4. What is Compensation Management
• General policy to address human resource and
implemented in conjunction with systems and
methods designed to provide financial benefit
to employees in return to using human talent.
• The ultimate goal is to reward the right people
to the greatest extent for the most relevant
reasons.
5. Compensation includes direct cash
payments and indirect payments
in the form of benefits, incentives
and rewards to motivate
employees to strive for higher
levels of performance and
productivity.
6. Compensation
Tool to foster
values and
culture
System of
rewards for
motivating
performing
employees
Instrument to
increase
performance and
productivity
Instrument to
enable
organization
achieving
objectives
7. Wage and salary
Incentives and
rewards
Social Security
and Fringe
benefits
Perquisites
Different
Components of
Compensation
8. Objectives of Compensation
• Survival and subsistence
• Competitive performance
• Executive development
• Motivation and morale
• Productivity, economy and efficiency
• Attraction and retention of competent personnel
• Organizational development
• Effective delivery of goods and services
• Positive group dynamics
• Organizational culture
9. Characteristics of Compensation
System
• Flexible and rigid
• Fixed and differentiated
• Position or Rank-based and Performance-
based
• Regulated and Autonomous
• Organizational and Programme-based
• Institutional and Outsourced
• Treasury funded and revenue funded
13. Basic Principles of Employee
Compensation
• Principle of survival and subsistence
• Principle of performance and productivity
• Principle of equity
• Principle of motivation and morale
• Principle of attraction
• Principle of profitability
• Principle of participation and ownership
• Principle of organization development
• Principle of sustainability
15. •Subsistence
•Marginal Productivity
•Productivity
•Profitability
•Surplus value
•Residual claimant
Economic
Theories
•Performance and Outputs
•Skill and competency
•Collective bargaining
Orgnanization
and Management
Development
Theories
•Motivation and morale
•Reinforcement
•Expectancy
•Group dynamics
•Equity and justice
•Quality of work life
Behavioural
Theories
17. Instrument of Compensation
Determination
• Job analysis and job evaluation
• Performance management
• Market research and analysis
• Permanent institution for determining
compensation
• Expert team mobilization
• Profitability and productivity analysis
• Sector analysis and harmonization
• Economic sustainability analysis
• Behavioural analysis
18. Components of a Compensation
System
Job Analysis
Pay
Structures
Salary
Surveys
19. Process of Compensation
Management
HR Policy and
Strategy
Compensation
Policy
Job Analysis and
Evaluation
Analysis of
Contingent
Factors
Design and
Implementation of
Compensation Plan
Evaluation and
Review
21. Changing Dimensions of
Compensation Management
• Extensive application of Information and
Communication Technologies
• Modernization of Production technology
• Knowledge management
• Changed dynamics of market
• Outsourcing and contracting out
• Virtual organizations
• Social inclusion
25. Compensation and Economy
• Efficiency and productivity
• Macroeconomic stability
• Budgetary control
• Efficient allocation of labour
• Labour market dynamics
26. Compensation and Motivation
• David McClleland’s Achievement motivation
• Abrahm Maslow and need-based motivation
• Herzberg’s Dual Factor Theory of motivation
– Performance pay
• Victor Vroom’s Expectancy Theory
• Skinner’s Reinforcement Theory
• Equity theory
27. Compensation and Industrial Relations
• Career and compensation
• Social dialogue and collective bargaining
• Economic advancement in employment
• Employee-management relations
29. Foundations for Compensation
Management in Nepal
• Constitutional provision
• Civil service law
• Budgetary policy
• Personnel Management Laws of enterprises
• Employees Provident Fund and Citizen Trust
Fund
• Social security provisions
• Labour law and labour standards
30. Human Resource Policy and Strategy
• Long-term vision for human resource
management
• Strategic plan for human resource management
• Human resource information system
• Human resource development and mobilization
plan
• Compensation plan
• Integration of compensation system into Human
Resource Policy and Strategy
31. Inferences Drawn from Nepalese
Experiences
• HR Policy analysis for compensation management
• Strategic Planning and Strategic Management:
Weak strategic orientation
• Weak integration
• Harmonizing compensation with organization’s
long term plan and policy: Low level of readiness
• Human resource information system is almost
non-existent
• Compensation is driven by ability to pay rather
than standards
32. Job Analysis and Job Evaluation
• Organization and management survey: Weak
research orientation
• Analyzing job for preparing job descriptions,
job specifications and job standards
• Job evaluation and ranking of job
• Position classification and grading of
positions
• Matching job with compensation
• Practice of job analysis and job evaluation is
almost non-existent in public enterprises
• Job and position are based on rank rather
than performance grades
34. Performance-based Compensation
• Performance management system has been
applied in business entities
• Difficult and complex in public enterprises
• Performance-based pay is almost non-existent
in public organizations
• Performance-based incentives system in a
team approach has been applied in adhoc
basis in civil service and public enterprises
• Bonus system applied on the basis of
immediate profit rather than profitability and
sustainability
35. Executive Compensation
• Compensation based on performance
contracts
• Performance contracts with Chief Executive
• Performance contracts between Chief
Executive and the Department/Project Chiefs
36. Social Dialogue and Collective
Bargaining
• Instrument for professional trade unions in
collectively determining compensation
• Differentiated interests of management and
employee unions
• Political interest vs organizational interest
• Sensitivity towards productivity
37. Social Security
• Lack of “Comprehensive Social Security
System”
• Differentiated system based on organizational
capacity
• Social insurance and public assistance
• Operationalization of “Social Security Fund”
39. Requirements for a Sound
Compensation System
• Strategic Framework
• Structural Capacity
• Effective Systems and Methods
• Integration with organizational development
and management effectiveness
• Harmonization with performance behaviour
• Sustainability
40. Requirements for an Effective
Compensation System in Nepal
• Human resource strategy and policy
• Human resource information system
• Harmonized compensation plan
• Comprehensive social security system
• Performance-based compensation system
• Research and survey on job engineering,
productivity and performance improvements
• Participatory and transparent process of
determining compensation
