6. The Importance of Compensation
• Impacts an employer’s ability to attract and retain employees.
• Ensure optimal levels of employee performance in meeting the
organization’s strategic objectives.
• Compensation’s components
Direct compensation in the form of wages or salary
Indirect compensation in the form of benefits
7. Theory Behind Compensation
Equity Theory
Comparing inputs and outputs of a similar co-worker
Perceived inequity affects employee effort
Expectancy Theory
People are motivated by intrinsic and extrinsic outcomes
they desire.
People will only be motivated if outcome is possible.
People will only be motivated if outcome is contingent.
8. Equity Theory
Internal equity
Comparison of my input or reward ratio with that of similar others.
Employees may seek to address imbalance by changing their inputs.
Fairness of pay differentials between different jobs in the
organization can be established by job ranking, job classification,
point systems and factor comparisons.
External equity
Fairness of organizational compensation levels relative to similar jobs in
other organizations.
9. Monkeys Demand Equal Pay
• A recent study shows brown capuchin monkeys refused to
play along when they saw another monkey get a better
payoff for performing the same work.
• The monkeys were trained to trade a granite token for a piece
of cumber. When the reward was the same for both monkeys,
they took the cucumber 95 percent of the time.
• But it was a different story when one monkey was given
something better -- namely, a grape. Then, the other monkey
often pitched a fit -- either throwing the token, refusing to eat
the cucumber or giving it to the other monkey.
Associated Press 2003
15. 3-Base Pay
Base pay is the initial rate of compensation an employee
receives in exchange for services. It excludes extra lump sum
compensation such as bonuses or overtime pay, as well as
benefits and raises. An employee's base pay can be expressed
as an hourly rate or as a weekly, monthly or annual salary.
16. 4-Merit Pay
It provides bonuses for workers who perform their jobs effectively,
according to easily measurable criteria
30. Wipro
• Flexible benefits
• Medical assistance plan and medical claim benefits
• Group life insurance program and employee deposit linked
insurance program
• kids@wipro(fun way of learning)