The document outlines the significance of compensation and benefits in human resources, emphasizing its role in attracting, retaining, and motivating employees while ensuring compliance and equity. It details the stages of compensation structure, including job analysis, job evaluation, pay surveys, and job pricing, alongside methods for evaluating jobs and types of rewards. Additionally, it discusses factors influencing remuneration, theories related to compensation, and the importance of performance management in determining employee pay.

1. Compensation & Benefits
(Pay Structure)
Enhance your knowledge About
Compensation and Benefits (One of
the core areas of Human Resources)
Faisal Anwar

2. Compensation & Benefits (Pay
Structure)
Objectives (Importance)
1. It attracts potential job applicants
2. It retains good employees
3. It motivates employees to make them do their best
4. It gains a competitive edge
5. It controls the compensation ensuring the optimum value within
the budget constraints
6. It complies with legal requirements
7. It ensures equitable (justifiable and unbiased) treatment
8. It accurately measures and appropriately rewards the performance

3. Stages of Compensation & Benefits
1. Policy
a) It defines how much an organization can
afford to pay employees
b) Apart From Fixed Salaries, how much/ many
other benefits an organization wants to pay or
offer
c) Whether Organization wants to lead the
Market, match the market or lag down the
market
2- Job Analysis
2 (a) Collecting Job Descriptions (Duties) and
Job Specifications (Skills, Education,
Experience required)
2 (b) Job Evaluation
(by analytical or non analytical methods)
Analytical Method= Point ranking and factor
comparison method.
Non Analytical Method = Ranking and Job
Grading
3 – Based on Job Evaluation, we create Job
Hierarchy and Weightage the Job.
a) Job Hierarchy: Position the Jobs in Job Families
and then Rank/Grade them inside their respective
Families based on Ranking/Grading Method
b) Job Weightage: Here we estimate how much
maximum, minimum and average salary should be
of a particular Job based on Point Ranking/ Factor
Comparison Method to make it Internally-
Equitable
3- Pay Surveys
To make the Jobs weightage externally
competitive we get the paid Surveys.
4- Pricing the Jobs
Finally based on Job Evaluation (2 c) and Pay
Surveys (3), all jobs are priced

4. Compensation and Benefits / Remuneration System
Best way to develop pay systems is Job Analysis
1 - Job Descriptions
(Duties) and Job
Specifications (Skills
required) are collected
for each Position
2 - Job Evaluation (by analytical or/ and non -
analytical methods)
Analytical Method= Point ranking or factor
comparison method.
Non Analytical Method = Ranking or Job Grading
3 – Based on Job Evaluation, we create Job Hierarchy
and Weightage the Job.
a) Job Hierarchy: Position the Jobs in Job Families and then Rank/Grade
them inside their respective Families based on Ranking/Grading
Method
b) Job Weightage: Here we estimate how much maximum, minimum
and average salary should be of a particular Job based on Point
Ranking/ Factor Comparison Method.
4 - Pay
Surveys
5 - Pricing
Jobs
Job Analysis

5. Non-analytical
method
category
Job Ranking
method: It is the
simplest method
of job
evaluation.
Jobs are ranked
on the basis of
the title or its
content from
highest to
lowest. In this
each job is
compared with
other and then
placed according
to that
Job-grading
method: this is a
type of ranking
method but in
this Jobs are
arranged
according to
Grades (e.g.
Grade 1, 2, 3 or
Grade A, B, C
etc) instead of
Job Titles
Analytical
method
category
Factor
comparison
method: Each
Job is divided
into number of
factors. These
factors are
assigned
compensatory
amount. Sum of
these amounts
determine the
total
compensational
value of that
specific Job.
Point ranking
method: It is an
extension of
the factor
comparison
method. Each
factor is divided
into levels which
are then
assigned points.
The points for
each factor are
summed to form a
total point score
for the job.

6. Factor Comparison Method
Skills Needed
to Perform
the Job
Efforts
Needed to
Perform the
Job
Degree of
Responsibilit
y that goes
with
Expectation
Working
Condition
•Advantages: The value of the job is
expressed in monetary terms.
•Can be applied to a wide range of jobs.
•Can be applied to newly created jobs.
•Disadvantages: The pay for each factor is
based on judgements that are subjective.
•The standard used for determining the
pay for each factor may have build in
biases that would affect certain groups of
employees (females or minorities)

7. Point Ranking Method
Skills
Needed to
Perform
the Job
1. Experi
ence
2. Educa
tion
3. Ability
Efforts
Needed to
Perform the
Job
1. Mental
2. Physical
Responsibili
ty
1. Fiscal
2. Supervi
sory
Working Condition
1. Location
2. Hazards
3. Extremes in
Environment
•Advantages: The value of the job is
expressed in monetary terms.
•Can be applied to a wide range of jobs.
•Can be applied to newly created jobs.
•Disadvantages: The pay for each factor is
based on judgments that are subjective.
•The standard used for determining the
pay for each factor may have built-in
biases that would affect certain groups of
employees (females or minorities).

8. Types of Rewards
1 - Wages
and Salary
(Wages is the
hourly rates of
pay while salary
refers to monthly
rate of pay)
2 –
Incentive
a) It depends
upon
productivit
y, sales,
profit or
cost
reduction
efforts
b) It depends
upon
performanc
e appraisals
Examples
1- Variable
Incentives
2- Bonuses
3- Pay For Results
4- Sales Incentives
4 - Fringe
benefits
these include
1. Paid Leaves
2. Transport /
Allowance
3. Housing /
Allowance
4. Gratuity
5. Educational
Facility
6. Meals
7. Employee
Discounts
Etc.
5 –
Perquisites
( Allowed to
executives
and include)
1. company car
2. Club
membership
3. Furnished
Accommodation
s
4. All extra
Fringe benefits
3 - Equity
(Shares)
It is also
based on
Performance
Appraisals
6 - Non
monetar
y
benefits
(cost
incurred by
Employer)
1. Time Off
2. Retirement
3. Medical
Insurance
4. Medical
Checkups
5. Trainings
6. Pension
7. Air Tickets
8.
Comfortable
Working
Conditions
9. Social
security
7 - Non
monetary
benefits
(Rewards)
1. Recognition
of hard
working
a) Announce
ments
b) Certificate
s
c) Trophies
2. Service
Awards
3. Promotions
4. Transfer to
different fields
Direct Compensation Indirect Compensation Non Monetary Comp

9. Remuneration
Theories
Equity Theory =
Two people on
the same level
should get same
pays
Agency Theory =
agency is
responsible to pay
to their employees
Reinforcement and
Expectant Theory =
This theory
emphasizes the
importance of a
person actually
experiencing the
award

10. Factors influencing employee remuneration
External Factors
Labour Market Cost of Living Economy
Internal Factors
Business strategy
1 - When a particular
company’s strategy focuses
on rapid growth they need
to pay more to the
employees
Job evaluation
and Performance
Appraisal

11. Methods are used to pay an
employee in an organization
Piece-rate pay Time-rate pay
Commission based
pay

12. 1 – Set Clear
Measureable
performance Goals
2 – Develop KPIs and
Resource Allocation
3 – Coaching by
Supervisor, Monitor
Goal Progress,
Conduct
Development
4 – Performance Evaluation (By
Annual / Periodic Appraisals) &
Review and Plan for next year (by
adjusting goals & KPIs)
5 - Reward system and
Administrative Decisions :
1 Paying the Incentives,
2 Pay raise,
3 Promotion,
4 Transfer,
5 Strict Actions (Warning,
Demotion, Layoff
Performance Management

13. Talent Review and Succession Planning

14. Thanks
Faisal Anwar
firstfaisal@yahoo.com
(UAE) +971 555 74 9650
(Kuwait) +965 55 294711
(Pakistan) +92 335 0979700