Compensation and benefits

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Compensation and benefits

  1. 1. A session on Compensation & Benefits<br />Shashikanth Jayaraman<br />
  2. 2. Some thoughts to begin with<br />People do what they do to satisfy some need<br />Before that, they look for a reward or pay-off<br />From gross salary to Cost to Company<br />Offering long term security to sudden higher levels of compensation<br />Grade oriented compensation to Performance based<br />As you sow, so you reap<br />What you see is not what you get<br />There is always a slip between the cup and the ‘pay slip’<br />Profit making to profit sharing<br />A paradigm shift<br />
  3. 3. Basic definitions<br />Wage: <br />Usually refers to the hourly or daily rate paid to at a worker level<br />For the blue collar worker<br />Salary: <br />Refers to the weekly or monthly compensation paid to clerical, administrative or professional employee<br />For the White collar worker<br />
  4. 4. Theory of wages<br />Fixed as a result of individual bargaining, collective bargaining or public regulation<br />Subsistence theory – Iron law of wages – David Ricardo<br />Wage fund theory – Adam Smith<br />Surplus value theory of wages – Karl Marx<br />Residual claimant theory – Francis A Walker<br />Marginal productivity theory<br />Bargaining theory of wages<br />
  5. 5. The process of Salary determination<br />
  6. 6. 6<br />Job Analysis<br /><ul><li>Human Resource Planning
  7. 7. Recruitment
  8. 8. Selection
  9. 9. Training and Development
  10. 10. Performance Appraisal
  11. 11. Compensation and Benefits
  12. 12. Safety and Health
  13. 13. Employee and Labor Relations
  14. 14. Legal Considerations
  15. 15. Job Analysis for Teams</li></ul>Tasks<br />Responsibilities<br />Duties<br />Job Descriptions<br />Job Analysis<br />Job Specifications<br />Knowledge<br />Skills<br />Abilities<br />
  16. 16. Factors influencing salary structure & administration<br />Organization’s ability to pay<br />Supply and demand of labour<br />Prevailing market rate<br />The cost of living<br />Productivity parameters<br />Bargaining power of unions<br />Job requirements<br />Psychological and social factors<br />
  17. 17. Legal framework for salary administration<br />Payment of wages act 1936<br />The minimum wages act 1948<br />The Equal Remuneration act 1976<br />Employees’ provident fund act 1952<br />Employees’ pension scheme<br />Employees’ state Insurance Act 1948<br />
  18. 18. 9<br />The Pay Model<br />Business Goals<br />Compensation activities serve Business Objectives<br />CEO<br />Business <br />Strategy<br />Compensation strategy is periodically reevaluated and the Compensation plan periodically developed<br />Compensation<br />Strategy<br />HR Head<br />Org.Structure<br />Non-Financial<br />Rewards<br />Compensation<br /> Plan<br />Market Surveys<br />Job Evaluation<br />Performance <br />Management<br />C & B/S M<br />Unit Inputs<br />Compensation Manager, along with team is responsible for carrying out compensation related activities<br />Pay levels /<br />structures<br />Contribution<br />/outputs<br />Total <br />remuneration<br />Employee<br />Performance <br />linked Pay<br />Individual Pay<br />Internal Equity<br />External Equity<br />
  19. 19. 10<br />Employment Relationship<br />TRANSACTIONAL<br />Low ----- High<br />RELATIONAL<br />Low ----- High<br />
  20. 20. Compensation structure<br />Basic Salary<br />Grade wise flat allowances<br />Reimbursements<br />Annual payments<br />Benefits<br />Employee stock option schemes<br />Retiral benefits<br />
  21. 21. Anatomy of a Pay structure<br />Pay Structure – consists of a series of Pay Ranges, or “grades”, each with a minimum and maximum pay rate<br />Pay Range - Has a minimum pay value, maximum pay value and a “midpoint”<br />Midpoint of a range – represents the competitive market value for the job or group of jobs.<br />Monday, March 28, 2011<br />12<br />
  22. 22. Some benefits<br />Company accommodation<br />Company provided vehicles<br />Medical coverage<br />Retiral benefits<br />Easy loan schemes<br />Entertainment benefits<br />
  23. 23. Some arithmetic<br />ESIC – 4.75% contribution by employer and 1.75 5 by employee<br />PF – 12% of Basic pay by Employee and Employee<br />Pension fund – 8.33% of Basic (part of PF)<br />Superannuation – 15% of Basic<br />Gratuity – <br />Last drawn Basic + DA per month X 15 X Total no of completed years of service__________________________________________________ __________26<br />
  24. 24. Statutory deductions<br />Provident fund<br />Profession tax<br />Income tax<br />Labour welfare fund<br />ESIC<br />Gratuity<br />
  25. 25. Keep in mind the following<br />Job evaluation methods and implementation of the structure needs endorsement from the management<br />Formulation of a compensation policy/philosophy<br />Review the policy after a period of time<br />Take feedback from people – What you think is best need not be for the employee<br />

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