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Published in: Economy & Finance, Business


  1. 1. Compensation & Benefits Kulkesh Kumar 14-Feb-2012
  2. 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. 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. 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. 5. Different Part of Compensation & Benefits
  6. 6. Defining the compensation context
  7. 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. 8. Extrinsic Compensation Continued… Employee Benefits
  9. 9. Intrinsic Compensation  Job Characteristics  Skill Variety  Task identity  Task significance  Autonomy  Feedback
  10. 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. 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. 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. 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. 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. 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. 16. Inputs in Compensation structure
  17. 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. 18. A Hierarchical Focus on Compensation Business Goals Compensation activities serveCEO Business Objectives Business Strategy Compensation strategy is periodically reevaluated and the Compensation planHR Head Compensation periodically developed Strategy Org.Structure Non-Financial Rewards Compensation PlanC & B/S M Performance Job Evaluation Market Surveys Management Unit Inputs Pay levels / Compensation structures Manager, along with Contribution team is responsible forEmployee /outputs carrying out Total compensation related remuneration activities Performance linked Pay Individual Pay Internal Equity External Equity
  19. 19. Compensation Professional’s Goal How HR professional fit into the corporate hierarchy. (Line employees and Staff employees)
  20. 20. Compensation Department Main Goal
  21. 21. Question & Answer / Open Discussion Q&A
  22. 22. Thank You