Basic classification of compensation methods Time rated - employees are paid on the basis of the time they put in on the job. Performance is not a basic criteria. Piece rated- employees are paid based on the number of units produced/serviced/sold by them. Time spent on the job is not a basic criteria.
Article 39(d) of Constitution suggests equal pay for equal work for both men and women.
Minimum wages Act 1948 empowers the government to
fix minimum wages irrespective of the ability of the employer to pay and to
Fix the hours of work
Fix overtime wages
Statutory requirements in India Payment of wages Act 1936 prescribes the method of payment of wages
Statutory requirements in India Payment of bonus Act 1965 requires employers to pay bonus to eligible employees every year. Beedi and Cigar Workers[conditions of employment )Act 1966 requires payment of overtime at double the normal rate[s.18] and One day paid holiday for every six days of work [s.21]
Sec.52 of the provides weekly holiday for workmen.
Sec.59 provides extra wages for overtime
Industrial Employment standing orders Act1946
Requires the employers to prescribe wage rates and mode of payment
Prescribes subsistence allowance during suspension
Statutory requirements in India Section 33 of Mines Act 1952 requires payment of overtime to workmen Working journalists Act 1955 provides for weekly holiday[s.6] over time [s.10] annual holidays [s.13]. Apprentices Act 1961 requires payment of overtime and weekly holiday.
Statutory requirements in India Weekly holidays Act 1942 and the Shops and commercial establishments Acts of the states provide for weekly holidays.
Employers’ compensation policy influences the determination of compensation.
Each organization has its own policy whether they want to be seen as high paying employer or low paying.
The other issues of compensation policy are the difference between managerial and non managerial salaries, apprentice’s salary etc.
The method of deciding increments, incentives etc.
Equity issues in pay External equity - pay must be comparable favourably with other organizations for similar jobs Internal equity - Each employee should feel that his pay is equitable compared to others in the organization
Ranking method- ranking each job relative to all other jobs
Select the raters and job to be rated
Select compensable factors
Methods of job evaluation Classification or grading method Categorizing jobs into groups based on the compensable factors Point method Identify several compensable factors and the degree to which each of these factors present in the said job.
Managerial compensation is different from employee compensation in many ways for example
Employee compensation is governed by many labour legislations like minimum wages Act or bonus Act, but this is not the case with managerial compensation.
employee compensation is mainly based on productivity of the employees within the organization but managerial compensation is determined normally on the basis of market performance of the organization.
the number of people covered under employee compensation are larger compared to managerial compensation plans
Are any statutory requirements for managerial compensation
Total managerial remuneration payable by a public company in a financial year shall not exceed 11% of the net profit
If any professional services are rendered, they are to be paid separately
If no profits in any year no remuneration payable except with prior approval of central government
The 11% limit is inclusive of
Rent free accommodation
Any other free amenities
Any expenditure incurred on behalf of directors.
Directors are not eligible for any tax free remuneration or allowances [section 198-200 Companies Act 1956]
The remuneration of MD shall not exceed 5% of the net profit [s.309]
Home based salary policy – retaining the home country salary structure of any manager by attaching additional allowances for cost of living differentials, depending upon the place of posting. Employees from different countries working in the same office and same work may be paid different salaries
Host based plan: the manager gets salary prevailing in the host country. Managers from advanced country posted in backward countries are at a disadvantage
There is no single best plan. It differs from case to case and from company to company
Individual incentive plans : give money over and above base salary to individual employees who meet specific performance standard. Example; Spot bonus
group incentive plans : give money over and above bas salary to all members of the group for meeting specific performance standard.
profit sharing plans: provide employees with a share of the organization's profit in a specified period.
Gain sharing plan : reward employees for improvements in organizational productivity
Incentive plans Piecework plans Straight piece work plan : each worker receives a set payment for each piece produced or processed in a factory/shop Guaranteed piecework plan : the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour. Standard hour plan : the worker is rewarded by a percent premium that equals the percent by which his or her performance exceeds the standard