Components Of Strategy

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Components Of Strategy

  1. 1. Components of a Compensation System <ul><li>Topic-2 </li></ul>
  2. 2. Basic Forms of Compensation <ul><li>Base Pay </li></ul><ul><ul><li>Wages </li></ul></ul><ul><ul><li>Salaries </li></ul></ul><ul><li>Variable Pay (Short term & Long term) </li></ul><ul><ul><li>Pay for Performance </li></ul></ul><ul><ul><li>Bonuses </li></ul></ul><ul><ul><li>Incentives </li></ul></ul><ul><ul><li>Stock Options </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Medical Insurance </li></ul></ul><ul><ul><li>Paid Time Off </li></ul></ul><ul><ul><li>Retirement Pensions </li></ul></ul><ul><ul><li>Worker’s Compensation </li></ul></ul><ul><ul><li>Non-Pecuniary Rewards (Non-Financial Rewards. E.g. reputation, power on the job.) </li></ul></ul>
  3. 3. Base Pay <ul><li>Base Pay – The basic compensation an employee receives in exchange for work performed. </li></ul><ul><ul><li>Wages - time-based (usually hourly) compensation calculated on the basis of the amount of time worked. </li></ul></ul><ul><ul><li>Salaries - payments consistent from time period to time period regardless of the actual amount of time worked. </li></ul></ul>
  4. 4. Variable Pay <ul><li>Variable Pay - compensation linked to individual, team and/or organizational performance. </li></ul><ul><ul><li>Piece-rate/ hourly-rate - productivity-based compensation paid for each unit of product produced or service provided. </li></ul></ul><ul><ul><li>Bonuses (short-term tied to performance) </li></ul></ul><ul><ul><li>Profit-sharing </li></ul></ul><ul><ul><li>Gain-sharing </li></ul></ul><ul><ul><li>Commissions </li></ul></ul><ul><ul><li>Stock options etc. </li></ul></ul>
  5. 5. Benefits <ul><li>Benefits - indirect compensation contingent upon organizational membership. [ 30-40% of total payroll costs ]. </li></ul><ul><ul><li>Health Insurance </li></ul></ul><ul><ul><li>Life Insurance </li></ul></ul><ul><ul><li>Vacations and Holidays </li></ul></ul><ul><ul><li>Pensions </li></ul></ul><ul><ul><li>Sick Leave </li></ul></ul><ul><ul><li>Severance Pay </li></ul></ul><ul><ul><li>Allowances: Eg. Utilities, Education Allowance, Uniform Allowance etc. </li></ul></ul><ul><ul><li>Awards and Recognition </li></ul></ul>
  6. 6. More examples of Benefits <ul><li>Extra payments for time worked: (Holiday premiums or Shift premiums) </li></ul><ul><li>Non-production awards and bonuses: (Anniversary awards/ Attendance bonus/ Quality bonus/ Safety awards/ Service bonus/ Suggestion awards) </li></ul><ul><li>Payments for time not worked: (Family allowances, Paid Holidays, Paid Sick Leave, Severance Pay) </li></ul><ul><li>Payments for employee security: (Contributions toward accident insurance, hospitalization & life insurance) </li></ul><ul><li>Payments for employee services: (Canteen service, Company Housing, Educational assistance, employee discounts for purchases, voluntary medical examination, festival gifts) </li></ul>
  7. 7. Prevailing Environment - Global Scenario <ul><li>Employers are increasingly taking a view that long term benefit costs are but one component of an employee’s total remuneration. </li></ul><ul><li>Employers can maximize their return on total remuneration costs by allowing individual employees flexibility (within regulatory & legal provisions) in deciding how they will receive their money. </li></ul>
  8. 8. Prevailing Environment - Global Scenario <ul><li>Retirement benefit program is a facility offered by the employer. </li></ul><ul><li>It makes sense to allow individual employees to tailor their benefits & contributions to their personal circumstances. </li></ul><ul><li>Employees have different needs at different stages-hence need to look at different cross section of the employees differently. </li></ul>
  9. 9. What Do Employers Want? <ul><li>Employers prefer to have control of cost. </li></ul><ul><li>Employers would like to provide infrastructure so that employee needs can be fulfilled. </li></ul><ul><li>Employers like pension plans to be a tool of retention and reward. </li></ul>

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