It is important to ensure that the approach taken is guided by the compensation philosophy and is applied consistently. Ensuring that established guidelines are followed will prevent offering a compensation package so tailored to a person that the organization is jeopardized by having too heavy a financial burden or that flexible arrangements actually hinder the critical work from being completed. It takes a carefully crafted balance between the organizational needs and the individual considerations to arrive at the optimal compensation structure.

1.  PREPARED BY:
SYED IJLAL AHMED WALEED
UNIVERSITY OF KARACHI
MHRM
 SUBJECT: COMPENSATION & BENEFITS
1

2. We will cover the following:
– Remuneration & its Components
– Compensation Administration Process
– Wage & salary Administration
– Different types of Incentives and Incentives Plan
– International Compensation.
Wage, Salary and
Reward Administration

3.  Results from employment with the organization
 Includes all forms of financial returns and tangible services &
benefits employees receive as part of employment relationship:
Intrinsic
Achievement
Feelings of accomplishment
Informal Recognition
Job Satisfaction
Personal growth
Status
Extrinsic
Fringe Benefits
Incentive Payments
Pay
Promotion
Social Relationships
Work Environment

4. Hourly
and
monthly
Rated
Wages
and
Salaries
Direct Indirect
Remuneration
Financial Non Financial
Incentives
Individual
Plans
Group
Plans
Fringe
Benefits
P.F,
Gratuity,
Medical
Care,
Accident
Relief,
Health and
Group
insurance
Perquisites
Company
Car, Club
Membership,
Paid
Holidays,
Furnished
House, Stock
option
scheme, etc
Job Content
Challenging job,
Responsibilities,
Recognition,
Growth
prospects,
Supervision,
Working
conditions, Job
sharing, etc.
Components:

5. 6

6.  It contains two parts: Job Description &
Job Specification. This can help to know
about the duties and responsibilities will
be covered by the specific job and also
the quality of the people engaged in that
job.
 This is necessary to set a rationale pay
structure for a specific position.

7. Factor
Comparison
Ranking Classification
Point
Method
Job
Evaluation
Methods
Job Evaluation: The systematic determination of the
relative worth of jobs within an organization.
Methods of Job Evaluation

8. Select Employers with Comparable Jobs
Determine Jobs to be Surveyed
Decide What Information Is Needed
Conduct Survey

9. Common Pay Structures
– Hourly and salaried
– Office, plant, technical, professional, managerial
– Clerical, information technology, professional,
supervisory, management, and executive
Factors that affect Remuneration/Pay Structure:
– External:
• Labor market
• Cost of Living
• Society
• The economy
• Geographic Location
– Internal Factor:
• Business Strategy
• Job Evaluation & Performance Appraisal
• The employee
• Kind of business

10.  Wages: Wages are compensation. This includes
basic wages, allowances, bonuses etc. On the
employers’ points of view, wages form that part of
cost of production which is attributed as
compensation paid to labor. Wages are paid in the
form of time rate or piece rate to the workers, who
are directly involved in the production or
commercial activities.
 Salary: This is compensation paid to the indirect
labor in the form of cash. Indirect labor involves
supervisors, managers and supporting staff like
office assistants, clerks, etc. Salaries are paid in
the form of time rate, mostly on monthly basis.

11.  On the basis of the employee needs and ability of the
organization, there are various kinds of wages. Wages are
generally four types:
– Subsistence wages
– Minimum Wages
– Fair Wages
– Living Wages
 Subsistence wages: This is level of wage below the
minimum level which can lead in human life to the
employees.
 Minimum Wages: This is a wage level fixed by
government which is considered adequate, taking into
account the cost of living. All the organizations are bound
to follow this direction so that no employee is paid a wage
less than the minimum wage fixed by government
irrespective of grade, class or nature of work.

12.  Fair Wages: This is fixed by employer. This level
of wage varies from industry to industry. The
main criteria are the capacity of payment. Fair
wage is a wage above the minimum wage but
below the living wage.
 Living Wages: Living wage is one which should
enable the earner to provide for himself and his
family not only the bare essentials of food,
clothing and shelter, but a measure of frugal
comfort, including education for his children,
protection against ill health, requirement of
essential social needs and a measure of insurance
against the more important misfortune including
old age.

13. Incentives can be added to the basic pay structure to
provide rewards for performance. It may be 3
types:
1. Individual Incentives include
– merit pay plans (annual increase, based on
performance)
– piecework plans (pay based on number of units
produced typically in a specified time period.)
– time-savings bonuses and commissions
2. Group Incentives : Incentives can be offered to groups,
rather than individuals, when employees' tasks are
interdependent and require cooperation.
3. Plant-wide Incentives: Direct employee efforts
toward organizational goals (such as cost reduction)

14.  S = Strategically-based
 M = Market-driven
 A = Analyze Thoroughly
 R = Reward Results
 T = Transformation

15.  Base Salary - the fixed amount to be paid
 Incentives - additional variable pay based on
performance against objectives
 Protective - programs which insure employees against loss
 Capital Accumulation – programs that provide the
opportunity to establish a personal estate (equity /stock
plan)
 Retirement Income - plans that defer income for
services rendered to a later payment date
 Perquisites - company paid allowances beyond
direct pay(Housing,Car, Leave travel, etc.)
 Paid Time Off - vacations, holidays, maternity leave, etc

16. Operationalizing C&B
COMPENSATION POLICY/DESIGN
• Policies Designed/Reviewed
•Compensation Structure/Design Issues
•Annual/Cyclical actions (TIR/Bonus/SPP)
•Employee Communication strategy
Corporation’s Strategy on C&B
IMPERATIVES
•Top Management Inputs
•Market Drivers
•HR Strategy
Tracking C&B Info
- GEMS, HRIS
Benefits
Administration
Gauging employee
satisfaction
Employee getting
the C&B package
PayrollHR OPERATIONS

17.  Base Salary
 Housing Assistance/House Rent Allowance
 Conveyance Allowance
 Leave Travel Allowance
 Medical Allowance

18.  Company Housing
 Company Car
 Furnishing program
Housing Loan
Personal loans
Car Loan
Tuition Refund Plan




 Professional Body Membership
 Retrials or Parachute Payments
– Provident Fund
– Gratuity
– Superannuation (for certain grades)

19.  Individual Performance Award/Annual Bonus
 Sales Incentive Plans
 Golden Handcuffs

20.  The wage and salary structure is concerned with the financial
aspects of needs, motivation and regards. Its basic purpose is to
establish and maintain an equitable wage and salary structure.
 It refers to the establishment and implementation of sound
policies and practices of employee.
 The wage levels represents the money an average worker makes in
his organization. Wages in the widest sense means any economic
compensation paid by the employers.
 Wages form the largest cost factor for the enterprise. The
employers perceive wages as a cost of their business efforts.
Employees consider wages as the means of satisfying their needs in
terns of an expected standards.