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Chapter 10 compensation and benefits

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Chapter 10 compensation and benefits

  1. 1. It is all about People <ul><li>“ Take our 20 best people and virtually overnight we become a mediocre company.” </li></ul><ul><li>- Bill Gates, Microsoft </li></ul><ul><li>“ Take my assets, leave my people, and in five years I will have it all back.” </li></ul><ul><li>- Alfred Sloan, General Motors </li></ul>Published by Lecturesheet.iiuc28a9.com
  2. 2. <ul><li>We will cover the following: </li></ul><ul><ul><li>Remuneration & its Components </li></ul></ul><ul><ul><li>Compensation Administration Process </li></ul></ul><ul><ul><li>Wage & salary Administration </li></ul></ul><ul><ul><li>Different types of Incentives and Incentives Plan </li></ul></ul><ul><ul><li>International Compensation. </li></ul></ul><ul><li>Wage, Salary and Reward Administration </li></ul>Human Resource Management
  3. 3. Building Blocks of Direct Compensation <ul><li>1. The Foundation: </li></ul><ul><li>A Compensation Philosophy </li></ul><ul><li>2 . The Basics: Elements of Base Pay Administration </li></ul><ul><li>3. The Glue: Pay for Performance Programs </li></ul><ul><li>4. The Future: Effective Compensation Management </li></ul>
  4. 4. The Organizational Reward System <ul><li>Results from employment with the organization </li></ul><ul><li>Includes all forms of financial returns and tangible services & benefits employees receive as part of employment relationship: </li></ul><ul><li>Intrinsic Extrinsic </li></ul><ul><ul><li>Achievement Formal Recognition </li></ul></ul><ul><ul><li>Feelings of accomplishment Fringe Benefits </li></ul></ul><ul><ul><li>Informal Recognition Incentive Payments </li></ul></ul><ul><ul><li>Job Satisfaction Pay </li></ul></ul><ul><ul><li>Personal growth Promotion </li></ul></ul><ul><ul><li>Status Social Relationships </li></ul></ul><ul><ul><li>Work Environment </li></ul></ul>
  5. 5. Remuneration & Its Components Hourly and monthly Rated Wages and Salaries Direct Indirect Remuneration Financial Non Financial Incentives Individual Plans Group Plans Fringe Benefits P.F, Gratuity, Medical Care, Accident Relief, Health and Group insurance Perquisites Company Car, Club Membership, Paid Holidays, Furnished House, Stock option scheme, etc Job Content Challenging job, Responsibilities, Recognition, Growth prospects, Supervision, Working conditions, Job sharing, etc. Definition: Remuneration' is a general term covering the monetary and related entitlements of employees - paid by employers in return for the work of employees. Components:
  6. 6. Compensation Administration Process
  7. 7. Job Analysis <ul><li>It contains two parts: Job Description & Job Specification. This can help to know about the duties and responsibilities will be covered by the specific job and also the quality of the people engaged in that job. This is necessary to set a rationale pay structure for a specific position. </li></ul>
  8. 8. Job Evaluation Factor Comparison Ranking Classification Point Method Job Evaluation Methods Job Evaluation: The systematic determination of the relative worth of jobs within an organization. Methods of Job Evaluation
  9. 9. Developing Pay Surveys Select Employers with Comparable Jobs Determine Jobs to be Surveyed Decide What Information Is Needed Conduct Survey
  10. 10. Pay Structures <ul><li>Common Pay Structures </li></ul><ul><ul><li>Hourly and salaried </li></ul></ul><ul><ul><li>Office, plant, technical, professional, managerial </li></ul></ul><ul><ul><li>Clerical, information technology, professional, supervisory, management, and executive </li></ul></ul><ul><li>Factors that affect Remuneration/Pay Structure: </li></ul><ul><ul><li>External: </li></ul></ul><ul><ul><ul><li>Labor market </li></ul></ul></ul><ul><ul><ul><li>Cost of Living </li></ul></ul></ul><ul><ul><ul><li>Society </li></ul></ul></ul><ul><ul><ul><li>The economy </li></ul></ul></ul><ul><ul><ul><li>Geographic Location </li></ul></ul></ul><ul><ul><li>Internal Factor: </li></ul></ul><ul><ul><ul><li>Business Strategy </li></ul></ul></ul><ul><ul><ul><li>Job Evaluation & Performance Appraisal </li></ul></ul></ul><ul><ul><ul><li>The employee </li></ul></ul></ul><ul><ul><ul><li>Kind of business </li></ul></ul></ul>
  11. 11. Wage & Salary <ul><li>Wages: Wages are compensation. This includes basic wages, allowances, bonuses etc. On the employers’ points of view, wages form that part of cost of production which is attributed as compensation paid to labor. Wages are paid in the form of time rate or piece rate to the workers, who are directly involved in the production or commercial activities. </li></ul><ul><li>Salary: This is compensation paid to the indirect labor in the form of cash. Indirect labor involves supervisors, managers and supporting staff like office assistants, clerks, etc. Salaries are paid in the form of time rate, mostly on monthly basis. </li></ul>
  12. 12. Wage & Salary <ul><li>On the basis of the employee needs and ability of the organization, there are various kinds of wages. Wages are generally four types: </li></ul><ul><ul><li>Subsistence wages </li></ul></ul><ul><ul><li>Minimum Wages </li></ul></ul><ul><ul><li>Fair Wages </li></ul></ul><ul><ul><li>Living Wages </li></ul></ul><ul><li>Subsistence wages : This is level of wage below the minimum level which can lead inhuman life to the employees. </li></ul><ul><li>Minimum Wages: This is a wage level fixed by government which is considered adequate, taking into account the cost of living. All the organizations are bound to follow this direction so that no employee is paid a wage less than the minimum wage fixed by government irrespective of grade, class or nature of work. </li></ul>
  13. 13. Wage & Salary <ul><li>Fair Wages: This is fixed by employer. This level of wage varies from industry to industry. The main criteria are the capacity of payment. Fair wage is a wage above the minimum wage but below the living wage. </li></ul><ul><li>Living Wages: Living wage is one which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter, but a measure of frugal comfort, including education for his children, protection against ill health, requirement of essential social needs and a measure of insurance against the more important misfortune including old age. </li></ul>
  14. 14. Incentive Compensation <ul><li>Incentives can be added to the basic pay structure to provide rewards for performance. It may be 3 types: </li></ul><ul><li>1. Individual Incentives include </li></ul><ul><ul><li>merit pay plans (annual increase, based on performance) </li></ul></ul><ul><ul><li>piecework plans (pay based on number of units produced typically in a specified time period.) </li></ul></ul><ul><ul><li>time-savings bonuses and commissions </li></ul></ul><ul><ul><li>2. Group Incentives : Incentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation. </li></ul></ul><ul><ul><li>3. Plant-wide Incentives : Direct employee efforts toward organizational goals (such as cost reduction) </li></ul></ul>
  15. 15. 4 . The Future: Effective Compensation Management <ul><li>S = Strategically-based </li></ul><ul><li>M = Market-driven </li></ul><ul><li>A = Analyze Thoroughly </li></ul><ul><li>R = Reward Results </li></ul><ul><li>T = Transformation </li></ul>
  16. 16. Compensation & Benefits Package <ul><li>Base Salary - the fixed amount to be paid </li></ul><ul><li>Incentives - additional variable pay based on performance against objectives </li></ul><ul><li>Protectives - programs which insure employees against loss </li></ul><ul><li>Capital Accumulation – programs that provide the opportunity to establish a personal estate (equity /stock plan) </li></ul><ul><li>Retirement Income - plans that defer income for services rendered to a later payment date </li></ul><ul><li>Perquisites - company paid allowances beyond direct pay(Housing,Car, Leave travel, etc.) </li></ul><ul><li>Paid Time Off - vacations, holidays, maternity leave, etc </li></ul>
  17. 17. The C&B Cycle Operationalizing C&B Corporation’s Strategy on C&B <ul><li>COMPENSATION POLICY/DESIGN </li></ul><ul><li>Policies Designed/Reviewed </li></ul><ul><li>Compensation Structure/Design Issues </li></ul><ul><li>Annual/Cyclical actions (TIR/Bonus/SPP) </li></ul><ul><li>Employee Communication strategy </li></ul><ul><li>IMPERATIVES </li></ul><ul><li>Top Management Inputs </li></ul><ul><li>Market Drivers </li></ul><ul><li>HR Strategy </li></ul>Tracking C&B Info - GEMS, HRIS Benefits Administration Gauging employee satisfaction Employee getting the C&B package Payroll HR OPERATIONS
  18. 18. Fixed Cash <ul><li>Base Salary </li></ul><ul><li>Housing Assistance/HRA </li></ul><ul><li>Conveyance Allowance (Q/R/S) </li></ul><ul><li>Leave Travel Allowance </li></ul><ul><li>Medical Allowance </li></ul>
  19. 19. Benefits <ul><li>Company Housing </li></ul><ul><li>Company Car (grades T & above) </li></ul><ul><li>Furnishing program </li></ul><ul><li>Housing Loan </li></ul><ul><li>Personal loans </li></ul><ul><li>Car Loan </li></ul><ul><li>Tuition Refund Plan </li></ul><ul><li>Professional Body Membership </li></ul><ul><li>Retrials or Parachute Payments </li></ul><ul><ul><li>Provident Fund </li></ul></ul><ul><ul><li>Gratuity </li></ul></ul><ul><ul><li>Superannuation (for certain grades) </li></ul></ul>
  20. 20. Variable Pay <ul><li>Individual Performance Award/Annual Bonus </li></ul><ul><li>Sales Incentive Plans </li></ul><ul><li>Golden Handcuffs </li></ul>
  21. 21. EMPLOYEE COMMUNICATION - taking C&B to the people <ul><li>During all C&B actions (e.g., Annual Salary Increase letters , SPP roll-out) </li></ul><ul><li>Through the HR web-site </li></ul><ul><li>Through online addressal of employee queries </li></ul><ul><ul><li>payroll & benefits related (HR Ops) </li></ul></ul><ul><ul><li>policy related (Regional HR/Compensation Unit) </li></ul></ul><ul><ul><li>through supervisors (queries of the type - “how does my salary increase stack-up vis-à-vis my peers ?”) </li></ul></ul>

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