Meaning, components, strategy of compensation management, developing a total compensation strategy

1. [HRM]
[Compensation Management]
Submitted To :
Assistant Professor [SBMS]
Central University of Himachal Pradesh
Submitted By : Manish Kumar
CUHP17MBA33

2. Contents
MEANING.
COMPONENTS OF COMPENSATION MANAGEMENT
STRATEGIES OF COMPENSATION MANAGEMENT
DEVELOPING A TOTAL COMPENSATION STRATEGY

3. Quote
“Our assets walk out of the door each evening. We have to make
sure that they come back the next morning”.
-Narayan Murthy
[Executive Chairman, INFOSYS]

4. Meaning of Compesnation Mgmt.
COMPENSATION MANAGEMENT IS THE PRACTICE OF THE ORGANIZATION THAT
INVOLVES GIVING MONETARY AS WELL AS NON-MONETARY REWARDS TO THE
EMPLOYEES, IN ORDER TO COMPENSATE FOR THE TIME THEY ALLOCATE TO
THEIR JOB AND HELP THE ORGANISATION TO ACHEIVE ITS OBJECTIVES.

5. Components of Compensation Management
Compensation Mgmt
Monetary
Direct
-Base Pay (Wage, Salary)
-Bonus
-Long term incentives
-Perks & Perquisites
-Commissions
Indirect
-Insurance (life, health)
-Leaves (sick,holiday, personal,
Jury Duty)
-Company Parties
-Phones, Laptops
-Retirement Programme
-Car
-Recreational Activities
Non- Monetary
-Praise & Rewards
-Dignity & satisfaction from
work performed
-Social relationship with co-
workers
-Recognition
-org. Support

6. Direct Compensation
It refers to monetary benefits offered and provided to
employees in return of the services they provide to the
organization. The monetary benefits include basic
salary, house rent allowance, conveyance, leave travel
allowance, medical reimbursements, special
allowances, bonus, PF/Gratuity, etc. They are given at a
regular interval at a definite time.

7. Indirect Compensation
It refers to non-monetary benefits offered and provided to
employees in lieu of the services provided by them to the
organization. They include Paid Leave, Car /
transportation, Medical Aids and assistance, Insurance (for
self and family), Leave travel Assistance, Retirement
Benefits, Holiday Homes.

8. Constituents of Compensation
Source:
Wage & Salary
 The most important component of compensation and these are essential
irrespective of the type of organization administered individually provides
employee satiable income and can plan chores of daily life,budget.
Incentives
Incentives are the additional payment to employees besides the payment
of wages and salaries. Often these are linked with productivity, either in
terms of higher production or cost saving or both.
Can be administered individually and for groups
Additional compensation having immediate effect and no future liability.

9. Continued......
Fringe Benefits
Fringe benefits include such benefits which are provided to the employees either
having long-term impact like provident fund, gratuity, pension; or occurrence of
certain events like medical benefits, accident relief, health and life insurance; or
facilitation in performance of job like uniforms, Canteens, recreation, etc.
Administered for a group mostly.
Perquisites
These are normally provided to managerial personnel either to facilitate their
job performance or to retain them in the organization. Such perquisites include
company car, club membership, free residential accommodation, paid holiday
trips, stock options, etc.
Administered individually mostly.

10. Continued......
 Enhance dignity & satisfaction from work performed
 Promote social relationship with co-workers.
 Allocate sufficient resources to perform work assignments.
 Offer supportive leadership and management.
 Enhance physiological health, intellectual growth.
Source:
Non Monetary

11. Compensation Management Strategies
 Compensation strategies refers to the methods on which different organisation
compensate or pay to its employees for the work they performed.
 Every organisation has its own compensation strategies depending upon the
expertise, skills required for the job.
 3P concept of Compensation
Source:

12. Continued....
Compensation
Position Person Performance
Pay by
Source:
3P Compensation Strategy

13. 3P Compensation Strategy
 Also known as position base pay or job based pay.
 Pays employees for the job to which they are assigned, regardless of the skills they possess.
 Each position is assigned a pay range and pay is based on education and seniority.
Source:
Pay for Position

14. Continued....
 Person focussed pay or Skill-based pay or Knowledge based pay or Competency
based pay
 Pay to the depth or breadth of the skills, abilities, competency and knowledge a
person acquires and applies to work.
 Person become multi-skilled and more flexible and valuable.
 It also incorporates market based pay approach.
Source:
Pay for Person

15. Continued....
 employees monetary compensation is related to how their performance is assessed
to stated criteria.
 It may be based upon individual, group, or organizational performance.
 Individual based criteria- individual goat setting, appropriate performance
appraisal, training to increase job knowledge and skills, and individual control over
his own performance.
 Team based criteria- appropriate where individual performance is difficult to
measure, need for a corporate culture to promote team values and cooperation.
Source:
Pay for Performance

16. Developing a Total Compensation Strategy
1. Assess Total
Compensation
Implications
-Competitive
dynamics
-Culture/Value
-Socio-political
context
-Employee/Union
needs
-Other HR systems
2. Map a total
Compensation
Strategy
-Objectives
-Allignment
-Competetiveness
-Contributions
-Management
3.Implement
Strategy
-Design system to
translate strategy into
action
-Chose techniques to
fit strategy
4.Reassess
-Realign as Condition
change
-Realign as strategy
changes.
Source:

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Payslip Examples

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23. Sources
-Compensation; Ninth Edition, George T Milkovich, Jerry M Newman, C S Venkata
Ratnam
https://www.hr-guide.com/data/G400.htm
https://www.managementstudyguide.com/components-of-compensation.htm
Source:

24. Open Discussion
THANK YOU
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