This document provides an introduction to strategic compensation management. It discusses the key components of compensation including wages and salaries, incentives, fringe benefits, and perquisites. It also defines total compensation as consisting of base compensation, pay incentives, and indirect compensation/benefits. Finally, it outlines factors that influence pay such as market forces, organizational policy, work value, and individual performance.

1. Introduction to Strategic
Compensation Management: Part I
Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor

3. Compensation
• Compensation - money and other benefits
received for providing services
• Cascio defined compensation as “Direct cash
payments, indirect payments (employee
benefits) and incentives to motivate
employees to strive for higher levels of
productivity”

4. Components of Compensation
• Wage and Salary
• Incentives
• Fringe Benefits
• Perquisites

5. Wage and Salary
• Wage - remuneration to workers,
hourly-rated payment
• Salary - remuneration paid to white-
collar employees & managerial
personnel
• Wages and salary - paid on the basis
of fixed time period, not associated
with productivity of an employee

6. Incentives
• Incentive - any reward of benefit given to
employee over and above the wage or
salary with a view to motivating him to
excel in his work
• Incentives include both monetary as well
as non-monetary rewards
• A scheme of incentive is a plan to
motivate individual or group performance

7. Fringe Benefits
• Fringe benefits
- Provident fund, gratuity, pension
- Medical benefits, accident relief,
health and life insurance
- Facilitation in performance of job
like uniforms, Canteens & recreation

8. BENEFITS

9. Perquisites
• Perquisites - provided to managerial
personnel either to facilitate their
job performance or to retain them in
the organization
• Perquisites include company car, club
membership, free residential
accommodation, paid holiday trips and
stock options

10. COMPENSATION AND
REWARD MANAGEMENT

11. Compensation & Reward
Management
• Beach defined compensation & Reward management as -
“Establishment and implementation of sound policies and
practices through job evaluation, surveys of wages &
salaries, analysis of relevant organizational problems,
development and maintenance of wage structure,
establishing rules for administering wages, incentives,
profit sharing, wage changes and adjustments,
supplementary payments, control of compensation costs
and other related items"

12. Remuneration & Rewards
Financial Non-Financial
DIRECT INDIRECT JOB ENVIRONMENT
(cash) (benefits) • Interesting • Good policies
• Insurance work and practices
• Salaries • Holidays • Challenge • Competent
• Incentives • Medical and • Responsibility supervision
• Bonuses health • Recognition • Congenial
• Child care • Advancement co-workers
• Employee • Safe and
assistance healthy work
environment
• Fair treatment
Components of Employee Remuneration

13. The Elements of Total
Compensation
Total
Compensation
Base Pay Indirect
Compensation/
Compensation Incentives Benefits

14. Total Compensation/Reward
Total
Compensation/
Reward
Total Total
Non-Financial
Financial
Compensation/
Compensation/ Reward
Reward

15. Factors Influencing Pay
Market
Organisation
Forces
Policy
Work Individual
Value Performance

16. Three Pay Policies
Pay Policy Attract Retain Motivate Control
Costs
Lead + + ? ?
Match = = ? =
Lag - ? ? +

17. Govt. regulation for Compensation in
India
• Minimum Wages Act, 1948
• Payment of Wages Act, 1936
• Adjudication of Wage Disputes
• Wage boards
• Pay Commissions
• Payment of Bonus Act, 1965

18. The Compensation Structure
Job Evaluation
Wage and Salary
Issues Involved
Issues Involved Surveys
in Setting
in Setting
Compensation
Compensation Pay Grades
Structures
Structures
Rate Ranges

19. Concept of Different Wages
• MINIMUM WAGE
• FAIR WAGE
• LIVING WAGE (HIGHEST IN
VALUE)

20. Concept of Wages
• Minimum Wage - For sustenance of
life and preservation of efficiency of
workers and to provide some measure of
education, medical requirements and
amenities.

21. Concept of Wages
• Living Wage – In addition to
providing food, clothing and shelter
for worker and family, education for
children, protection against ill-health,
essential social needs and insurance
against misfortunes and old age.

22. Concept of Wages
• Fair Wage -above minimum wage but
below living wage; fair wage to be paid
based on capacity of industry to pay.

23. Calculation of minimum wages
• Worker’s family – 3 members, earnings of
women, children & adolescents disregarded
• Minimum food requirements - 2,700
calories/adult.
• Clothing requirements- 18 yards per
annum/person.
• Housing - minimum rent charged by Govt for
houses under subsidized housing scheme
• Fuel, lighting and other miscellaneous items
- 20 % total minimum wage.

24. Thank you