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COMPENSATION ADMINISTRATION Chapter EXCEL BOOKS 16-1 16
ANNOTATED OUTLINE 16-2 INTRODUCTION   ,[object Object],[object Object],[object Object],[object Object],Compensation Administration The most important objective of any pay system is fairness or equity, generally expressed in three forms ,[object Object],[object Object],[object Object]
16-3 Objectives of compensation planning   ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Compensation Administration
16-4 Equity And Pay Rates   Equity in pay rates could be achieved through five steps   Compensation Administration Ensuring equity in pay rates   ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
16-5 Components of Pay Structure  The two  essential  components of pay structure are; basic wages and dearness allowance .the basic wage rate is fixed taking the skill  needs of the job, experience needed, difficulty of work, training required, responsibilities involved and the hazardous nature of the job. Dearness allowance it paid to employees in order to compensate them for the occasional or regular rise in the price of essential commodities.  Compensation Administration Components of pay structure in India ,[object Object],[object Object],[object Object],[object Object]
16-6 The following, however, do not come under the term wages  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Compensation Administration Components of Pay Structure
16-7 It is the process of managing a company’s compensation (base compensation as well as supplementary) programme Base compensation, here, refers to monetary payments to employees in the form of wages and salaries.  It is a fixed, non-incentive kind of payment calculated on the basis of time spent by an employee on the job. Supplementary compensation signifies incentive payments based on the actual performance of an employee.  Compensation Administration Wage And Salary Administration
16-8 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Compensation Administration Wage And Salary Administration   ,[object Object],[object Object],[object Object],[object Object],[object Object]
Factors affecting compensation levels   16-9 Compensation Administration Factors influencing compensation levels ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
16-10 Compensation Administration Wage Policy In India   ,[object Object],[object Object],[object Object],[object Object]
16-11 Compensation Administration State regulation of wages   Institutions involved in fixation of wages
16-12 Compensation Administration Wage differentials   Differences in wage rates are inevitable in any industry and the reasons are fairly obvious Reasons for wage differentials
16-13 Compensation Administration Choices In Designing A Compensation System   The compensation that is followed by a firm should be in tune with its own unique character and culture and allow the firm to achieve its strategic objectives.  A variety of choices confront a firm here: ,[object Object],[object Object],[object Object]
16-14 Compensation Administration Guidelines for effective performance based pay stems   ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Choices In Designing A Compensation System
16-15 Compensation Administration Suitability of job based vs. knowledge based pay systems ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Choices In Designing A Compensation System
16-16 Compensation Administration Broad banding vs. Competency based pay system   Organisations that follow a skill-based or Competency Based Pay System frequently use  broad banding  to structure their compensation payments to employees. Broad branding simply compresses many traditional salary grades (say 15 to 20 grades) into a few wide salary bands (three or four grades). By having relatively few job grades, this approach tries to play down the value of promotions. Depending on changing market conditions and organisational needs, employees move from one position to another without raising objectionable questions, (such as when the new grade is available, what pay adjustments are made when duties change etc.) As a result movement of employees between departments, divisions and locations becomes smooth. Employees with greater flexibility and broader set of capabilities can always go in search of jobs in other departments or locations that allow them to use their potential fully. Broad banding, further, helps reduce the emphasis on hierarchy and status. However, broad banding can be a little unsetting to a new recruit when he is made to roll on various jobs. Most employees still believe that the existence of many grades helps them grab promotional opportunities over a period of time. Any organisation having fewer grades may be viewed negatively – as having fewer upward promotion opportunities. Moreover, a number of individuals may not want to move across the organisation into other areas.
16-17 Compensation Administration ,[object Object],[object Object],Choices In Designing A Compensation System
Managerial Compensation In India   16-18 Compensation Administration ,[object Object],[object Object],[object Object],[object Object]
16-19 Compensation Administration Executive compensation: Private sector vs. Public sector   In a well publicised front page news sometime back The Economic Times mentioned about the miserable salary levels of top executives in public sector units in India. For example the State Bank of India chief is paid 10% of HDFC Bank Managing Director, BHEL's chief getting about Rs.10 to 12 lakhs per year as against ABB's MD getting nearly Rs.40 to 50 lakhs; Indian Oil Corporation's chief getting Rs.10 to 15 lakhs per annum as against Reliance Industries' Ambanis getting a package of over Rs.10 crore per annum. Salary levels in 'hot' private sector such as BPO, hospitality, biotechnology 'Media', IT, Telecommunications, Oil, Automobiles and Insurance are way above the packages offered to executives in public sector for various reasons such as: overstaffing, inefficient processes, pressure on margins due to competition, appointment of people without requisite skills at the top level, political interference especially in pricing the products or services, legal constraints etc.
16-20 Compensation Administration How to retain talent? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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Chapter 16

  • 2.
  • 3.
  • 4.
  • 5.
  • 6.
  • 7. 16-7 It is the process of managing a company’s compensation (base compensation as well as supplementary) programme Base compensation, here, refers to monetary payments to employees in the form of wages and salaries. It is a fixed, non-incentive kind of payment calculated on the basis of time spent by an employee on the job. Supplementary compensation signifies incentive payments based on the actual performance of an employee. Compensation Administration Wage And Salary Administration
  • 8.
  • 9.
  • 10.
  • 11. 16-11 Compensation Administration State regulation of wages Institutions involved in fixation of wages
  • 12. 16-12 Compensation Administration Wage differentials Differences in wage rates are inevitable in any industry and the reasons are fairly obvious Reasons for wage differentials
  • 13.
  • 14.
  • 15.
  • 16. 16-16 Compensation Administration Broad banding vs. Competency based pay system Organisations that follow a skill-based or Competency Based Pay System frequently use broad banding to structure their compensation payments to employees. Broad branding simply compresses many traditional salary grades (say 15 to 20 grades) into a few wide salary bands (three or four grades). By having relatively few job grades, this approach tries to play down the value of promotions. Depending on changing market conditions and organisational needs, employees move from one position to another without raising objectionable questions, (such as when the new grade is available, what pay adjustments are made when duties change etc.) As a result movement of employees between departments, divisions and locations becomes smooth. Employees with greater flexibility and broader set of capabilities can always go in search of jobs in other departments or locations that allow them to use their potential fully. Broad banding, further, helps reduce the emphasis on hierarchy and status. However, broad banding can be a little unsetting to a new recruit when he is made to roll on various jobs. Most employees still believe that the existence of many grades helps them grab promotional opportunities over a period of time. Any organisation having fewer grades may be viewed negatively – as having fewer upward promotion opportunities. Moreover, a number of individuals may not want to move across the organisation into other areas.
  • 17.
  • 18.
  • 19. 16-19 Compensation Administration Executive compensation: Private sector vs. Public sector In a well publicised front page news sometime back The Economic Times mentioned about the miserable salary levels of top executives in public sector units in India. For example the State Bank of India chief is paid 10% of HDFC Bank Managing Director, BHEL's chief getting about Rs.10 to 12 lakhs per year as against ABB's MD getting nearly Rs.40 to 50 lakhs; Indian Oil Corporation's chief getting Rs.10 to 15 lakhs per annum as against Reliance Industries' Ambanis getting a package of over Rs.10 crore per annum. Salary levels in 'hot' private sector such as BPO, hospitality, biotechnology 'Media', IT, Telecommunications, Oil, Automobiles and Insurance are way above the packages offered to executives in public sector for various reasons such as: overstaffing, inefficient processes, pressure on margins due to competition, appointment of people without requisite skills at the top level, political interference especially in pricing the products or services, legal constraints etc.
  • 20.