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Foundation Certificate in HRM
Compensation & Benefits
Managements
Organizational Goals & Strategies
• All departmental goals and strategies
(ex: recruitment strategy &
compensation strateg...
Organizational Goals & Strategies
• Long term strategic objectives have short
term requirements.
• All executives , manage...
Development of an Organization
• How does an organization develop?
Activities in the Development of an Organization
Grouping Tasks into Jobs
Defining Work Unit Activities
Determining Object...
Establishing a Philosophy
• The philosophy of an organization establishes
general guidelines and provides standards for
de...
Identifying the Mission
• The Mission Statement details the reason
for the existence of the organization. It
describes in ...
Developing Policy
• The policy must support the mission of
the organization.
• It must be broad enough to relate to
differ...
Formulating Organizational Strategy
• Responsibility of top management.
• Provides the foundation for future growth and
de...
Determining Objectives & Goals
• Translate mission statement into specific
output requirements.
• Into more specific short...
Defining Work Unit Activities
• Each unit must develop its own function
statement.
• It identifies the principal activitie...
Grouping Tasks into Jobs
• From the activities assigned to each
work unit come the tasks assigned to
specific individuals ...
Employees- A critical resource
• Quality & quantity of organizational
output depend on the skill, interest,
and effort of ...
Employees: A critical resource: Division of labor
The basis of employer – employee exchange
process is the division of lab...
Employees- A critical resource
• It is important to understand the effect
of Pay Satisfaction, Job Satisfaction,
and Organ...
Pay Satisfaction
• Employees compare their pay rate with: co-
workers and workers in other organizations with
identical or...
Job Satisfaction
• Recognition of a job well done, an
opportunity to advance in the current
job or current career ladder, ...
Job Satisfaction & Pay Satisfaction
Pay and job satisfaction are entirely
different but they interact and influence
each o...
Organizational Satisfaction
• Includes, but not limited to, job
satisfaction and pay satisfaction.
• Can be promoted by re...
Organizational Satisfaction
• Security in employment can
minimize frustration and stress
arising from job and pay
dissatis...
Satisfaction
• Reward Systems should be designed,
developed, and implemented in a way
leading to improved employee pay, jo...
Satisfaction
• In an employment perspective:
satisfaction means the fulfillment of an
obligation (employee and employer).
...
Compensation
Cash, Bonuses, Insurance,
Vacation, Holidays
Perks, Recognition
What is compensation
• Compensation & Benefits are also
known as Total Rewards
• An exchange of payment from an
employer f...
Organization’s Strategic Focus
• C & B (Total Reward System) refers to all
forms of financial and non-financial returns
(c...
26
What is Compensation?
• Compensation represents both the
intrinsic and extrinsic rewards
employees receive for performi...
27
Extrinsic vs. Intrinsic Compensation
Core
compensation
• Hourly wage
Annual /
monthly
salary
Adjustments
to core
compe...
Extrinsic vs. Intrinsic Compensation
29
Extrinsic Compensation.
• Core Compensation
1) Salaries (Monthly).
2) Wages (Hourly, Daily, or Weekly).
• Cost-of-Leavi...
30
Extrinsic Compensation
• Employee Benefits:
 Legally Required Benefits
1) Social Insurance
2) Sick leave.
 Discretion...
31
Compensation
• In many organizations,
Compensation & Benefits costs are
the single largest operating
component.
Compensation: A Definition . . .
• All forms of
–financial return,
–tangible services
–benefits
that employees receive as ...
Definitions
Compensation:
A money value is presented in return of an
employee efforts doing certain tasks or jobs
for defi...
Definitions
Benefits:
A certain type of financial or non financial
rewards are presented for the purpose of
rewarding & re...
Definitions
Salary:
A money value is presented in return of an
employee efforts doing certain tasks or jobs, on
monthly or...
Compensation systems
• Should reflect the idea that
employees are valued contributors
in the success of the organization.
...
Some Compensation Strategies
promoting fair treatment
• Relating job worth to differences in job
requirements.
• Recognizi...
Some Compensation Strategies
promoting fair treatment
• Supporting team and work unit
cooperative efforts.
• Designing com...
Compensation Policy Objectives
• To Reward Past Performance
• To Remain Competitive in Marketplace
• To Maintain Equity Am...
compensation & benefits
• A competitive compensation & benefits
program:
- Attracts
- Retains
- Motivates
Compensation
• Used to Serve Organizations Goals
• Enhance Employee Needs but Create Profits
• Relative Worth of Job
• Sig...
Corporate Policies, Competitive Strategy
and Compensation
• The compensation plan should support and be
aligned with the f...
Compensation Policy Issues
• Pay for performance
• Pay for seniority
• The pay cycle
• Salary increases and promotions
• O...
Compensation Policy Issues
• Whether to emphasize seniority or
performance is a compensation policy
issue.
• seniority-bas...
Compensation Policy Issues
• Salary Compression is a salary inequity problem
generally caused by inflation resulting in lo...
Compensation Policy Issues
• Geography : cost of living differences between
cities can be considerable; employers handle c...
Compensation Policy Issues
• Compensating Expatriates employees:
multinational companies compensate expatriate
employees t...
Components of a Total Compensation
• Financial
• Direct
– wages, salaries, commissions, bonuses
• Indirect
– insurance pla...
Components of a Total Compensation
• Non-Financial
• The Job
– interesting, challenging, responsible
– opportunity for rec...
Components of a Total Compensation
• There are two ways to make direct financial
payments to employees:
• you can base the...
Pay-for-Performance Standard
Standard by which
managers tie
compensation to
employee effort and
performance.
Pay-for-Performance Standard
• Merit Pay
• Cash Bonuses
• Incentive Pay
Components of a Total Compensation
• It is common for Blue-collar workers to get
hourly or daily wages while others like
m...
Components of a Total Compensation
• Employers often create pay plans in which
employees receive some combination of time-...
Compensation & Benefits
Basic Factors in determining pay rate in any
organization:
 Legal Consideration
 Compensation po...
Factors that Influence Wage Levels
External Factors Internal Factors
WAGE
MIX
Conditions of
Labor Market
Area Wage
Rates
C...
Pay Equity
An employee’s perception
that compensation
received is equal to the
value of the work
performed.
Equity
Equity is an employee’s perception
that compensation received is equal
to the value of the work performed
Equity and Its Impact on Pay
Rates
External
equity
Procedural
equity
Internal
equity
Individual
equity
Forms of Compensati...
Equity
• The equity theory of motivation assumes
that people have a need for, values and seek
fairness at work . There are...
Equity
• Individual Equity: the fairness of an
individual's pay compared with his/her
co-workers earnings for the same or
...
Methods to address equity issues
• Salary surveys to monitor and
maintain external equity.
• Job Analysis and Job Evaluati...
Methods to address equity issues
• Performance Appraisal and various types of
incentive pay to maintain individual equity....
Compensation & Benefits System
1- Direct Compensation (Pay System)
2- Indirect Compensation (Benefits)
(some are legally m...
Direct
Compensation Indirect Compensation
Total Compensation
Base Pay
• Wages
• Salary
Incentives
• Commissions
• Piece ra...
Compensation & Benefits
Com & Ben – Methods of payment:
A) Direct Payment ( Financial) :
 Position ( title)
 Basic Salar...
Compensation & Benefits
Com & Ben – Methods of payment:
B) Indirect Payment ( Benefits) :
 life insurance
 Social Insura...
Compensation & Benefits
Com & Ben – Methods of payment:
B) Indirect Payment ( Benefits) :
 Staff loans
 Uniforms
 Staff...
Bonus
• Incentive payment that is
supplemented to the base
wage.
Profit Sharing
Any procedure by which an
employer pays, or makes
available to all regular
employees, in addition to
base p...
Gain sharing Plans
Programs under which both employees
and the organization share the
financial gains according to a
prede...
Piecework
Work paid according to the
number of units
produced.
Straight Piecework
• Incentive plan under which
employees receive a certain
rate for each unit produced.
Classification
• Exempt
• Non-Exempt
Exempt Employee
Employees not covered by the overtime
“Management”
Nonexempt Employees
Employees covered by the overtime
“Labor”
Consumer Price Index (CPI)
• Measure of the average change in prices
over time in a fixed “market basket” of
goods and ser...
Escalator Clauses
• Clauses in labor
agreements that provide
for quarterly cost-of-living
adjustments in wages,
basing the...
Real Wages
• Wage increases larger than rises in the
consumer price index; that is, the real
earning power of wages.
Relationship of Compensation
Management to Other HRM Functions
81
How the Compensation Function fits
into HR Department:
Compensation, Recruitment, and Selection.
Compensation and Per...
Legislation
&
Compensation
Key Compensation Legislation
- Minimum wages
- Periodic annual increment (7% ‫التأميني‬ ‫الثابت‬ ‫علي‬ (
- Deductions (‫تأ...
Minimum Wages
• National Council for Wages established under
the chairmanship of the Ministry of Planning.
‫التخطيط‬ ‫لوزا...
Annual Increment
Minimum periodic annual increments:
Employees are entitled to a periodical annual
increment of not less t...
Deductions
• Employer cannot deduct more than
10% from worker wage for payment of
money employer had loaned to
him/her.
• ...
Social Security and Public Health Insurance
• Employers and employees must pay social
insurance contribution.
• Monthly ba...
Overtime Pay
• 35% of normal pay for overtime work
during day light on a working day.
• 70% for overtime worked at night o...
Profit sharing
• Employees of a Joint Stock Company, limited
Liability Company ( with a capital equal or
more than L.E 250...
Leaves
• Annual Leaves
• Public Holidays
• Maternity Leave
• Pilgrimage
• Sick Leaves
Unemployment Insurance
• A law that establishes a fund to compensate
workers/employees whose wages are
suspended due to fi...
TAXATION LAWS
Tax Law 91 year 2005
Tax Law 111 year 2013
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Compensation and benefits management

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An overview of the Compensation and Benefits rules , types , and importance to the organisation

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Compensation and benefits management

  1. 1. Foundation Certificate in HRM Compensation & Benefits Managements
  2. 2. Organizational Goals & Strategies • All departmental goals and strategies (ex: recruitment strategy & compensation strategy ) should be aligned with, supportive of, and leading to the goals and objectives of the organization.
  3. 3. Organizational Goals & Strategies • Long term strategic objectives have short term requirements. • All executives , managers, HR, should understand how all the short term and departmental objectives and strategies are integrated and interact towards achieving the long term objectives of the organization.
  4. 4. Development of an Organization • How does an organization develop?
  5. 5. Activities in the Development of an Organization Grouping Tasks into Jobs Defining Work Unit Activities Determining Objectives & Goals Formulating Organizational Strategy Developing Policy Identifying the mission Establishing a Philosophy
  6. 6. Establishing a Philosophy • The philosophy of an organization establishes general guidelines and provides standards for decisions and actions taken. • Describes the values of top management. • A positive relationship between the values of the members of an organization and the philosophy-based behaviours of leaders is an important factor of success.
  7. 7. Identifying the Mission • The Mission Statement details the reason for the existence of the organization. It describes in broad and general terms what the organization wishes to accomplish: the product it intends to provide and how it intends to provide it. • It identifies desired results that must be translated into actions.
  8. 8. Developing Policy • The policy must support the mission of the organization. • It must be broad enough to relate to different actions and behaviours required of the various work units. • Must be understood by all members of the organization.
  9. 9. Formulating Organizational Strategy • Responsibility of top management. • Provides the foundation for future growth and development of organization. • Must have a clear vision and be realistic. • From OS, sub-strategies are developed. • All action plans and departmental goals and tactics should promote the accomplishment of the organizational objectives.
  10. 10. Determining Objectives & Goals • Translate mission statement into specific output requirements. • Into more specific short-term goals for work units. • Establish levels of performance needed. • In making this transition from strategic to tactical operations, the most effective and efficient means of accomplishing the organization’s mission must be determined.
  11. 11. Defining Work Unit Activities • Each unit must develop its own function statement. • It identifies the principal activities of the work unit. • It assists in integrating the top-down established organizational objectives and goals with the assignments of each working unit.
  12. 12. Grouping Tasks into Jobs • From the activities assigned to each work unit come the tasks assigned to specific individuals in the unit. (tasks, duties, and responsibilities of a job).
  13. 13. Employees- A critical resource • Quality & quantity of organizational output depend on the skill, interest, and effort of employees.
  14. 14. Employees: A critical resource: Division of labor The basis of employer – employee exchange process is the division of labor and performance. - Board of Directors - Senior Managers - Operating Managers - Sales people - Technicians - Skilled Workers - Semi skilled workers - White, blue, and pink collars
  15. 15. Employees- A critical resource • It is important to understand the effect of Pay Satisfaction, Job Satisfaction, and Organizational Satisfaction on individual behaviour of employees.
  16. 16. Pay Satisfaction • Employees compare their pay rate with: co- workers and workers in other organizations with identical or similar assignments, and others performing different activities. • Result of comparison influence the employee’s performance, or even his or her decision to stay or leave the company.
  17. 17. Job Satisfaction • Recognition of a job well done, an opportunity to advance in the current job or current career ladder, taking a bridging job to a new career path… all enhance job satisfaction.
  18. 18. Job Satisfaction & Pay Satisfaction Pay and job satisfaction are entirely different but they interact and influence each other. A positive view of one can improve the other.
  19. 19. Organizational Satisfaction • Includes, but not limited to, job satisfaction and pay satisfaction. • Can be promoted by recognizing and understanding organizational philosophy and policies.
  20. 20. Organizational Satisfaction • Security in employment can minimize frustration and stress arising from job and pay dissatisfaction. • Recognizing fairness in all personnel decisions might limit frustration about a specific issue.
  21. 21. Satisfaction • Reward Systems should be designed, developed, and implemented in a way leading to improved employee pay, job, and organizational satisfaction. • Satisfaction is individually based and dynamic.
  22. 22. Satisfaction • In an employment perspective: satisfaction means the fulfillment of an obligation (employee and employer). 1- What the organization expects from you 2- These are the rewards we offer you in exchange for the availability of your skills and efforts (Compensation & Benefits)
  23. 23. Compensation Cash, Bonuses, Insurance, Vacation, Holidays Perks, Recognition
  24. 24. What is compensation • Compensation & Benefits are also known as Total Rewards • An exchange of payment from an employer for the services provided by employees
  25. 25. Organization’s Strategic Focus • C & B (Total Reward System) refers to all forms of financial and non-financial returns (cash & non-cash) employees receive from their employers. • The concept behind C & B approach is to motivate employees to give more by fulfilling their needs.
  26. 26. 26 What is Compensation? • Compensation represents both the intrinsic and extrinsic rewards employees receive for performing their jobs.
  27. 27. 27 Extrinsic vs. Intrinsic Compensation Core compensation • Hourly wage Annual / monthly salary Adjustments to core compensation • Cost-of living Seniority Merit Incentive Person- focused Total Compensation Extrinsic Compensation Intrinsic Compensation Legally Required Employee Benefits • Social Security Act •Workers compensation laws Family & Medical leave Act Discretionary Employee Benefits Health insurance Disability insurance life insurance retirement plans paid time-off Accommodation and enhancement Job characteristics • Skill variety •Task identity Task significance Autonomy Feedback
  28. 28. Extrinsic vs. Intrinsic Compensation
  29. 29. 29 Extrinsic Compensation. • Core Compensation 1) Salaries (Monthly). 2) Wages (Hourly, Daily, or Weekly). • Cost-of-Leaving Adjustment (COLAs). 1) Consumer Price Index (CPI). 2) Seniority Pay. 3) Merit Pay. 4) Incentive Pay. 5) Person-focused Pay (Pay-for-Knowledge and Skill-Based Pay).
  30. 30. 30 Extrinsic Compensation • Employee Benefits:  Legally Required Benefits 1) Social Insurance 2) Sick leave.  Discretionary Benefits (not legally obligatory): 1) Health Insurance 2) Life Insurance. 3) Retirement Plans. 4) Paid time-off.
  31. 31. 31 Compensation • In many organizations, Compensation & Benefits costs are the single largest operating component.
  32. 32. Compensation: A Definition . . . • All forms of –financial return, –tangible services –benefits that employees receive as part of their employment relationship
  33. 33. Definitions Compensation: A money value is presented in return of an employee efforts doing certain tasks or jobs for definite or indefinite time frame . It varies in terms of formation and type presenting based on the nature of job. It is an obligatory right forced by law.
  34. 34. Definitions Benefits: A certain type of financial or non financial rewards are presented for the purpose of rewarding & recognition, to the employee in returns of his efforts doing a job. Some benefits are obligatory and some are not forced by Law.
  35. 35. Definitions Salary: A money value is presented in return of an employee efforts doing certain tasks or jobs, on monthly or annually basis. Manly are given to white collars. Wage: A money value is presented in return of an employee efforts doing certain tasks or jobs, on hourly or daily basis. Manly are given to Blue collars.
  36. 36. Compensation systems • Should reflect the idea that employees are valued contributors in the success of the organization. • Should promote fair treatment.
  37. 37. Some Compensation Strategies promoting fair treatment • Relating job worth to differences in job requirements. • Recognizing the worth and value of skills and knowledge. • Rewarding employee contributions and results achieved. • Promoting continued employee acquisition and upgrading of knowledge and skills.
  38. 38. Some Compensation Strategies promoting fair treatment • Supporting team and work unit cooperative efforts. • Designing compensation plans that compete within labor markets. • Aligning compensation of all employees with objectives & goals of organization. • Providing a compensation package that enhances current lifestyles and provides long-term protection for employees.
  39. 39. Compensation Policy Objectives • To Reward Past Performance • To Remain Competitive in Marketplace • To Maintain Equity Among Employees • To Motivate Future Performance • To Maintain a Realistic Budget • To Attract New Employees • To Reduce Turnover
  40. 40. compensation & benefits • A competitive compensation & benefits program: - Attracts - Retains - Motivates
  41. 41. Compensation • Used to Serve Organizations Goals • Enhance Employee Needs but Create Profits • Relative Worth of Job • Significant Part of HRM • Formal Policy Essential
  42. 42. Corporate Policies, Competitive Strategy and Compensation • The compensation plan should support and be aligned with the firm's strategic aims. • HR compensation manager will write the policies in coordination with top management, in a manner that is consistent with the firm's strategic aims.
  43. 43. Compensation Policy Issues • Pay for performance • Pay for seniority • The pay cycle • Salary increases and promotions • Overtime and shift pay • Probationary pay • Paid and unpaid leaves • Paid holidays • Salary compression • Geographic costs of living differences
  44. 44. Compensation Policy Issues • Whether to emphasize seniority or performance is a compensation policy issue. • seniority-based pay may be of advantage to the extent that employees seek seniority as an objective standard yet a disadvantage is that top performers may get the same raises as poor ones.
  45. 45. Compensation Policy Issues • Salary Compression is a salary inequity problem generally caused by inflation resulting in longer-term employees in a position earning less than workers entering the firm today. • Prices go up faster than company's salaries and firms need a policy to handle it, One policy is to install a more aggressive merit pay program, Others authorize supervisors to recommend equity adjustments for selected employees who are both highly valued and victims of pay compression..
  46. 46. Compensation Policy Issues • Geography : cost of living differences between cities can be considerable; employers handle cost of living differences to give the transferred person a nonrecurring payment, others pay a differential ongoing cost in addition to one time allocation, while others simply raise the employee's base salary.
  47. 47. Compensation Policy Issues • Compensating Expatriates employees: multinational companies compensate expatriate employees those who are sent overseas using two basic international compensation policies; home-based and host-based plans.
  48. 48. Components of a Total Compensation • Financial • Direct – wages, salaries, commissions, bonuses • Indirect – insurance plans • life, health, dental, staff meals, laptops & mobiles – social assistance benefits • retirement plans, social security – paid absences • vacations, holidays, sick leave
  49. 49. Components of a Total Compensation • Non-Financial • The Job – interesting, challenging, responsible – opportunity for recognition, advancement – feeling of achievement • Job Environment – policies, supervision, co-workers, status symbols, working conditions, flextime, compressed work week, job sharing, telecommuting, flexible benefits programs
  50. 50. Components of a Total Compensation • There are two ways to make direct financial payments to employees: • you can base them on time or on performance. • Time-based pay is still the foundation of most employers' pay plans.
  51. 51. Pay-for-Performance Standard Standard by which managers tie compensation to employee effort and performance.
  52. 52. Pay-for-Performance Standard • Merit Pay • Cash Bonuses • Incentive Pay
  53. 53. Components of a Total Compensation • It is common for Blue-collar workers to get hourly or daily wages while others like managers or white collar employees are paid by month . • The second direct payment option is to pay for performance, piecework is a good example, it ties compensation to the amount of production or number of pieces the worker turns out while sales commission is another example.
  54. 54. Components of a Total Compensation • Employers often create pay plans in which employees receive some combination of time- based pay plus incentives. • Several factors influence the design of pay plans: legal, union, company policy and equity.
  55. 55. Compensation & Benefits Basic Factors in determining pay rate in any organization:  Legal Consideration  Compensation policies  Union influences  Cost of living & Inflation rates  Markets Demand & Supply  Financial positioning ( Ability to pay)  Internal & External Equity
  56. 56. Factors that Influence Wage Levels External Factors Internal Factors WAGE MIX Conditions of Labor Market Area Wage Rates Cost of Living Collective Bargaining Legal Requirements Compensation Policy of Organization Worth of Job Employee’s Relative Worth Employer’s Ability to Pay
  57. 57. Pay Equity An employee’s perception that compensation received is equal to the value of the work performed.
  58. 58. Equity Equity is an employee’s perception that compensation received is equal to the value of the work performed
  59. 59. Equity and Its Impact on Pay Rates External equity Procedural equity Internal equity Individual equity Forms of Compensation Equity
  60. 60. Equity • The equity theory of motivation assumes that people have a need for, values and seek fairness at work . There are four forms of equity: • External Equity: how a job's pay rate in one company compares to the job's pay rate in other companies. • Internal Equity: how fair the job's rate is when compared to other jobs within the same company.
  61. 61. Equity • Individual Equity: the fairness of an individual's pay compared with his/her co-workers earnings for the same or similar jobs within the company based on each individual performance. • Procedural Equity: the perceived fairness of the processes and procedures used to make decisions regarding the allocation of pay.
  62. 62. Methods to address equity issues • Salary surveys to monitor and maintain external equity. • Job Analysis and Job Evaluation to maintain internal equity.
  63. 63. Methods to address equity issues • Performance Appraisal and various types of incentive pay to maintain individual equity. • Communications, grievance mechanisms and employees' participation in developing the company's pay plan help employees view the pay process as transparent and fair. • Some firms administer surveys to monitor employees' attitudes regarding the pay plan, but others maintain strict secrecy over pay matters.
  64. 64. Compensation & Benefits System 1- Direct Compensation (Pay System) 2- Indirect Compensation (Benefits) (some are legally mandate and some aren’t)
  65. 65. Direct Compensation Indirect Compensation Total Compensation Base Pay • Wages • Salary Incentives • Commissions • Piece rate • Bonuses • Stock Options • Profit Sharing • Gains Sharing Pay for Time Not Worked • Vacations • Breaks • Holidays • Sick Days • Jury Duty Insurance Plans • Medical • Dental • Life Security Plans • Pension • Social Security • Disability Insurance Employee Services • Educational Assistance • Recreational Programs • Food Services
  66. 66. Compensation & Benefits Com & Ben – Methods of payment: A) Direct Payment ( Financial) :  Position ( title)  Basic Salary / Wage  Bonus  Commission  Profit Share  Incentives  Cash Allowances  Overtime.
  67. 67. Compensation & Benefits Com & Ben – Methods of payment: B) Indirect Payment ( Benefits) :  life insurance  Social Insurance  Medical Insurance  Staff Meals  Housing options  Transportation tools  lap tops  Clubs memberships
  68. 68. Compensation & Benefits Com & Ben – Methods of payment: B) Indirect Payment ( Benefits) :  Staff loans  Uniforms  Staff sales  Mobiles phones  Public Holidays  Paid Vacations Training & Development plans
  69. 69. Bonus • Incentive payment that is supplemented to the base wage.
  70. 70. Profit Sharing Any procedure by which an employer pays, or makes available to all regular employees, in addition to base pay, special current or deferred sums based upon the profits of the enterprise.
  71. 71. Gain sharing Plans Programs under which both employees and the organization share the financial gains according to a predetermined formula that reflects improved productivity and profitability.
  72. 72. Piecework Work paid according to the number of units produced.
  73. 73. Straight Piecework • Incentive plan under which employees receive a certain rate for each unit produced.
  74. 74. Classification • Exempt • Non-Exempt
  75. 75. Exempt Employee Employees not covered by the overtime “Management”
  76. 76. Nonexempt Employees Employees covered by the overtime “Labor”
  77. 77. Consumer Price Index (CPI) • Measure of the average change in prices over time in a fixed “market basket” of goods and services. “Inflation Influence”
  78. 78. Escalator Clauses • Clauses in labor agreements that provide for quarterly cost-of-living adjustments in wages, basing the adjustments upon changes in the consumer price index.
  79. 79. Real Wages • Wage increases larger than rises in the consumer price index; that is, the real earning power of wages.
  80. 80. Relationship of Compensation Management to Other HRM Functions
  81. 81. 81 How the Compensation Function fits into HR Department: Compensation, Recruitment, and Selection. Compensation and Performance Appraisal. Compensation and Training. Compensation and Employee Termination. Compensation and Employee Relations.
  82. 82. Legislation & Compensation
  83. 83. Key Compensation Legislation - Minimum wages - Periodic annual increment (7% ‫التأميني‬ ‫الثابت‬ ‫علي‬ ( - Deductions (‫تأمينات‬ ‫و‬ ‫ضرائب‬) - Social security and public health insurance (‫صحي‬ ‫تأمين‬ ‫و‬ ‫اجتماعي‬ ‫تأمين‬) - Overtime - Profit Sharing - Leaves - Unemployment insurance - Income tax exemption
  84. 84. Minimum Wages • National Council for Wages established under the chairmanship of the Ministry of Planning. ‫التخطيط‬ ‫لوزارة‬ ‫التابعة‬ ‫لألجور‬ ‫العامة‬ ‫الهيئة‬ • Wage is to be determined by individual contract, if not the worker shall be entitled to a wage of equivalent position. • Wages (even based on production or commission) cannot be less than the minimum wages stated by the council.
  85. 85. Annual Increment Minimum periodic annual increments: Employees are entitled to a periodical annual increment of not less than 7% of the basic salary on which the social insurance subscriptions are calculated insured ( 7%‫التأميني‬ ‫الثابت‬ ‫الجزء‬ ‫من‬ )
  86. 86. Deductions • Employer cannot deduct more than 10% from worker wage for payment of money employer had loaned to him/her. • Under certain conditions 25% can be deducted for settlement of debt (by court order) • Increased to 50% for alimentary debt.(‫)النفقة‬
  87. 87. Social Security and Public Health Insurance • Employers and employees must pay social insurance contribution. • Monthly basic salary up to 987.5 L.E (26% by employer & 14% by employee) ‫الثابت‬ ‫الجزء‬ ‫في‬ ‫عليه‬ ‫التأمين‬ ‫يمكن‬ ‫الذي‬ ‫األقصي‬ ‫الحد‬ ‫هو‬ ‫التأميني‬987.5‫المعاش‬ ‫يزيد‬ ‫الجزء‬ ‫هذا‬ ‫زاد‬ ‫كلما‬ ‫و‬ ‫جنيه‬ • Variable up to 1590 L.E (24% by employer and 11% by employee) ‫الجزء‬ ‫في‬ ‫عليه‬ ‫التأمين‬ ‫يمكن‬ ‫الذي‬ ‫األقصي‬ ‫الحد‬‫المتغير‬‫التأمين‬ ‫هو‬1590‫جنيه‬‫الجزء‬ ‫هذا‬ ‫زاد‬ ‫كلما‬ ‫و‬‫المكافأة‬ ‫تزيد‬
  88. 88. Overtime Pay • 35% of normal pay for overtime work during day light on a working day. • 70% for overtime worked at night on a working day. • 100% on rest day • 200% on official holidays
  89. 89. Profit sharing • Employees of a Joint Stock Company, limited Liability Company ( with a capital equal or more than L.E 250,000), or foreign branch are entitled to a share in the distributable profits • The share is fixed at an amount not less than 10% of the distributable profits and not more than the total annual salaries of the employees.
  90. 90. Leaves • Annual Leaves • Public Holidays • Maternity Leave • Pilgrimage • Sick Leaves
  91. 91. Unemployment Insurance • A law that establishes a fund to compensate workers/employees whose wages are suspended due to firm closure or downsizing. • The fund’s resources come from 1% deduction from the base salaries of the employees in firms with over 30 workers, and government contribution. 1%‫المرتبات‬ ‫إجمالي‬ ‫علي‬ ‫شهريا‬(‫التأميني‬ ‫األساسي‬) ‫العاملين‬ ‫طوارئ‬ ‫لصندوق‬
  92. 92. TAXATION LAWS Tax Law 91 year 2005 Tax Law 111 year 2013

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