2. 1. Compensation is what employees receive in
exchange for their contribution to the organization,
it helps the organization achieve its objectives and
obtain, maintain, and retain a productive
workforce.
2. Compensation refers to all forms of financial
returns and tangible services and benefits
employees receive as a part of an employment
relationship
3. The objectives of Compensation management are to
help the organization achieve strategic success while
ensuring internal and external equity.
• Acquire qualified personnel
• Retain current employees
• Reward desired behavior
• Control costs
• Comply with legal regulations
Internal equity, ensure that more demanding positions or better qualified
people within the organization are paid more.
External equity, assure that jobs are fairly compensated in comparison with
similar jobs in the labor market
4. Total
Returns
Total Relational
Compensation Returns
•Recognition &
Status
Cash
Compensation Benefits •Employment
security
•Base •Income •Challenging work
protection
•Merit/Cost •Learning
of Living opportunities
•Work/life
•Short-term focus
incentives
•Allowances
•Long-term
incentives
5. Major phase of Compensation management
Job analysis
Phase-I
Identify & study jobs Position Job Job
descriptions descriptions standards
Job evaluation (develop a rational approach to pay)
Phase-II
Internal equity Job Job Factor Point
ranking grading comparison system
Wage & salary surveys
Phase-III
External equity Dept Employer Professional Self conducted
NAKER association associations surveys
Pricing jobs
Phase-IV
Matching internal
and external worth Job evaluation Labor market
worth Match worth
Rate range for each job
6. Job Ranking, rank each job subjectively according to its relative
importance (consider individual factors such as the responsibility, skill, effort
and working condition) in comparison with other jobs in the firm.
Position Rank Remark
Janitor 1 Less Importance
Secretary 2 Importance
Office Manager 3 Very Importance
7. Job Grading, it works by having each job assigned to a grade by
matching standard descriptions with each job’s description.
Job Grade Standard Description
I. Work is simple and highly repetitive, done under close supervision, requiring
minimal training and little responsibility or initiative
Ex: Janitor, file clerk
II. Work is simple and highly repetitive, done under close supervision, requiring some
training or skill. Employee is expected to assume responsibility or exhibit initiative
only rarely.
Ex: Clerk-typist I, Machine cleaner
III. Work is simple, with little variation, done under general supervision. Training or skill
required. Employee has minimum responsibilities and must take some initiative to
perform satisfactorily.
Ex: Part expediter, machine oiler, Clerk-typist II.
IV Work is moderately complex, with some variation, done under general supervision.
High level of skill required. Employee is responsible for equipment or safety;
regularly exhibits initiative.
Ex: Machine operator I, Tool and die apprentice
V Work is complex, varied, done under general supervision. Advance skill level
required. Employee is responsible for equipment and safety; shows high degree of
initiative.
Ex: Machine operator II, Tool and die specialist
8. Factor Comparison, comparing the critical or compensable
factors (common job elements such as responsibility, skill, mental effort,
physical effort, and working condition) for each key job (commonly found
throughout the organization), and put wages for each job as its
compensation.
Key Jobs
Compensable or critical factors
Forklift
Machinist Secretary Janitor File Clerk
Driver
Responsibility 3,20 1,80 2,40 0,80 1,40
Skill 4,00 1,80 2,00 0,80 1,30
Mental Effort 3,00 1,20 1,80 0,50 1,40
Physical Effort 2,00 1,80 0,70 2,70 0,90
Working Condition 0,07 0,60 0,60 1,90 0,60
Total 12,27 7,20 7,50 6,70 5,60
Wage Rate ($) 12,27 7,20 7,50 6,70 5,60
10. Point System, this system evaluates the compensable factors of each
job, but instead of using wages as the factor comparison does, it uses
points.
Level
Compensable or critical factors Minimum Low Moderate High
I II III IV
1 Responsibility
a Safety of others 25 50 75 100
b Equipment and materials 20 40 60 80
c Assisting trainees 5 20 35 50
d Product/ service quality 20 40 60 80
2 Skill
a Experience 45 90 135 180
b Education/ training 25 50 75 100
3 Effort
a Physical 25 50 75 100
b Mental 35 70 105 150
4 Working Condition
a Unpleasant condition 20 40 60 80
b Hazard 20 40 60 80
Total
1000
11. 1. Responsibility
b. Equipment and materials.
Each employee is responsible for conserving the company’s equipment and
materials. This include reporting malfunctioning equipment or defective materials,
keeping equipment and materials cleaned or in proper order, and maintaining,
repairing, or modifying equipment and materials according to individual job duties.
The company recognizes that the degree of responsibility for equipment and
material varies widely throughout the organization.
Level I. Employee reports malfunction equipment or defective materials to
immediate superior.
Level II. Employee maintains the appearance of equipment or order of
materials and has responsibility for the security of such equipment
or materials.
Level III. Employee performs preventive maintenance and minor repairs on
equipment or correct minor defects in materials.
Level IV. Employee performs major maintenance or overhauls of equipment
or is responsible for deciding type, quantity, and quality of materials
to be used.
12. Wage and Salary surveys, suatu aktifitas penelitian yang bertujuan
untuk mendapatkan informasi tentang standar upah dan gaji yang
berlaku dipasar tenaga kerja (labor market), dan akan dipergunakan
sebagai referensi dalam penetapan besaran upah dan gaji (pay level)
oleh satu organisasi/ perusahaan.
Wages or Salaries
Point Values
13. Problematika kompensasi
1. Strategic Objectives, pola kompensasi dapat dipergunakan untuk
mendorong terciptanya kerjasama tim, apabila besaran kompensasi
dikaitkan dengan tingkat kinerja tim (bukan kinerja individu).
2. Prevailing wage rates, kondisi ini terjadi apabila permintaan TK
jauh melebihi penawaran yang tersedia di pasar tenaga kerja,
sehingga tingkat upah yang diminta melebihi tingkat normal.
3. Union power, kekuatan menawar (bargaining power) yang dimiliki
Serikat Buruh, dapat berpengaruh pada kesepakatan upah.
14. 4. Government regulations, ketentuan-ketentuan pemerintah yang
mengatur hubungan industrial, terkadang menimbulkan ketidak
samaan pemahaman antara buruh dan majikan.
5. Productivity and costs, kondisi ideal adalah bila buruh dibayar
sesuai dengan produktifitasnya.
15. Nontraditional Compensation
Kompensasi tambahan yang diberikan kepada karyawan/ unit
kerja, apabila kinerja seorang karyawan tersebut melebihi tingkat
yang telah ditentukan (Insentive), dan atau apabila unit kerja
dapat melakukan penghematan biaya/ peningkatan laba (gain-
sharing).
16. Three Primary Reasons for Adopting Pay
Incentive Plans
1. Increase employee motivation.
2. Minimize costs per unit produced.
3. Attract and retain a high
performing workforce.
17. PROS
• Individual motivation.
• Employee perception of equity – high
performance linked to high reward.
CONS
• Inflexible behavior: focus only on rewards.
• Undesireable outcomes: low quality, equipment
damage, poor customer service, etc.
• Low cooperation.
• Perceived inequity & low distributive and
procedural justice.
18. Group/Team
• Equal rewards for all group
members.
• Differential rewards based on
individual merit.
• Differential rewards between
groups based on performance goals.
19. PROS
• Individual motivation.
• Employee cooperation.
• Broader employee focus: totality of outcomes.
• Employee perception of equity tied to reward
of whole group.
CONS
• Difficulty in designating operating groups.
• Perception of individual inequity tied to “free
rider” effect.
