1. Compensation & Benefits
Kulkesh Kumar
14-Feb-2012

2. Agenda
 What is compensation?
 Different parts of compensation
 Extrinsic compensation and Intrinsic Compensation
 Purpose of compensation
 Its Importance
 Factors affecting compensation
 Constituents of Compensation
 Law governing and affecting pay structure
 A Hierarchical Focus on Compensation
 Compensation professional’s Goal
 Compensation department main goal

3. Objectives
 Able to define compensation
 Understand different types of Extrinsic compensation
 Why it is importance from different perspective
 Mandatory laws to be take care in compensation
 Factors to be consider for Compensation
 Pay Model
 Compensation professional’s Goal
 Understand main goal of compensation department

4. What is Compensation & Benefits ?
 Compensation is payment to an employee in return for their contribution to
the organization, that is, for doing their job. The most common forms of
compensation are wages, salaries and tips.
 Benefits are forms of value, other than payment, that are provided to the
employee in return for their contribution to the organization, that is, for doing
their job.

5. Different Part of Compensation & Benefits

6. Defining the compensation context

7. Extrinsic Compensation
 Core Compensation
 Salary (Monthly)
 Wages (Hourly, Daily or Weekly)
 Adjustment of core Compensation
 Consumer Price Index
 Seniority Pay
 Merit Pay
 Incentive Pay
 Person focused pay

8. Extrinsic Compensation Continued…
Employee Benefits

9. Intrinsic Compensation
 Job Characteristics
 Skill Variety
 Task identity
 Task significance
 Autonomy
 Feedback

10. Purpose of Compensation
 For Employer
 Brand image (employer of choice) for attracting candidates
 Motivating employees for higher productivity and performance
 Retaining talent
 Consistency in compensation
 Provoking healthy internal competition
 For Employee
 Work-life Balance
 Recognition as tool to self esteem
 Planning for better quality of life

11. Its Importance
High Compensation-Low Commitment High Compensation-High Commitment
Hired Guns Professionals
High Compensation-High
Commitment
Low Compensation-Low Commitment Low Compensation- High Commitment
Workers as commodity Family oriented organization

12. Its Importance
 Compensation is an integral part of human resource management which
helps in motivating the employees and improving organizational
effectiveness
 Effectiveness in terms of:
 Attracting & Retaining Talent
 Motivating talent for better performance
 Cost effectiveness

13. Effective Compensation
Contribution based Ensure Equity
Remuneration
Institutional
effectiveness
Effective
Attract talent Compensation Administratively
Efficient Legal
Compliance
Motivate & Reward Valued
Retain Staff Behavior
Employee
Management

14. Factors affecting compensation
 Mental Requirement
 Physical requirements
 Skill requirements,
 Responsibility level
 Working conditions (risk, time, hazards)
 Organizational Affordability
 Man power planning
 Sales – salary ratio
 Market Rate for Talent
 Economic Conditions

15. Constituents of Compensation
 Fringe Benefits
 Fringe benefits include such benefits which are provided to the employees either
having long-term impact like provident fund, gratuity, pension; or occurrence
of certain events like medical benefits, accident relief, health and life
insurance; or facilitation in performance of job like uniforms, Canteens,
recreation, etc.
 Perquisites:
 These are normally provided to managerial personnel either to facilitate their job
performance or to retain them in the organization. Such perquisites include
company car, club membership, free residential accommodation, paid holiday
trips, stock options, etc.

16. Inputs in Compensation structure

17. Law Governing and Affecting Pay Structure
 Minimum Wages Act, 1948
 Payment of Wages Act, 1936
 Payment of Bonus Act, 1965
 Income Tax Act, 1961
 Equal Remuneration Act, 1976
 Acts on social securities (PF, Bonus, Gratuity, Employee Compensation)

18. A Hierarchical Focus on Compensation
Business Goals Compensation
activities serve
CEO
Business
Objectives
Business
Strategy
Compensation strategy
is periodically
reevaluated and the
Compensation plan
HR Head
Compensation periodically developed
Strategy
Org.Structure Non-Financial
Rewards
Compensation
Plan
C & B/S M
Performance Job Evaluation Market Surveys
Management
Unit Inputs
Pay levels / Compensation
structures Manager, along with
Contribution team is responsible for
Employee
/outputs carrying out
Total compensation related
remuneration activities
Performance
linked Pay
Individual Pay
Internal Equity External Equity

19. Compensation Professional’s Goal
How HR professional fit into the corporate hierarchy. (Line employees and Staff
employees)

20. Compensation Department Main Goal

21. Question & Answer / Open Discussion
Q&A

22. Thank You