an bird eye view on compensation

2. What is compensation
 Compensation is a tool used by management for a
variety of purposes to further the existance of the
company. Compensation may be adjusted according
the the business needs, goals, and available
resources.
 “Compensation means all forms of pay or reward
going to employees and arising from their
employment ”
… Gary dessler

3. Objectives of compensation
 To establish equity
 To improve employees efficiency
 To allocate labor effectively
 To maintain macroeconomic stability
 To control costs
 To maintain industrial peace
 To comply with legal regulations

4. Essentials of compensation
 Availability
 Timeliness
 Performance related
 Durability
 Equity
 Visibility
 Flexibility
 Cost effective

5. Principles of compensation

6. Theroies of compensation
 In order to understand which components of
remuneration are more effective, we need to
understand the conceptual framework or theories or
employee remuneration.
 Three such theories are reinforcement and
expectancy theories, equity theory and agency
theory.

7. Theories of compensation
Reinforcement and Expectancy Theories postulates that a
behavior which has a rewarding experience is likely to be
repeated. Expectancy perceptions often have more to do
with job design and training than pay systems.
Equity Theory
Adams equity theory says that an employee who perceives in
equity in his or her rewards seeks to restore equity.
AgencyTheory
The agency theory focuses on the divergent interests and
goals of the organization’s stake holders and the way that
employee remuneration can be used to align these interests
and goals.

8. Difference between wage and salary

9. Components of compensation

10. Monetory compensation
Direct Methods
 Basic salary is the minimum annual amount
received or the standard salary that an employee
receives for doing a specific job.
 Bonus represents a share of profits as a result of
joint contribution of capital and labor.
 Allowences is greatly defined as a fixed quantity of
money given in addition to salary for meeting
specific requirement.
 Incentives is anything which attracts an employee
and stimulates him to work more effectively.

11. Monetory compensation
Indirect methods
 Leave policy enables employee to enjoy leaves alloted to them
 Over Time policy is time put in by employees and work done by
them beyond normal hours of work.
 Hospitalization should be provided for regular check-ups.
 Insurance gives them emotional security and feel themselves
valued in organization.
 Leave travel means employee are provided with leave travel
allowances with families.
 Retirement benefits are provide by organization which benefits
them when they are retired at prescribed age.

12. Non monetory compensation
 Achievement is need for competitive success measured
against a person’s measurable standards.
 Recognisation means showing appreciation to employees for
effective performance, significant achievements to
organization.
 Responsibilty may motivate employee when given more of it
for their own work.
 Influence can motivate people to exert power and is an
aspect of empowerment.
 Personal growth will help an individual to to contibute more
with extended capabilities .

13. Presented to
Dr G.Suma
Presented by
Mounika Ramachandruni