This document discusses various aspects of compensation management including its relationship to performance management systems. It describes different types of performance-linked compensation schemes such as variable pay linked plans (VPLP), employee stock ownership plans (ESOP), and economic value added (EVA). The document also discusses dimensions of performance compensation and provides references for further reading.

1. Compensation Management
Relation between compensation management
and PMS ,types of performance linked
compensation scheme , VPLP, ESOP, economic
value added, Performance matrix, Various
dimension of performance compensation
AMIT KR. VERMA

2. What Expert Says :
“If you pick the right people and give them the opportunity to
spread their wings - and put compensation and rewards as a carrier
behind it - you almost don’t have to manage them.”
— Jack Welch

3. Brief About Compensation
Compensation management is the act of distributing some type of
monetary value to an employee for their work by means of the company's
policy or procedures. In basic terms, it is paying an employee based
upon the decided pay and benefit package for the position.

4. Relation between compensation
management and PMS
From compensation management point of view, pms helps in achieving
the following critical goals:
• It helps in recognizing the efforts and contributions of employees
objectively, and thus facilitates effective job pricing through cost
optimization and rewarding of talented performers.
• It facilitates suitable compensation design by providing for rewarding
employees based on performance metrics.
• It helps employees develop their core competencies and achieve their
goals.

5. Continued..
• It helps retain good performers through competitive compensation
design , and offer flexibility for increased income based on
performance.
• It helps attracts good performers from compensation.

6. Types of performance linked
compensation scheme
It can also be termed as Performance related pay (PRP) which
encompasses several company wide schemes such as employee
participation and share ownership schemes awarded to the employees.
• Base pay : Base pay, or basic pay, is the minimum amount that an
employee receives for working for an organisation.
• Performance-related pay : Performance-related pay is a generic term
for reward systems where payments are made based on the
performance, either of the individual (individual performance-related
pay) or a team of employees (group performance-related schemes).

7. Continued..
• There are many types of performance related pay, and the most
popular ones are described below:
• 1. Piecework schemes: Piecework schemes are appropriate where
output can be measured easily in units. They are typically used for
paying freelance, creative people. Freelance writers for example are
often paid based on the number of words.
• 2. Individual performance-related pay schemes : In this scheme
employee receives either a bonus, or an increase in base pay on
meeting previously agreed objectives or based on assessment by their
manager, or both.

8. Continued..
• 3. Group-related performance-related pay schemes: This schemes
are similar to individual, in that rewards are paid based on the
achievement of targets. However the targets are set for a group of
employees, such as a particular department, or branch of a company,
rather than for an individual. Since the rewards apply to a group.
• 4. Knowledge contingent pay : It is where an employee will receive a
pay rise or a bonus, or both, for work-related learning.
• 5. Commissions : It is a form of remuneration normally used for sales
staff. The staff may receive a low basic pay, but will then receive
commission, based on a percentage of the amount of their sales.
Some more plans are:
Profit-related pay
Stock option plans

9. VPLP
Voluntary Personal Leave Program (VPLP)
Provides information on employee participation in the program
VPLP allows eligible employees to receive additional leave time in return
for a corresponding reduction in pay. The program is available to rank-
and-file and excluded employees, and employees may voluntarily
participate on a continuous basis.

10. ESOP
Employee Stock Ownership Plan (ESOP)
An ESOP is a defined contribution employee benefit plan that allows
employees to become owners of stock in the company they work for. It is
an equity based deferred compensation plan.
First, only an ESOP is required by law to invest primarily in the securities
of the sponsoring employer.
Second, an ESOP is unique among qualified employee benefit plans in
its ability to borrow money. As a result, "leveraged ESOPs" may be used
as a technique of corporate finance.

11. Economic Value Added (EVA)
It was pioneered by stern stewart and co.,a US based management
consultancy firm.
It is defined as ,’return on invested capital (ROIC)minus an appropriate
charge for the cost of capital invested in an enterprise as a financial
performance measure that captures the economic value added of an
enterprise.’

12. Performance Matrix

13. Compensation Dimensions

14. References
Books:
• Compensation management by Deepak Kumar Bhattacharyya
Online:
http://erepo.usiu.ac.ke/bitstream/handle/11732/2193/The%20Relationship%20between%20Performance%20Management%20Systems
%20and%20Employee%20Performance%20A%20Case%20Study%20of%20Assorted%20ways%20Limited.pdf?sequence=3
https://www.paycor.com/resource-center/the-link-between-performance-management-and-employee-engagement
https://study.com/academy/lesson/what-is-compensation-management-definition-components.html
https://study.com/academy/lesson/what-is-compensation-management-definition-components.html
https://www.mspb.gov/MSPBSEARCH/viewdocs.aspx?docnumber=224104&version=224323&application=ACROBAT
https://www.google.co.in/search?q=dimension+of+performance+compensatioin&rlz=1C1CHZL_enIN763IN763&source=lnms&tbm=isch
&sa=X&ved=0ahUKEwiv7ez75tHYAhUDQY8KHdqyDCsQ_AUICigB&biw=1349&bih=561#imgrc=ZuxlkEqr9oS-UM:
http://hrmanual.calhr.ca.gov/Home/ManualItem/1/2114

15. .Thank you