82311649-compensation-management-1-1207896570595112-9

7/31/2019 82311649-compensation-management-1-1207896570595112-9

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COMPENSATION OF MIDDLE LEVEL

MANAGEMENT

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DEFINITION A set ofcompensable factors are identified as

determining the worth of jobs. Typically thecompensable factors include the major categoriesof

Skill

Responsibilities Effort

Working Conditions


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Compensation Plan of Middle levelmanagement

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Broad banding paying executives at presentlevels based on their level of competency.

Golden parachute a financial protection planfor top executives in case they are severed from

the organisation.


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Implications4

Purpose of evaluation should be clearly defined

Adoption of appropriate technique

Allocation of sufficient resources


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Useful for standardizing compensation practices.Most pay structures include several grades with eachgrade containing a minimum salary/wage and eitherstep increments or grade range.

Pay for each job is pre-determined through collectivebargaining.

PAY STRUCTURE


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What is Compensation System?

Compensation is a systematic approach.

Compensation is a tool.

Compensation System is flexible.

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ELEMENTS OF A COMPENSATIONSYSTEMTAXES

INCENTIVES

ALLOWANCES

LONG TERMBENEFITS

BENEFITS

SALARY


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Objectives of compensationsystemAcquire qualified personnel

Retain present employees

Ensure equity

Reward desired behavior

Control costs

Comply with legal regulationsFacilitate understanding

Further administration efficiency

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How Compensation System is used

Compensation is used to:

1. Recruit and retain qualified employees.

2. Increase or maintain morale/satisfaction.

3. Reward and encourage peak performance.

4. Achieve internal and external equity.

5. Reduce turnover and encourage companyloyalty.

6. Modify (through negotiations) practices ofunions.

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Components of compensation system

Job Descriptions :- define in writing the responsibilities,requirements, functions, duties, location, environment,

conditions, and other aspects of jobs

1. Job Analysis :- The process of analyzing jobs fromwhichjob descriptions are developed.

2. Job evaluation :- for comparing jobs for thepurpose of determining appropriatecompensation levels for individual jobs or job

elements


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Sources of Compensation Data

Labour

Employer Information

Employer Association

Professional Association

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Compensation Methods

There are basically two compensation systemviz. Basis Time Rate and Piece Rate.

Its is meant for making payment, which shouldadequate compensate the worker for his efforts.

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Compensation StructureCompensation System Consists of the following:

Salary, Basic Salary or Consolidated Salary:

Grade wise flat Allowance:

Reimbursements of expenses:

Annual payments:

Benefits:

Employee stock option schemes :

Total cost to the Company concept :

Retiral benefits:

Performance Bonus:

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Financial and Non Financial

IncentivesAn incentive scheme can offer employees extra

pay according to individual or groupperformance targets.

Examples include: profit-related and share option schemes

bonuses

commission

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Continue..

Non-financial Example include: vouchers

extra holidays gifts

company cars

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Advantages and Disadvantages

Incentives Advantages Disadvantages

Financial

1.Focus on hitting target

2.Achievement a givenvalue

1.Rewards aresometimes small2.Can demoralize if notearned

Non Financial

1.Can recognizeemployee priorities andlifestyle2.Can encourage

attachment to business

1.Can be taken forgranted

2.May be inappropriate

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Compensation structure

Basic salary :

Savings :- CPF, LIC, PPF, NSC, MIS

Bonus

Arrears

Medical allowance

Education allowance Price

Stocks

Salary of an employee
http://ashoksalary_slip_dec.doc/http://ashoksalary_slip_dec.doc/


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DIFFERENT TYPES OF COMPENSATIONPLANSBase Pay

Commissions

Overtime Pay

Bonuses, Profit Sharing, Merit Pay

Stock Options

Travel/Meal/Housing AllowanceBenefits including: dental, insurance, medical,

vacation, leaves, retirement, taxes...


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PROCESS OF DESIGNING ACOMPENSATION PLANDevelop a program outline.Designate an individual to oversee designing the

compensation program.Develop a compensation philosophy.Conduct a job analysis of all positions.

Evaluate jobs.Determine grades.Establish grade pricing and salary range.Determine an appropriate salary structure.Develop a salary administration policy.Obtain top executives' approval of the basic salary program.Communicate the final program to employees and managers.Monitor the program.


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A Monetary Compensation plan mustfulfill four conditions:Should attract and keep appropriate number of

people in the organization;

Should motivate the people at work to contributetheir best toward the companys objective;

Should satisfy the needs of the companys ownpeople;

Should not attract frequent demand and struggle ofpeople for wage enhancement affecting the cordialindustrial relations.


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ELEMENTS OF TOTAL COMPENSATION

TotalCompensation

BaseCompensation

Incentive

Compensation /Variable

compensation

Supplementary

compensation paid tolarge group of

employees


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A. BASE COMPENSATIONBasic pay fixed to various categories of jobs, post or

positions > Basic Pay/ Scale of Pay

Paid mostly in monetary terms -> MonetaryCompensation

Factors considered in the process: Job Content the job expected to be carried out by the

employee and his worth to be on that particular job; Bargaining Power of the trade union, or that of the

employee, representing the trade or the job;


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B. INCENTIVE COMPENSATION

A good incentive system motivates people to put intheir best efforts to perform well.

Commonly used to motivate people at work. Steps of the process:

1. Fixation of Performance Standards

2. Fixation of specific Incentive Schemes

3. Linking of performance levels with organizationalobjective

4. Classification of performance standards


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C. SUPPLEMENTARY COMPENSATION

It includes additional annual wage, employeeprofit sharing (present day bonus), production

sharing plans, employees equity participation asan additional bonus


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Documents

82311649-compensation-management-1-1207896570595112-9