PMRS - Salary & Wages Intro - Dhaval

8/9/2019 PMRS - Salary & Wages Intro - Dhaval

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& SCHEMES INWAGES

Presented By : Kanchan Sharma , Richa Agrawal , Dhaval Jain



Employee Compensation :

Employee compensation refers to all forms of pay accruing toemployees and arising from their employment.

It consists of both direct financial payments (wages, salaries,incentives, commissions, bonus) and indirect financial

payments (club membership, insurance etc) Direct financial payments made on the basis of time or

performance

Time based pay can be hourly or daily (blue collared workers)or monthly as salary (managers)

Performance based pay can be piecework or commissions Most pay structures today are a combination of time based

pay and incentives (based on productivity, sales, profits orcost reduction efforts)



Factors Influencing Compensation :

Internal Factors :

Compensation policy of organization

Worth of job

Employees relative worth

External Factors :

Labour Market rates

Cost of living

Collective Bargaining

Govt Legislations



The compensation structure of an organization addresses 4forms of equity:

External equity ² refers to how a job·s pay rate in onecompany compares with other companies

Internal equity ² refers to how fair a job·s pay rate iscompared to other jobs within the same company

Individual equity ² refers to the fairness of an individual·spay as compared to the pay of coworkers in same or

similar jobs based on each individual·s performance Procedural equity ² refers to perceived fairness in

processes and procedures used in allocating pay



ESTABLISHING PAY RATES :

Conduct a salary survey of what other employers arepaying for comparable jobs (external equity) to pricebenchmark jobs

Conduct job evaluation (internal equity) to determineworth of all jobs in relation to benchmark jobs

Group similar jobs into pay grades (consists of jobshaving equal difficulty or equal importance)

Price each pay grade

Fine tune pay rates which involves

Developing pay ranges

Correcting out of line rates



Purpose :

Attracting talented resources- a competitive pay structure can help

to recruit top performers and good resources for the organization

Retaining and motivating employees- a fair and rewarding paystructure serves as a positive reinforcement for higher performance

levels in the organization

Financial management- a rational compensation system helps in

reducing turnover and ensuring better ROI. Wage bill can be kept

reasonably low by a judicious salary administration Legal requirements- are in place to ensure fair pay to employees

and organizations operating in several countries, states need to

comply with laws relating to compensation



Concepts : Types of Wages

MINIMUM WAGE- is the amount of remuneration that is just sufficient toenable an average worker to fulfill all his obligations. It is fixed by the governmentand enforced by law with respect to all scheduled employments and is revised atleast once in 5 years based on CPI

FAIR WAGE- In a narrow sense wage is fair if it is equal to the rate prevailing

in the same trade and in the neighborhood for similar work and in a wider sense itis fair if it is equal to predominant rate for similar work throughout the countryand for trades in general. Fair wage is between minimum and living wage andmust consider the capacity of organization to pay, productivity of labor and reflectthe level of national income and its distribution

LIVING WAGE- is higher than fair wage and is described as one which enablesthe wage earner to provide for himself and his family not only the bare essentials

of food, clothing and shelter, but also a measure of frugal comfort includingeducation for children, protection against ill-health, requirements of essentialsocial needs and a measure of insurance against misfortunes including old age



Elements of Pay :

Base Salary

Short-term Incentives

Long-term Incentives

Deferred Compensation/Capital Accumulation

Non-monetary incentives and benefits



BASIC WAGE PLANS :

SKILL BASED PAY-

COMPETENCY BASED PAY-

BROADBANDING



TYPES OF INCENTIVE PLANS :

Short Term Plans : based on time rate or piece rate

HALSEY PLAN

ROWAN PLAN

BARTH SYSTEM

POINT RATING SYSTEM

Long Term Plans :

ANNUAL BONUS

PROFIT SHARING GAIN SHARING

EMPLOYEE STOCK OPTION PLANS



NON-MONETARY INCENTIVES :

Recognizing an employees performance. It can be a social or

informal recognition but it should boost the employees self-esteem

an job satisfaction

Achallenging assignment would assure an employee of themanagements confidence and expectations of the employees

capabilities

Giving additional responsibility to an employee also motivates the

employee

Rewarding the employee for his performance through free gifts orfree vacations

Awards, as a form of incentive, for exceptional performance and

valuable contributions will add to the social esteem of an employee



INCENTIVES SCHEMES

An incentive program is a

formal scheme to promote

or encourage specific action

or behavior by a specific

group of people during a

defined period of time.

It is an employeemotivational scheme

designed to encourage

commitment to increase

productivity.



TYPES OF INCENTIVES OF SCHEMES

Incentives schemes can be classified into

A) Individual incentives schemes:-

Measured day work system.

Payment by results system.

B) Group incentive system.

C) Plant wide /Company wide incentive system. D) Financial incentives.





MEASURED DAY WORKED SYSTEM

Under this system, an employee have to maintain a

target level of output in order to secure a stable

higher wage rate.

If employee performance falls below target, their

wage rate will be downgraded.

It suits organizations where a high , steady and

predictable level of performance is required ratherthan highest individual performance.



Employees who fulfills specified target level of output

will secure higher wage rate.

Employee if not meeting target level for a period

1-First given warning and

2-If again the same is repeated the basic wage rateis reduced.

Two levels of wages:-

1-An agreed higher level of wages for a specific

higher level of consistent performance.

2-Basic wage for lower levels of performance.



PAYMENT BY RESULT

It is the continuous relation between money and

results.

It gives different results with different wages. The schemes are modified to accommodate the

modern day requirement that the worker are

guaranteed a minimum flat wage rate.



GROUP INCENTIVE SCHEMES

Used to increase social cohesiveness of staff,

foster cooperation and team effort

Free-Riding Effect Group incentives is restored to, where the

enhanced earnings of the group are distributed

amongst the members in an equitable manner

agreed upon earlier.



Rewards employees for their collective performance

Use has increased in industry

2 types Team - based or small group

Gain sharing



COMPANY BONUS SCHEMES

Many company likes to retain the principle

of motivation by financial incentives.

U

ltimate objective is to enhance the over all productivity of the plant or company.

This calls for working in an integrated

manner with cooperation from all the

departments of a company



This cooperation is to be achieved through the use

of financial incentives.

A suitable measure of productivity established by

agreement between the management and the

workers.

This is used to distribute the labor cost savings

amongst all the workers of the company.



TYPES OF COMPANY INCENTIVES





Ownership

---Stock optionAn employee ownership plan that gives

employees the opportunity to buy

the company·s stock at a previously fixed

price.

Employee stock ownership plan (ESOP).

---An employee ownership plan that provides

employers certain tax and financialadvantages when stock is granted to

employees.



FINANCIAL INCENTIVES

Much space for labor-management bargaining.

May perpetuate old technologies and practices.

May be difficult for the employees to comprehend.

Quality of output may become a judgmental issue.

Problems in planning of production.



EXAMPLES OF INCENTIVE PLANSHalsey Plan

Rowan Plan

Barth Plan Time-Based

Bedaux Plan

Taylor·s

Differential Piece

Rate Output-Based

Merrick

Gantt task





CONDITION FOR EFFECTIVE

INCENTIVES PLANS

Plan is clearly communicated.

Plan is understood.

Rewards are easy to calculate.

Employees participate in administering the plan.

Employees believe they are being treated fairly.

Employees believe they can trust the company and that

they have security. Rewards are awarded as soon as possible after the

desired performance.



Bonus schemes are designed to motivate employeesby rewarding them for achieving particular targets orstandards previously agreed with the employer.

These payments are in addition to basic salary and

are usually paid as a cash reward, although someschemes may award shares as part of the bonuspackage

BONUS SCHEMES



ADVANTAGES

They allow the company to focus efforton areas that can maximize performanceand profit

A good scheme can help to recruit,motivate and retain staff

They can support other importantcompany objectives, such as promotingeffective team working or reducingsickness absence

Payment is not consolidated into basesalary, and is therefore not perpetuatedregardless of future performance



They can raise management andemployee awareness andrecognition of good

individual/group work

They can increase employeeunderstanding, involvement and

commitment to the business

Schemes can be designed to beflexible, easily administered and

to more than cover the costs.



DISADVANTAGES

Forcing employees to concentrate onthe performance targets can stifletheir creativity and innovation

Not all jobs can show a clear linkbetween employee performance andproductivity/profit gains, and itmight be difficult to design aneffective bonus scheme for these

posts, for example some employeesworking in research & development

Measurement of performance can bedifficult and arbitrary



TYPES

of BONUS SCHEMES



CURRENT PROFIT SHARING

One very basic type of bonus program is current profit sharing.

A company sets aside a predetermined amount,

usually between 2.5 and 7.5 percent of payroll butsometimes as high as 15 percent, as a bonus on topof base salary.

Such bonuses depend on company profits, either theentire company's profitability or from a given line

of business.

Sometimes the bonuses are given across the board,and sometimes they are given in larger percentagesof compensation the more someone makes.



The purpose of profit sharing bonuses is to encourageemployees to understand how their work affects thecompany's performance and to improve the company'sprofitability.

Learn how your company makes money and how yourposition can help it make more.

The annual report and other statements will give an ideaof how the company is performing.

It will also make you look good to your manager if you

show an interest in the company's performance.



GAIN SHARING

This type of bonus program is most common in manufacturing plants and isdesigned to reward productivity and improved product quality.

Gain sharing works best when employees become responsible for production

quantity and quality and are encouraged to improve the way the product ismade.

This program reflects a philosophy that employees know their job best.

Gain sharing programs pay out bonuses for statistical improvements inproduction and quality on a quarterly or sometimes monthly basis, providinga sense of excitement for participants.

These programs are often very successful, transforming the manufacturingplant into a center of employee commitment.



SPOT BONUS AWARD

Some companies reward employees on the spot forachievements that deserve special recognition.

Spot bonus awards are typically $50 and up and can bemade by your immediate supervisor and any higher-level person or peer in your company.

You can get these for just being extra helpful. The math

is in employees' favor: companies with spot bonusprograms offer approximately 1 percent of payroll andexpect to give out such bonuses to 25 percent of theemployees eligible for them, allowing them to earn morethan one instant bonus in a year.



NONCASH BONUS

Although the wrong kind of "employee of themonth" concept can be cheesy, smarmy, andcondescending, it's all in the execution.

A well designed noncash bonus program caninstill pride and improve employee morale.

Employees who have done a great job shouldhave to come to the front of a crowded room ata special ceremony, as if they are receiving anAcademy Award.



The certificate or trophy should bethoughtfully and cleverly designed, andappropriate to the occasion. These awardsare sometimes coupled with a token

tangible award, such as a gift certificate, abonus day off, or a great parking space.

You know your company has a goodnoncash bonus program if these awards are

coveted, and if people who receive themdisplay them proudly at their desks or intheir homes. Moreover, this type of awardmay help you get a promotion or a new job,so include it on your resume.



SIGN-ON BONUS

No longer just for star athletes, sign-on bonuses

have become commonplace. Their usage nowextends to nearly all level of employees in all walks

of life, especially when unemployment is low andtop talent is hard to find.

Given to new employees who have just joined the

company, this award serves two purposes: toestablish goodwill and to buy out any compensation"left on the table" from a previous employer.



The second purpose is important toremember. Before joining a new company,be sure to account for every kind ofcompensation program in which youparticipate. If you are expecting a bonus ina few months, ask your new employer to buyyou out of it. If you have any stock options,particularly options that are in the money,ask the employer to buy them out (either incash or new stock options).

Don't forget to include profit-sharing bonusesor defined contributions match or anEmployee Stock Options Program (ESOP))made to your retirement account. Remember,a sign-on bonus, at a minimum, is to keepyou whole as you trade one set ofcompensation programs for a new one.

Medium to large signing bonuses may bepaid over a period up to a year to protectthe company's interests.



Mission bonus (also known as a task

bonus or a milestone bonus) T ask bonuses are given to a team of employees for achieving a milestone or

for completing an important project.

Usually these bonuses are offered sparingly, but they have been used more

frequently in software and hardware development to encourage meeting tightdeadlines.

Sometimes these programs incorporate a quality measure to guard against too

much focus on speed.

Mission bonuses are in addition to any other compensation program in which

you participate and can be significant (one month's salary is not uncommon,

and certainly no less than one week). Again, this award is for the kind of

achievement that deserves mention in your resume



REFERRAL BONUS

In hot job markets, it can be difficult for employers

to find qualified personnel. When talent is scarce,

many employers retain recruiters to find candidates,

typically paying the recruiter 20 to 30 percent ofthe new hire's first-year pay.

Many employers would rather not pay this fee, andinstead offer referral bonuses to employees for

recommending friends and acquaintances.



Employers are comfortable in hiringfriends of employees because employeesare unlikely to recommend people whowill make them look bad. So don't beafraid to invite your friend to work at

your company.

Referral bonuses are typically hundredsto thousands of dollars and normallydepend on the level of the new hire.Some firms pay as much as $10,000 to

$20,000 if you introduce a new seniorperson to the firm. So if your former bossis a good fit for an opening, it might beworthwhile to let your new companyknow.





The bonus lets employees know their

employer wants them to complete

the project or, in the case of amerger, to stay until a specified

date so that critical activities can

continue without disruption.

Retention bonuses are usually about

10 to 15 percent of salary.



HOLIDAY BONUS

It range from small gifts (for example, cash or the

ubiquitous holiday turkey) to one month's salary.

The amount is usually dictated by the company's

practices. If you do receive one month's salary, countit as part of your salary if you look for work

elsewhere.

This practice is usually referred to as a "13-month

salary," and is not a true bonus since noperformance is required to receive it.



SALES COMMISSION

Sales commissions are awarded to salespeople for selling

These awards are paid out as a percentage of salesvolume.

In some cases, commission percentages can increase withhigher sales volume. In fewer cases, the percentage candecrease.

It all depends on the scheme. Sales commissions aresupposed to be a significant source of income for salesemployees, making up at least 50 percent of total cashcompensation.



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PMRS - Salary & Wages Intro - Dhaval

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