Compensation refers to the total cash and non-cash payments given to employees in exchange for their work. It includes wages as well as benefits like health insurance, retirement plans, and paid time off. The goals of compensation are to attract, retain, and motivate qualified employees while controlling costs and complying with legal regulations. Compensation management involves job analysis, descriptions, salary structures, and procedures to achieve these goals in a fair and consistent manner.
1. UNIT 2 - COMPENSATION
• Compensation is the total cash and non-cash payments that
an employee are given in exchange for the work they do for
the business.
• Biggest expenses for businesses with employees.
• Compensation is more than an employee’s regular paid
wages. It also includes many other types of wages and
benefits
2. DEFINITION OF COMPENSATION
Dale Yoder: “Compensation is paying people for work.”
Edwin B Flippo: “the adequate and equitable remuneration of
personnel for their contributions to the organizational
objectives.”
Benham: Compensation is the value of work of the employees
according to the agreement between employer and employee.
3. TYPES OF COMPENSATION
• Direct Compensation:
• 1. Basic pay, dearness allowance, cash allowance
• 2. Incentive pay, bonus, commission, profit sharing, stock
option
• Indirect Compensation:
• 1. Legal requirement (Fringe Benefits)
• Provident fund – another name of pension fund.
• Gratuity - (Number of years of service) * (Last drawn
monthly Basic and DA) *15/26.
• Pension
• Insurance
• Medical leave
• Accident benefits
• Maternity leave
4. TYPES OF COMPENSATION
• Optional sick leave
• Casual leave
• Travelling allowance
• Telephone bills
• Canteen allowance
• Perquisites or Non monetary
• Club membership
• Company Car, Free residential, Paid trips, Stock options
5. OBJECTIVES OF
COMPENSATION
• Attract qualified personnel
• Retain personnel:
• Equity in pay
• Cost control
• Avoid legal regulation
• Easy to understand
• To recognize value of jobs
• Enable individual to reach full earnings and to take
initiatives.
7. PRINCIPLES OF GOOD
COMPENSATION STRATEGY
• Appointing persons
• Helping for compensation decision
• Collection of data
• Reviewing
• Equality
• Consistency
• Flexibility
• Considering
• Solving problems
• Simplicity
8. • Paid time off – Sick leave and vacation
• Health and Life insurance
• Dental and vision insurance
• Paid prescriptions
• Retirement benefits
• Flexible spending account
• Long term disability insurance
• Short term disability insurance
9. CASE-LET
Employee benefits at Tata Elxsi
• Tata Elxsi says “Elxsians are an inspired group who love to accept
and accomplish challenging tasks. An array of benefits is made
available to the employees so that they successfully meet their
responsibilities on their personal and career front. The benefits
serve to motivate them and acknowledge their efforts. All of it adds
to much more than just monetary gain”. The various benefits that
the company offers to its employees are
• 1. common benefits: all the are eligible for wide range of benefits
like hospitalization insurance, Parivar Raksha Yojna, employee
referrals, housing loan, Exigency loan, Health check up, car lease
and transport
• 2. performance Incentives – Project completion incentive, best
project award, outstanding performance bonus and spot awards.
• 3. special benefits – tax planning consultancy, retrial benefits,
special young genius awards for dependent children
11. JOB DESCRIPTION
• Is a record that a person use for general task.
• Includes:
• Position reports
• Specifications – qualifications or skills needed.
• Salary range
• Defines in writing the responsibilities, requirements,
functions, duties, location, environment, and other aspects of
job.
12. FEATURES OF JOB DESCRIPTION
• Helps hire the right person
• Lays out employee expectations
• Discourages innovation and expansion
• Becomes outdated quickly
13. JOB ANALYSIS
• Helps the organization in recruitment and selection,
performance management, training needs identification,
deciding compensation and benefits
• Process of Job Analysis involves
• Collecting information
• Behaviour
• Human requirements
• Machines,
• Tools,
• Job aids
• Performance standards, job context
• Helps define job description and job specification
14. IMPORTANCE OF JOB ANALYSIS
• Analysing the resources and establishing the strategies to
accomplish goals and objectives
• Effectively developed job description are communication
tools
• Helps in hiring right quality workforce
• Can be used in developing training programmes
• Can be used to identify or determine Skill levels, work
environment, responsibilities, level of education
15. GOALS OF COMPENSATION
• Attracting and retaining personnel
• Motivating personnel
• Optimising cost of compensation
• Consistency in compensation
16. WAGES
• Wage is the payment for labour or services to a workers
especially remuneration on an hourly, daily or weekly basis
or by the piece.
• According to Benham, “Wage means the amount paid to
the labour for his service to the employer”.
• “Wages is the payment to labour for its assistance to
production.” -A.H. Hansen
• According to payment of wage Act 1936, “Any award of
settlement and production bonus, if paid, constitute wage”.
Thus, Wage are the remuneration paid for the service given
by the labourer.
17. CONCEPTS OF WAGE LEVELS
• Minimum wages
• Ensuring a decent starting wage
• Article 2 of International labour Organization
• Consider needs and their family, general wages, cost of living,
social security benefits and living standards of other social
groups.
• Fair wages –
• Between minimum wages and living wages
• Depends on productivity, prevailing rates and level of national
income
• Living wages
• Everyone who works has the right to just and favourable
remuneration
• Minimum living wage to all employee and in need of suct
protection
18. SALARY
• The term salary is defined as the remuneration paid to the
clerical and managerial personnel employed on monthly or
annual basis.
• Thus, salary is a fixed compensation paid by the employer to
his employees for the provided services to the firm.
19. NATURE / CHARACTERISTICS OF WAGE
AND SALARY ADMINISTRATION
• Employer and employee relationship
• Salary and Wages are same: Administrative work and Manual
work
• Consideration of Benefit
20. OBJECTIVES OF WAGE AND
SALARY ADMINISTRATION
• Organizational Objectives:
• Enable an organization to have the quantity and quality of
staff it requires.
• Retain the employees in the organization.
• Motivate employees for good performance for further
improvement in performance.
• Maintain equity and fairness in compensation for similar jobs.
• Achieve flexibility in the system to accommodate
organizational changes as and when these take place.
• Make the system cost-effective.
21. OBJECTIVES OF WAGE AND
SALARY ADMINISTRATION• Individual Objectives:
• Ensures a fair compensation.
• Provides compensation according to employee’s worth.
• Avoids the chances of favoritism from creeping in when
wage rates are assigned.
• Enhances employee morale and motivation.
22. OBJECTIVES OF WAGE AND
SALARY ADMINISTRATION
• Collective Objectives:
• Compensation in ahead of inflation.
• Matching with market rates.
• Increase in compensation reflecting increase in the prosperity
of the company.
• Compensation system free from management discretion.
23. PRINCIPLES OF WAGE &
SALARY ADMINISTRATION
• Preserving real income
• Labour productivity
• The capacity of business to afford wage increases
• The capacity of the economy to absorb wage increases
• Supply and demand of labour
• Prevailing market value
• Living wage
• Managerial attitudes
• Psychological and social factors
Editor's Notes
PF – Lumpsum amount at the time of exit from organization.
Gratuity – 15 wages for 15 days and 26 is no of days in a month
Fringe Benefits: benefits like PF, Gratuity, Pension, Medical, Accident, health, life, Uniform, Canteen, Recreation Majorly for group.
Club membership – for recreation, social, athletic, sporting, luncheon, airline, hotel and "business" clubs.
Perquisities: to managerial personnel to facilitate Job performance or to retain, Company car
Employee :
Performance: Better performance fetches more pay.
Experience: devoted to the organization for long period, expects increased pay.
Potential: worthless if it goes unnoticed. Many organizations pay better pay to potential employees.
The payment of wages Act 1936, The Minimum wages act 1948, The payment of Bonus Act 1965, Equal Remuneration Act 1976, Payment of Gratuity Act 1972 are some of the acts passed in the welfare of the labor, and all the employers must abide by these.
