2. All forms of
financial return,
tangible services and
benefits
that employees receive as part of their
employment relationship
3. Compensation refers to wages,
salaries or tips while benefits
describes job extras provided by
the employer.
Benefits might include health
care packages, dental and life
insurances, and paid time off.
4. High compensation and
appealing benefits attract
employees .
Some workplace benefits are
required by law and others are
offered as a job perk.
5. ‘COMPENSATION’ IN OThEr TErMS
AlSO CAllEd AS ‘EMPlOyEE
remuneratioN’
Remuneration is the compensation;
an employee receives in return of
his or her contribution to the
organization. His or her standard of
living, status in the society,
motivation, loyalty and productivity
depends upon the remuneration he
or she receives.
8. Non-Financial
The Job
interesting, challenging, responsible
opportunity for recognition, advancement,
feeling of achievement
Job Environment
policies, supervision, co-workers, status
symbols, working conditions, flextime,
compressed work week, job sharing,
telecommuting, flexible benefits programs
9. Factors that Influence Wage Levels
CONDITIONS
OF LABOR
MARKET
AREA
WAGE
RATES
EMPLOYER’S
ABILITY TO PAY
WAGE
MIX
COST OF
LIVING
WORTH OF JOB
EMPLOYEE’S
RELATIVE WORTH
COMPENSATION POLICY OF
ORGANIZATION
11. CLASSIFICATION OF REWARDS
TOTAL Compensation
Financial
Direct
Monthly
Salary
Annual
Incentives
Bonus
Indirect
Non - Financial
Job Satisfaction
Provident Fund
Gratuity
Travel allowance
Mobile expense
Sales Promotional Expense
Praise / Rewards
12. PRAISE/REWARDS
Future Leadership Program (FLP): Executives earmarked
and declared future leader based on their competency
Development based Career Plan (DLCP): Competent
executives committing 5 years service to company in the
form of bond will be given minimum 2 elevation during
the bond period.
Executive of the year Award
Company Jeep at individual level
Foreign Tour with family for the team achieving their
yearly target
Major medical claim for self and dependant
13. Aims of employee compensation
Attract capable employees to the
organization.
Motivate them towards superior
performance.
Retainment of their services over an
extended period of time.
14. The Importance of Compensation
Impacts an employer’s ability to attract
and retain employees.
Ensure optimal levels of employee
performance in meeting the organization’s
strategic objectives.
15. Theory Behind Compensation
Equity Theory
Comparing inputs and outputs of
a similar co-worker
Perceived inequity affects
employee effort
16. Expectancy Theory
People are motivated by intrinsic and
extrinsic outcomes they desire.
People will only be motivated if outcome
is possible.
People will only be motivated if outcome
is contingent.
17. Types of Base Pay Systems
Job-based
oPay the job (not the person)
oMarket-based (external equity
focus)
oPoint factor-based (internal equity
focus)
Skills / knowledge-based
oPay the person (not the job)
18. Job Based Pay
Attraction
Depends on market pricing
Motivation
No performance impact
Skill Development
Learn job-related and upward mobility
skills
Culture
Bureaucratic, hierarchical
Structure
Hierarchical, individual jobs and
differentiation
Cost
Good control of individual pay
19. Knowledge Based Pay
Attraction
Attracts learning-oriented individuals,
high skills individuals
Motivation
Little performance impact
Skill Development
Motivates needed skill development
Culture
Learning, self-managing
Structure
Flat or team-based
Cost
Higher individual pay
20. Strategic Issues in Compensation
Determining compensation relative to
the market.
Striking a balance between fixed and
variable compensation.
Deciding whether or not to utilize teambased versus individual pay.
21. CONT……..
Creating the appropriate mix of
financial and non-financial
compensation.
Developing a cost-effective
compensation program that results
in high performance.
22. New Thinking for the New Millennium
Pay the person .
Reward excellence .
Individualize the pay system .
