Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Compensation strategies


Published on

Published in: Recruiting & HR
  • Be the first to comment

  • Be the first to like this

Compensation strategies

  2. 2. COMPENSATION STRATEGY The compensation strategy is derived from the HR Strategy and it defines the position of the organization on the job market, the level of the total cash, the main bonus principles in the organization and rules for the base salary setting.
  3. 3. ASPECTS OF COMPENSATION STRATEGY I. Following tasks are performed- •Model the changes from a proposed salary or compensation reorganization, based on market values, to evaluate the cost of moving the workforce up to market levels. •Create new types of variable compensation to help motivate the workforce, and evaluate the cost impact. •Target special compensation plans for specific groups of employees, such as executives, salespeople, or workers with mission-critical job skills.
  4. 4. II. Following tasks are performed: •Model compensation cost changes based on forecasted workforce growth and reduction. •Establish a merit matrix or other rules for pay out of annual base pay increases. •Determine what types of performance goals or related pay out rules we need for any base compensation or variable compensation types in the compensation plan. •Examine the compensation cost effects based on organizational performance indicators, for periodic bonuses and so on.
  5. 5. •Set proposed compensation budgets for departments or business units. •Allocate compensation pools across organizations, special classifications, groups, and individuals.  Compensation Strategy Importance •Manage the personnel expenses of the organization •Gives the certainty to the HR employees and HR managers •Acts as the basic document
  7. 7.  POSITION BASED MODEL Fixed pay model Compensation based on attributes and challenges of position Based on grade structure and designation Motivation through high compensation
  8. 8. PITFALLS Encourage a bureaucratic orientation. Entails top-down decision making and information flow Costly and time consuming May not reward desired behaviour
  9. 9. PERSON BASED MODEL  Personal and professional attributes necessary for for effective performance  Based on individual’s skills, knowledge and experience  Pay for what employee is capable of doing and not what he actually performs  Retain competent employees  Self-efficacy
  10. 10. PITFALLS  Very costly  Topping-out  Difficult to determine market rates
  11. 11. PERFORMANCE BASED MODEL  Objective:-  To develop a Productive, Efficient, and Effective organization to increase employee Motivation and Performance.  To keep Employee engaged throughout their work as they are rewarded based on the outcome of their work.
  12. 12. ESSENTIALS FOR EFFECTIVE PAY  VISION- Organization must have a clear purpose for establishing pay for performance programme.  ALIGNMENT- Organization should consider that compensation level should match with the level of performance desired or achieved.  HOLISTIC APPROACH- Human Resource create competitive advantage for their organization, as a result integrated compensation strategy should be formulated.  TOP MANAGEMENT COMMITMENT- The words and action of top management is essential for success of pay for performance ,so that people may not lose confidence and belief while at work.
  13. 13. PITFALLS  Its difficult to successfully implement in government organization.  It induces the employees to manipulate the compensation system, as only those aspects of the job will be seen which can directly be rewarded, instead of seeing the other equally valuable tasks.  Inculcate a habit of looking at short- term goals for making more money.  Often they doubt against the fairness and sensitivity of pay as they feel personal biasness.
  14. 14. CONT....  Highly dependent upon having enough money to fund incentives.  The use of extrinsic motivation may erode intrinsic motivation which affects productivity.  Undermines teamwork.
  15. 15. COMPENSATION STRATEGIES IN INDIA India maintains its Labour cost advantage India continues to maintain its labour cost advantage relative to the US, with fixed compensation levels for entry-level and mid-career professionals ranging between 15% and 25% of US base salaries.
  16. 16. INDIA IS DIVERSE, SO ARE ITS COMPENSATION PRACTICES Just as India is a highly diverse nation-made up of multiple languages, religions, ethnic groups, and custom spread across a tremendous geographic range- so too are its compensation practices
  17. 17. Double digit fixed compensation increases continue  As overall economic growth moderates in India, fixed compensation(salary) increase budgets are slowing down as well.  Increasingly, compensation professionals will need to reconcile between specific cases where practices might differ widely from macro trends.  For ex-offering 25%annual increase to a group of key employees in India, while others in the same location receive 5% to 10% increases.
  18. 18. CONCLUSION Tackle work avoidance(position based model) Inducing greater effort(performance based model) Performance based model best because it controls not only the type but also rate at which activities are performed.
  19. 19. THANKYO U