anna university - HRM

1. COMPONENTS OF REMUNERATION
UNIT-5,TOPIC-3
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2. COMPONENTS OF REMUNERATION
Components of employee
compensation could be divided
into two categories viz.
1)Basic compensation and
2)Supplementary
compensation.
Again supplementary
compensation comprises
allowances and perquisites or
perks.
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3. COMPONENTS OF REMUNERATION
 Basic Compensation:
Basic compensation refers to the basic pay of an employee which
is usually expressed in terms of a pay scale e.g. 5,000-200-10,000-
500 -20000 etc. This pay scale implies that an employee will get a
basic pay of Rs. 5000 per month on joining the organization.
The employee will get an increment of Rs. 200 per year till he/ she
reaches the basic pay of Rs. 10,000 and after wards will be
entitled to an increment of Rs.500 per year till he / she reaches
the pay of Rs. 20,000 per month and so on. Basic pay for a job is
decided though a process of systematic job evaluation. In many
cases, Government fixed pay scales apply which employers have
to accept and implement.
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4. COMPONENTS OF REMUNERATION
 Supplementary Compensation:
Supplementary compensation refers to payment
of allowances and provision of perks or
perquisites. Allowances refers to amounts of
money which are given to employees regularly for
particular purposes; while perks refer to
privileges enjoyed by a person because of his/her
organizational status and paid/provided in
addition to wages/ salaries.
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5. TYPES OF ALLOWANCES AND PERKS
 Allowances:
(i) House Rent Allowances (HRA):
HRA is given by the employers to the employee to meet the
expenses in connection with the rent of the accommodation,
which the employee might have to take.
(ii) Dearness Allowances (DA):
DA is paid to employees to compensate them, at least
partially, against the phenomenon of rising prices. DA is
decided as per an agreed formula, taking into account the
increase, in the cost of living.
(iii) City Compensatory Allowance (CCA):
CCA is paid to employees to compensate them partly for
higher cost of living in cities, which differs from one type of
city to another.
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6. TYPES OF ALLOWANCES AND PERKS
(iv) Conveyance Allowance:
Conveyance allowance is an allowance granted to employees to
meet the expenditure incurred on conveyance in performance of
duties of job; when free conveyance is not provided by the
employer.
(v) Uniform Allowance:
It is an allowance which is granted to meet the expenditure
incurred on the purchase or maintenance of uniform for wear
during the performance of duties of job.
(vi) Children Education Allowance:
Amount paid at the rate of certain amount per child to meet the
cost of education of children (subject to a maximum of two
children or more as per rules of the organisation) is called
children education allowance.,
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7. TYPES OF ALLOWANCES AND PERKS
 Underground Allowance:
This allowance is granted to an employee who is working in
uncongenial, unnatural climate in underground coal mines.
 (viii) Miscellaneous Allowances:
Some other allowances payable to employees may
be:
1. Medical allowance
2. Lunch / Tiffin allowance
3. Overtime allowance
4. Non-practicing allowance (in case of doctors)
5. Servant allowance etc.
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8. TYPES OF ALLOWANCES AND PERKS
 Perquisites/Perks:
(i) Rent free accommodation or accommodation provided to
employees at concessional rate. The accommodation may be
furnished or unfurnished.
(ii) Gas, electricity bill of employees paid or reimbursed.
(iii) Interest free or concessional loans to employees.
(iv) Leave Travel Concession (LTC) to employees.
(v) Free meals, tea and snacks, provided to employees.
(vi) Payment or reimbursement by the employer of club
membership of the employee and expenses incurred in a
club by the employee.
(vii) Use of laptops and computers by employees, belonging to
the employer.
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9. TYPES OF ALLOWANCES AND PERKS
viii) Motor car/ other vehicles, provided by the
employer to specified employees.
(ix) Provision by the employer of services of a
sweeper, a gardener, a watchman or a personal
attendant to specified employees.
(x) Re-imbursement of medical treatment expenses,
incurred on employee or members of his / her
family.
(xi) Contribution by the employer to recognised
provident fund, kept for the benefit of employees.
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