result of labour union pressure the industry wide wage level is more important than the wage level in the local labour market.

METHODS OF PAYMENT

CONTINUE……

1.Use of time rates

2.Problem of installing incentive rates

3.Combined piece and time rates

TYPES OF COMPENSATION

TCOMPENSATION SYSYTEM

DIRECT

BASE PAY/SALARY

INCENTIVE PAY

. BONUS.COMMISI

ON.PROFIT

SHARINGetc

INDIRECT

LEGALLLY REQUIRE

D. SOCIAL SECURITI

ES.EMPLOYE

MNT COMPENS

ATON.WORKER

S COMPENS

ATION.FAMILY

AND MEDICAL

LEAVE

OPTIONAL .HEALTH INSURANCE.RETIREMENT PLANS

. DISABILITY INSURANCE.LIFE INSURANCE

etc

ELEMENTS OF COMPENSATION

1. WAGE AND SALAY.2. INCENTIVES 3. FRINGE BENEFITS4. PERQUISITES

WAGE AND SALARY•Wage is refers to as remuneration to workers particularly hourly rated payment.•Salary refer to as remuneration paid to white collar employees including managerial person. They are paid on the basis of fixed period of time.Two types of wages:-Nominal wages:-wages paid in terms of money are called money wages or nominal wages.Real wages:-in addition to nominal wages the extra benefits which the employee gets is real wages.

2. INCENTIVES

Incentives are the additional payment to the employees besides the payment of wages and salary incentives are the gains which motivates the workers to a better performance..

CONTI………CLASSIFICATON OF INCENTIVES:A. Positive and negative:- positives refers to reward for better work and negative refers to penalties.B.Individual and collective:-it is also called direct and indirect incentives. individual incentives benefits the worker individually while collective incentives accrue to the group

C.Monetary and non-monetary incentives:Monetary incentives are paid in terms of monetary and non-monetary incentives includes merit certificates etc

3.FRINGE BENEFITS

Fringe benefits includes which are provided to the employees either having long term impact like: provident fund,gratuty,pension,or occurrence of certain events like medical benefits, canteen ,recreation, accident leave, health and life insurance etc.

4.PERQUISITES

These are generally provided managerial personnel either to facilitate their job performance or to retain them in the organisation.such perquisites includes:Company carClub membershipFree residential accommodationPaid holiday trips.Stock option etc

PRINCIPLES OF COMPENSATIONThere should be definite plan to ensure that differences in pay for jobs are based upon variations in job requirements , such as skill effort , responsibility or job or working conditions, and mental and physical requirements.

The general level of wages and salary should be reasonably in line with that prevailing in the labour market.

The plan should carefully distinguished between jobs and employees-a job caries a certain wage rate, and a person is assigned to fill at the rate. exceptions sometimes occur in very high level jobs in which the job holder may make the job large or small ,depending on his ability and contribution.

Equal pay for equal work.

CONTI…

An equitable practice should be adopted for the recognition of the individual differences in ability and contribution.

There should be clearly established procedure for hearing and adjusting wage complaints.

The employees and the trade union ,,should be informed about the procedure used to establish wage rates.

The wage rate should be sufficient to ensure for the workers and his family reasonable standard of living

The wage and salary structure should be flexible.

CONT….. Prompt and correct payments of the dues of the

employees must be ensured and arrears of payment should not accumulate.

For revision of wages , wage committee should always be preferred to the individual Judgment

The wage and salary payments must fulfill a wide variety of human needs , including the need for self actualization .

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