The document discusses various topics related to compensation management including job evaluation, incentive plans, and strategic benefit planning. It covers job evaluation methods like Hay Profile Method and factors. It defines incentives and different types of individual, team, and enterprise incentive plans. It also discusses the importance of strategic benefit planning and providing a balanced bouquet of benefits to employees.

1. COMPENSATION
MANAGEMENT
&
JOB EVALUATION
Human Resource Management
Term II

2. It is all about ‘people’…
■ Our Assets walk out of the door each evening.We have to make sure that they come back the next
morning.
-NarayanA Murthy
(Chief Mentor Infosys)
■ Take our 20 Best people and virtually overnight, we become a mediocre company.
-Bill Gates
Microsoft
■ Take my assets, leave my people, and in five years I will have it all back.
-Alfred Sloan
General Motors

3. What We Shall Be Covering in Next 1 Hr?
I. Concept of Compensation Management?
II. Concept of Incentive?
III. Concept of Strategic Benefit Planning?
IV. Conclusion

4. Concept of Compensation Management ?
■ Compensation is a blend of 3 components:
– DirectComponents
– Indirect Components
– Non-FinancialComponents
■ It is given to employees to increase
Loyalty.
■ If used Strategically, it becomes a tool to
secure a Competitive Advantage.

5. Compensation Design : ‘Pay Mix’
Internal Factors
• Compensation Strategy
• Worth of Job
• Employee’s RelativeWorth
• Employer’sAbility to Pay
External Factors
• Labor Market Conditions
• Area Pay Rates
• Cost of Living
• Collective Bargaining
• Legal Requirements
Pay Mix

6. Job Evaluation System
Job Ranking System
• Ranking of Jobs on RelativeWorth
• Listing Duties & Responsibilities
Job Classification System
• Classification & Grouping of Jobs
• Series of Predetermined Grades
Point System
• Quantitative Job Evaluation
• Compensable Factor Basis
WorkValuation
• Measuring Job’sWorth
• Value to Organization Basis

7. Hay Profile Method
(Job Evaluation For Management Positions)
• Knowledge
• Mental Activity
• Accountability
Profile factors-
Hay’s Guide
Chart
• Determination
of percentage
value assigned
Profile
Development
• Factor Based
Ranking
• PointValue
Assignment
Job Ranking

8. Hay Job Evaluation Factors
Knowledge /
Know-how
Technical/
Specialized
Skills
Managerial
Skills
Human
Relations Skills
Mental Activity /
Problem Solving
Thinking
Environment
Thinking
Challenge
Accountability
Freedom to Act
Scope
Impact

9. Application of Hay Job Evaluation
Organizational
Design & Analysis
• Common Framework &
language
• Strategic Goals
Objectives Specification
Job Design
and Analysis
• Determination of Doable
Jobs
• Relationship between
Organization’s
Requirement & Job
Positions
Job/ Person
Matching
• Job Shape Sampling
• Matching Nature of Job
and Competencies
Required

10. Chevron
■ Manjit Lakhmana:General Manager HRM and Country HR Head, India
■ June 1997 – March 2001 (3 years 10 months)
Training for Representatives
Creation of Job Evaluation Board
Revision of all Job Descriptions
Organization Map and Banding Proposal
Board Review and Job matching

11. Compensation System
Indirect Compensation
Protection Programs
1. Medical Insurance
2. Life Insurance
3. Disability Income
4. Pension
5. Social Security
Pay for Time Not
Worked
1. Vacations
2. Holidays
3. Sick leave
4. Jury duty
Services and
Perquisites
1.Recreational
Facility
2. Car
3. Financial
Planning
4. Low-cost or free
meals
Direct
Compensation
Base Pay
Salary
Wage
Merit Pay
Incentive Pay
1.Bonus
2. Commission
3.Piece rate
4.Profit Sharing
5.Stock option
6.Shift differential
Deferred Pay
1.Savings plan
2.Stock purchase
3.Annuity

12. Sample Compensation Scorecard
Function
Average Performance
Rating (1-5)
Average Merit
Increase (4% Budget)
Grade Inflation Compa Ratio
Anuual Incentive (%
of Target)
Marketing 3.4 4.30% -3% 101% 100%
R&D 3.2 4.40% 0% 98% 102%
Production 4 4.20% 12% 96% 105%
Sales 4.1 3.40% 8% 99% 100%
Customer Service 3.6 3.60% 17% 88% 110%
Grade Inflation is determined by calculating the percentage change in the number of employees in each grade in comparison to the
year before
Compa Ratio is actual salary divided by the midpoint of the salary range. It is a guage of the appropriateness of the organization's
salary range
The Direct Correlation between profit growth over a three-year period relative to LTI expense

13. Salary Levels for Different Jobs
Source : http://www.payscale.com/research/IN/Job=General_%2f_Operations_Manager/Salary

14. Pay By Experience Level

15. Stats For Different Countries
Source : http://www.gapminder.org/world/#$

16. Government Regulatory Acts for Employees
The following acts are the part of Government Rules and Regulation for the benefits of
Employees:
■ The Payment ofWages Act, 1936
■ The Equal Remuneration Act, 1938
■ The Industrial Disputes Act, 1947
■ The Employee State InsuranceAct, 1948
■ The Factory’s Act, 1948
■ The MinimumWages Act, 1948
■ The Employee’s Provident Fund and Miscellaneous ProvisionsAct, 1952
■ The Payment of Bonus Act, 1965
■ The Payment of Gratuity Act, 1972

17. The Payment of Gratuity Act, 1972
■ Act applies to every establishment in which 10 or more person are employed or were employed on any
day of preceding 12 months
■ Once covered will continue to be under coverage even if the employee number goes down
■ Gratuity is payable to an employee on
– Termination of his employment after he has rendered continuous service for not less than 5 years.
– Reaching age of superannuation.
– Retirement/resignation or.
– Death or disablement due to accident or disease
■ Gratuity is calculated on Basic Rate plus Dearness Allowance. Does not include any bonus,
commission, house rent allowance, overtime wages and any other allowance
■ Formula: (Number of yrs of service x Last salary drawn X 15 days salary) / 26
– Here,
■ 26 = No. of Working Days
■ Last Drawn Salary = Basic Salary + D.A.
■ Maximum limit Rs 10,00,000

18. Violations Of Acts : SuBWAY
■ About 17,000 Fair Labor Standards Act violations and resulted in franchisees having to reimburse
Subway workers more than $3.8 million over the years.
■ It's a significant sum considering many Subway "sandwich artists" earn at or just above the minimum
wage of $7.25 an hour.
■ The next most frequent wage violators in the industry are McDonald's (MCD)and Dunkin'
Donuts(DNKN) stores.
■ That said, Subway's problems were considered serious enough to prompt the Department of Labor
(DOL) to partner with the company's headquarters to boost compliance efforts last year.
■ "It's no coincidence that we approached Subway because we saw a significant number of violations," a
Department of Labor spokesperson said.
The franchise model impact
■ In cases like these, the corporate parents like to draw a distinction between themselves and their
independently operated stores.While Subway declined to comment for this article, both McDonald's
and Dunkin' Donuts submitted comments to that effect.

19. Violations Of Acts : Reliance

20. Concept of Incentive ?
■ Incentive in Common Language means ‘extra financial reward given for encouraging work”.
■ Incentive are basically a performance-link reward to improve motivation and productivity of
employees.
■ It includes any kind of remuneration that is provided for extra performance in addition to regular
wages for job.
■ These are considered as beneficial to both employers as well as employees:
– Workers are likely to work at their best when offered for monetary rewards for their performance.
– Opportunity for hard working employees to earn more.
– Improves productivity
– Helpful in obtaining desired result as it improves discipline and commitment towards work.
■ Strategic reason for Incentive Plans is “Variable Pay”, also known as ‘Performance Pay’; It is used to
recognize employee contribution above and beyond normal job requirements, like ‘Productivity’,
‘Profitability’, and ‘Quality’.

21. Incentive Plan
■ Employee incentive programs are a very powerful concept when employees can understand and see
the connection between their performance and their rewards.
■ Which motivate employees to exceed expectations and grow the business. Such plans promote
exceptional behavior during a specific period.
■ It implies monetary inducements offered to employees to perform beyond acceptance standards.
Incentive Plans
Individual
Time Based
Output Based
Organization-Wide
Profit Sharing
Co-Partnership
Gain-Sharing
ESOP’s
Group
Time Based

22. Design Related Issues
■ Employee Eligibility: Incentive plan allows for an incentive to be paid to eligible staff based on the
following factors:
– Achievement of Personal Goals
– Achievement of DivisionalGoals
– The Profit achievement of the Organization in which they work.
■ MediumOf Payment: How the bonus should be paid ? Such as:
– Money
– Fringe Benefits, Recognition/Appreciation
– Flexibility at work
– Holidays, etc..
■ Frequency of Payment: How often should we pay?

23. Incentive Plans
ShortTerm Incentives
■ Merit Pay
■ Lump-Sum Bonuses
■ Individual Spot Awards
■ Individual Incentives
LongTerm Incentives
■ Employee Stock Ownership
Plans (ESOPs)
■ Performance Plans
(Performance Share and
Performance Unit)
■ Broad-BasedOption Plans
(BBOP)
Team / Group Incentives
■ Gain-Sharing Plans
■ Profit Sharing Plans
■ Earnings-at-Risk Plans

24. Enterprise Incentive Plans
 Profit Sharing
– Any procedure by which an employer pays, or makes available to all regular
employees, in addition to their base pay, current or deferred sums based upon the
profits of the enterprise.
– Challenges:
 Agreement over the percentages of shared of profits and the forms of
distribution (cash or deferred) of profits between company and employees
 Annual variations and possibility of no payout due to financial condition of
company
 Maintaining motivational connection of profit-sharing to performance of
employees

25. Employee Stock ownership Plans (ESOP’s)
STOCK OPTIONS
■ Granting employees the right to purchase a specific number of shares of the company’s stock at a
guaranteed price (the option price) during a designated time period.
■ The value of an option is subject to stock market conditions at the time that option is exercised.
ESOP’s
■ Stock plans in which an organization contributes shares of its stock to an established trust for
the purpose of stock purchases by its employees.
– The employer establishes an ESOP trust that qualifies as a tax-exempt employee trust under Section
401(a) of the Internal Revenue Code
– Stock bonus plans are funded by direct employer contributions of its stock or cash to purchase its
stock.
– Leveraged plans are funded by employer borrowing to purchase its stock for the ESOP.

26. Incentive For Professional Employees
 These includes Engineers ,scientists ,attorneys
 In some organizations professionals employees cannot advance
beyond certain point in salaries
 Hence they are provided with cash bonuses, profit sharing , or stock
owner ship on completing the project on or before deadline dates
 In addition to this they allotted with simple rules to keep them
motivated such as :
1. Provide clear goals
2. Reward performance quickly
3. Involve in decision making

27. Incentive For Executives
 ShortTerm Incentives
■ Plans that are designed to motivate short-term
performance of managers and are tied to company
profitability
■ Eligibility – Fund Size – Individual Awards
 Long term Incentives
■ The right to purchase a specific number of shares of
company stock at a specific price during a specific period
of time
■ Stock Option Problems – Broad Based Stock Options –
Other Plans

28. Concept of Strategic Benefit Planning ?
■ Benefits represent a major proportion of theTotal Pay; so are termed as ‘Expensive’ by the companies;
Hence need to be taken special care of.
■ Some benefits are legally required, whereas some are voluntarily granted by the employers.
■ Benefits Plan must be drafted in such a way that it must take care of:
– Employee’s needs
– Organization’s strategic compensation plan, including itTotal reward Strategy.
■ Employee needs are taken care of by:
– Consultation
– Opinion Surveys
– Involving Employees in making of Benefits Plan
■ Communication of Benefits is done by Employer by various methods (few of them are):
– Social Media
– In-House Publications
– Employee Meetings and InformationSessions
– Emails with Benefit Info.

29. Employee
Benefits
Required By
Law
TCS Example:

35. Major Discretionary Employee Benefits
By Various Companies
Tuition Assistance
Program
Professional
Counseling &
Support Services
Relocation
Facilities
Performance
Bonuses
Transportation
Benefits
One Share
Program
FlexibleWork
Hours
Group Insurance
Fully Paid Leaves
Utilities
Reimbursement
Gym & Recreation
Centers
Sports
EducationalTie-
Ups
Free & Healthy
Breakfasts
Tie- Up Day Care
Long Service
Awards
WelfareTrusts
Business Funds
Emergency
Assistance

36. Example Case :
Work Life
Balance

37. Company Culture
• Fast Paced, High EnergyWork Environment
• Creativity & Innovation Extolled
• College like Campus Environment at California
office
• Non hierarchical Structure
• Non dress codes & formal meetings
• Freedom to play.
• Credo : To engage employees in teamwork and
creative involvement.
• Chief Cultural Officer
Source :http://www.aabri.com/manuscripts/09429.pdf

38. Googler’s Benefit
Free Food
Numerous Holidays &
Leaves
Transportation
Services
Pets Allowed rule
Onsite Childcare
Facilities
Laundry & Dry
Cleaning Services
20% Creative
Program
HealthCare
Services
Sports Facilities
Environmentalism
Source :http://www.aabri.com/manuscripts/09429.pdf

39. Google Issues In Employee Retention
Long
Working
Hours
Low Pay
Unstructured
Work
Environment
Lost in the
crowd
Poor
Management
Source :http://www.aabri.com/manuscripts/09429.pdf

40. Cost Implication
50% revenue as
Payroll benefits
Performance
Source :http://www.aabri.com/manuscripts/09429.pdf

41. Conclusion
1. Compensation Management:
– HayJob Evaluation method is the most effective in the modern era due to its systematic framework.
– Compensation Assessment tool can be used to maintain transparency, increase decision making and
helping to detect potential compensation problem
2. Incentive:
– Incentive for the Employees, is the easiest way to retain Employees (ESOP’s)
– So, we can say that from varied kind of incentives, company should choose according to its capital
equity which is best.
3. Strategic Benefit Planning:
– It leads to higher employee satisfaction, thus increasing employee retention and attraction

42. Group –
■ Prachi Sharma
■ Pranali Baxi
■ PratipalSinh Jadeja
■ PriyankThakkr
■ RajVadukul
■ RajdeepSinh Parmar
■ RajveerSinh Chauhan
■ Riddhima Kartik
20151030
20151031
20151032
20151033
20151034
20151035
20151036
20151037

43. Time To Test Learnings..??
Rules:
■ Only one person shall answer for the question; by raising his/her hand.
■ Quiz Consist of 7 questions.
■ Question are both Descriptive and MCQ

44. Question 1 ..??
Q:
What are the Factors under Hay Job Evaluation Method?

45. Question 3 ..??
Q:
Out of these four Job Evaluation System, which one is through the “Modern
Approach” ?
A:
(a) Job ranking System
(b) Job Classification System
(c) Point System
(d) WorkValuation

46. Question 2 ..??
Q:
In which Industry does Incentive Plans play an important role to the employees?
A:
(a) Banking and Insurance
(b) Automobile
(c) Retail
(d) IT Industry

47. Question 4 ..??
Q:
Of the Group Incentive Plan, which plan is the Financially suitable for the company?
A:
(a) Gain-Sharing Plans
(b) Profit Sharing Plans
(c) Earning at Risk Plans
(d) Non of the Above

48. Question 5 ..??

49. Question 6 ..??
Q:
Which company has come up with a unique designation of Chief Culture Officer and
why?
A: Google

50. Question 7 ..??
Q:
What is “BoB”?
A: Bouquet of Benefits