COMPENSATION & BENEFITS MANAGEMENT Dr. Asit Mohapatra Director HR Raymond Ltd.
“ OUR ASSESTS WALK OUT OF THE DOOR EACH EVENING. WE HAVE TO MAKE SURE THAT THEY COME BACK THE NEXT MORNING ”
- NARAYAN A MURTHY
CHIEF MENTOR OF INFOSYS
HISTORY OF COMPENSATION
Started with barter system
WHAT IS THE MEANING OF…
WAGES, SALARY AND COMPENSATION
Payment for labor or services to a worker, especially remuneration on an hourly, daily, or weekly basis or by the piece.
Regular wages received by an employee from an employer on a weekly, biweekly, or monthly basis. It includes employee benefits such as health and life insurance, savings plans, and Social Security.
Direct and indirect monetary and nonmonetary rewards given to employees on the basis of the value of the job, their personal contributions, and their performance. While making these payments one should be alive to the governing legal regulations.
WAGES, SALARY AND COMPENSATION
COMPENSATION STRATEGY Business Strategy Compensation Strategy Contingent Factors
Defines the intentions of the organization on reward policies, processes and practices required to ensure that it has the skilled, competent and well-motivated workforce it needs to achieve its business goals
Legal requirements or government policies
Strength of Trade Union
Labour market conditions
Capacity to pay
External Equity Internal Equity Retain existing talent Attract new talent Lead the market Lag the market External Equity Lead the market Attract + Retain Compensation Philosophy
PHILOSOPHY ORGANISATION MISSION, VISION, GOALS & VALUES – INCLINATION TOWARDS PEOPLE DEVELOPMENT, ATTRACTION & RETENTION OF TALENT APPROACH TOTAL COST TO COMPANY (TCC), BASE SALARY, TOTAL CASH SALARY PARITY INTER / INTRA LEVEL RELATIVITY, COMPA RATIO POSITIONING ASSESS COMPETITIVENESS – CURRENT & TARGETTED PERCENTILE POSITIONING MIX DEGREE OF FLEXIBILITY PAYING ABILITY BUDGET CONSIDERATIONS FACTORS INFLUENCING COMPENSATION POLICY
Company has fixed salary structure with bands based on the employees grade. An employee has no choice
Employee has a flexibility to choose his/her salary components from the basket of components offered by the company
A combination of Traditional & Cafeteria
COMPENSATION STRUCTURES IN INDIA Traditional Basic Salary COLA/DA Personal Pay Special Allow. LTA Medical Education Allow. Bonus / Exgratia Housing Hard Furnishing Conveyance/Driver Variable Pay Retirements Benefits Flexible Basic Salary Flex. Plan LTA Medical Allowances Housing Hard Furnishing Conveyance Variable Pay Retirements Benefits Rationalized Basic Salary Special Allow. LTA Medical Housing Conveyance Variable Pay Retirements Benefits Evolved Basic Salary Special Allowance Variable Pay Retirements Benefits
Difference between Benefits and Perquisites Any benefit or amenity granted or provided free of cost or at concessional rate by the employer to the employee during employment along with cash wages or salary in kind form.
Additional principles for designing executive compensation
The compensation is a mix of –
Restricted Stock unit
Performance stock unit
Source: If applicable, describe source origin
EXECUTIVE COMPENSATION - CHALLENGES
Arriving at the right mix of the various components like
Restricted Stock unit
Performance stock unit
Benchmarking executive compensation is a challenge
Expatriates vs. Local executives in senior roles
Executive compensation in a multinational organisation
Support the management of risks while achieving company objectives.
Substantiate integrity through design and execution.
Contribute to providing reasonable assurance of reliable financial reporting.
Help to safeguard physical and intellectual assets and detect/prevent fraud.
RISK & CONTROL
COMPENSATION AND BENEFIT SURVEY
CURRENT CTC STRUCTURE Compensation Survey COMP TEAM COLLECTS SURVEY DATA
GENERIC LEVEL PROFILE FOR GRADE EQUIVALENCE GRID Generic Band BAND A Generic Description Experience Range [Average] (Yrs) 18 ~ 30  15 ~ 28  VII SR ENGR/ SR OFFR VI ASSTT MGR DY MGR V 8 ~ 20  SR MGR / MGR IV 12 ~ 25  5 ~ 10  3 ~ 7  1 ~ 5  Head of a Major Function with responsibility for inter / intra functional co-ordination. Reports to the CEO and is responsible for overall operational planning and execution for his function. Has overall responsibility for planning functional objectives/ targets as per company AOP & accountable for quarterly/ annual results as per plan. Member of the top management and contributes towards the overall strategic direction of the company. Responsible for Customer Satisfaction & People Satisfaction Confirmation level for Graduate Engineer Trainees or Executives with 1 to 5 years of experience. Reports to Sectional Head. In a manufacturing setup responsible for process improvement of assigned job, analyse cause of problem in the assigned area of job and ensures high level of quality parameter in the assigned area of job Frontline Executive with slightly increased managerial responsibilities . As a Team Leader develop plans with clear milestones & deadlines and manages to extract high performance levels from subordinates. Responsible for improving processes & operation standards and reports to the Departmental/ Sectional Head. Head of a Medium Sized Department / Sectional Head . Reports to Major Functional Group Head / Large Departmental Head. Responsible for implementation of departmental / sectional KRAs, Staff development & proper allocation of work. Head of a Relatively Smaller Section - Responsible for day to day management of work. Reports to Departmental Head. Manages one or more related activities within a department. Ensures achievement of sectional plans within the defined budget and demonstrates use & application of concepts & techniques in the job. BAND B Head of a Large Departmental - Responsible for management of activities/ projects under his preview and reports to the Functional Head. In a manufacturing setup is overall accountable for Departmental Monthly Budgeted Plan v/s Actual Plan and constantly reviews the processes, suggest changes and ensures quality of highest standards is maintained in all processes and services under his departmental preview Head of a Relatively Smaller Function/ Number 2 position in a major functional group, with independent responsibility for certain key functions. Responsible for inter/ intra functional co-ordination. Reports to the CEO/ Major Functional Head and is responsible for implementing operational plans. Is responsible for the activities of the function. Standardised Grade & Typical Designations BAND C III DGM II GM I VP
COMPONENT - B Allowances/ Reimbursements : Special Allowance, House Rent Allowance, Children Education Allowance, Professional Development Reimb, Business Promotion/ Entertainment Reimbursement, Gas/ Electricity, Medical Reimbursement, Company Driver/ Driver Allowance, Leave Travel Allowance, Conveyance Allowance, Petrol Reimbursement/ Fuel Expenses, Soft Furnishing, etc COMPONENT - A Basic Salary COMPONENT - C Variable Pay : Performance Linked Pay, Annual Bonus/ Ex-gratia etc. COMPONENT - D Retirals : Provident Fund, Gratuity, Superannuation COMPONENT - E Valued Perquisites : Company Car Value, Company Leased/ Owned Accommodation, Hard Furnishing (White Goods), Telephone at Residence, Mobile Reimbursement, Lunch Subsidy/ Allowance etc. A B C D E COMPONENTS OF COMPENSATION STRUCTURE
GRADE EQUIVALENCE GRID Sample only
GRID INDICATING OVERALL IMPACT (AVERAGE) ON TOTAL EMPLOYEE COST AT 25 th , 50 th , 66 th PERCENTILE
SALARY BANDS OF PROPOSED TOTAL COST TO COMPANY
DEFINE SMART KRAs Key Area Description Unit of measurement Weightage (%) Annual Objective / Target Sales revenue Achieve sales revenue of 200 from distributive, and 50 from institution Rs Crores 30 200 from Distributive, & 50 from institution Process barometer To put in place a system & processes that will trace productivity, bpc and range selling from October on weekly basis Time 25 Weekly basis Secondary sales system To set up secondary sales system by January 10 Time 20 Jan ’11 Ground work for Customer Connect programme To set up a digital information system to implement Customer Connect – a key account relationship building programme by Feb 2010 Time 10 Feb ’11 Debtors To improve collections & reduce debtors 8 day month on month Time 15 8 days month on month
RATING SCALE Individual KRA Achievement Rating Scale Below 90% achievement of Target 1 90 - 92% achievement of target 2 93 – 96% achievement of target 3 97-103% achievement of target 4 Above 103% achievement of target 5
Above 103% achievement of target.
The Appraisee has performance that exceeded the goal set for him in all Key Result Areas
97 -103% achievement of target .
Performance meets or exceeds requirements in all KRAs
93- 96% achievement of target
Performance meets the expectations in most KRAs
90-92% achievement of target
Performance fails to meet requirements in critical KRAs. ( KRAs with higher weight ages)
Below 90% achievement of target
Performance fails to meet requirements in most of the KRAs.
RATING PERFORMANCE MATRIX Individual KRA Achievement Level Final Performance Score (Cumulative Weighted score) Final Performance % Eligibility for Variable Payout Below 90% 1 1.4 and below Does not Meet Expectation Nil 90 - 92% 2 1.5 to 2.4 Partially Meets Expectations 70% 93 – 96% 3 2.5 to 3.4 Meets Expectations 90% 97-103% 4 3.5 to 4.4 Exceeds Expectation 100% Above 103% 5 4.5 and above Exceptional Performance 110%
4.35 – Exceeds Expectations Key Area Description Unit of measurement Weightage (%) Annual Objective / Target Actual Achievement Level Wtd Score Sales revenue Achieve sales revenue of 200 from distributive, and 50 from institution Rs Crores 30 200 from Distributive, & 50 from institution 220 Distributive 58 Institution 5 1.5 Process barometer To put in place a system & processes that will trace productivity, bpc and range selling from October on weekly basis Time 25 Weekly basis Monthly basis 4 1.0 Secondary sales system To set up secondary sales system by January 10 Time 20 Jan ’11 Jan ‘10 3 0.6 Ground work for Customer Connect programme To set up a digital information system to implement Customer Connect – a key account relationship building programme by Feb 2010 Time 10 Feb ‘11 Before time 5 0.5 Debtors To improve collections & reduce debtors 8 day month on month Time 15 8 days month on month Surpassed 5 0.75 PERFORMANCE EVALUATION