Compensation includes basic pay, allowances, incentives, and benefits. It aims to achieve internal equity between jobs, external equity with similar jobs in other industries, and individual equity of equal pay for equal work. Compensation also aims to attract and retain talent while ensuring equity and compliance with legal rules. Factors like skill, effort, responsibility, and working conditions are evaluated. Wages are also affected by comparable industry pay, ability to pay, cost of living, productivity, unions, legislation, and supply and demand of labor. Compensation satisfies employees and improves performance. Benefits administration oversees health insurance, retirement programs, and ensures employees understand their benefits.

1. Compensation
Definition 1
Generally, something received in return for
something else.
Definition 2
Wages and other financial benefits earned
from labor.

2. Compensation
Compensation includes
Basic Pay and DA
Variable Pay or Allowances
Incentives or Beneifts

3. Objectives
• Internal Equity:
– Difficult job paid more
• External Equity:
– Similar job in different industry
• Individual Equity:
– Equal pay equal work
• Attract Talent
• Retain Talent
• Ensure Equity
• New and Desired Behavior
• Control Costs
• Comply With Legal Rules
• Ease of Operations

4. Examples of Job Evaluation Factors
Skill Effort
• Education Mental Effort
• Experience Problem Solving
• Communication Concentration
• Complexity
Responsibility Working Conditions
• Financial Responsibility Mental Demand
• Supervision Physical Effort
• Freedom to Act Visual Demand
• Decision-making
• Contacts with others
• Operational Latitude

5. Factors Affecting Wages
• Remuneration in Comparable Industries
• Firms ability to pay
• Employees Relative Worth
• Cost of Living
• Productivity
• Union pressure and Strategies
• Government Legislations
• Demand and Supply of labour
• Job needs

6. Need for Compensation
• Most of the employees satisfaction and work
performance are based on pay
• Internal inequalities in pay are more serious to
certain employees
• Employees compare their pay with that of others
• Employees act only to gross external inequities
• Employees compare the pay of different
employees with their skill

7. Concept of Compensation
• Wage:
– hourly services
• Salary:
– Monthly services
• Earnings:
– Total earnings
• Nominal Wage:
– Received in monitory terms
• Real Wage:
– Defines Purchasing power
• Take Home Salary:
– Net Salary

8. • Minimum Wage:
– to meet nominal needs
• Statutory Minimum Wage:
• Living Wage:
– includes amenities
• Fair Wage:
– equal work
• Incentive Wage:
– Over and above
• Wage Rate:
– Time Rate method
• Standard Wage:
– It is fixed on job evaluation standards

9. Job Evaluation
“It is a process to determine the value of jobs
to fix appropriate compensation”
It determines relative worth of a Job
ILO Defines “As attempt to determine and
compare demands which the normal
performance of a particular job makes on normal
workers without taking into account the
individual abilities or performance of the workers
concerned”

10. Objectives of Job Evaluation
• To gather data about Job description and
available job
• To compare duties and responsibilities
• To determine hierarchy
• To determine ranks
• To ensure fair and equitable pay
• To minimize wage discrimination

11. Procedure of Job Evaluation
• Analyze and Prepare Job Description
• Select and Prepare a Job Evaluation Plan
• Classify Job
• Install the Program
• Maintain the Program

12. Job Evaluation Technique / Methods
• Non Quantitative Techniques
– Ranking Method
• Simple Ranking
• Ranking the Key Jobs
• Paired Comparison
• Single Factor Ranking Method

13. Job Classification and Grading Method
A predetermined number of job groups or job classes are
established
Jobs are assigned to these classifications.
This method places groups of jobs into job classes or job
grades.
Separate classes may include office, clerical,
managerial, personnel, etc

14. Examples Classification Method
• Class I - Executives: Further classification under this
category may be Office manager, Deputy office
manager, Office superintendent, Departmental
supervisor, etc.
• Class II - Skilled workers: Under this category may
come the Purchasing assistant, Cashier, Receipts
clerk, etc.
• Class III - Semiskilled workers: Under this category
may come Stenotypists, Machine-operators,
Switchboard operators, etc.
• Class IV - Semiskilled workers: This category
comprises Daftaris, File clerks, Office boys, etc.

15. • Quantitative Techniques
– Point Rating Method
Point Method A set of compensable factors are
identified as determining the worth of jobs. Typically
the compensable factors include the major categories
of:
• Skill
• Responsibilities
• Effort
• Working Conditions

16. – Assigning Points
– The analyst divides each factor to be used into levels
and defines and assigns points to each.
– For example, he could define the "experience" factor
into 5 levels with points distributed as follows:
No experience (entry level) = 10 points
1-3 years experience = 30 points
4-6 years experience = 50 points
7-10 years experience = 75 points
Over 10 years experience = 100 points

17. Salary Structure
• Basic Wages
• Dearness Allowances
• Other Allowances

18. • In India different acts include different items
under Wages, Though Basic and DA are
included compulsory
– Workman’s Compensation Act 1923 Section 2m
“wages for leave period, holiday pay, overtime pay,
bonus, attendance bonus and good conduct bonus”
form part of wages
– Payment of Wages act 1936 ”any award of settlement
and production bonus, if paid constitutes wages”
– Minimum wages Act 1948 “retirement compensation
payment in lien of notice and gratuity payable on
discharge constitute wages

19. Basic Wage
• Basic Salary
• Dearness Allowance
– All india price consumer index
– Time Factor
– Point Factor

20. Legislations in India
• Minimum Wages Act 1948
• Payment of Wages Act 1936
• Payment of Bonus Act 1965
• Equal Remuneration Act
• Workmen Compensation Act 1923

21. Wage and Salary Survey
• It is the survey of the wages paid in an
organization
• It is in comparison with Market – Local,
Regional or National depends on the job
• Labour market is the place from where
employees are obtained

22. Salary Fixation
• Skill needs of the job
• Experience needed
• Difficulty of Work: mental and physcial
• Training needed
• Responsibilities involved
• Hazardous nature of job

23. Wage and Salary Surveys
Published Reports
• Reports of Ministry of labor
• Pay commission reports
• Reports of wage boards
• Reports of employees and employers
organizations
• Trade journals of industry

24. Incentives Plan
• Taylor Piece Rate
– Two slabs, one is lower and one is higher
• Halsey Piece Rate
– If the job is done less in standard time bonus
of 50% of time saved at time in addition to
normal wages
– Total Earnings = Time Taken * Hourly Rate
Plus Bonus
– Bonus = 50% of time saved

25. • Rowan Plan
– Bonus = Time Saved
----------------------------- * Time taken * Hourly Rate
Time Allowed
• Gantt Plan
– Wages are guarnteed
– If worker reaches standard, he will be paid
time wage plus fixed bonus

26. Health Provision
• Cleanliness
• Wastes
• Ventilation and Temperature
• Dust and Fumes
• Artificial Humidificatin
• Overcrowding
• Lighting
• Drinking Water
• Laterines and Urinals
• Spittoons

27. Effective safety management
• Safety Policy
• Top management support
• Safety committee
• Safety discipline motivation
• Safety engineering
• Safety training and communications
• Accident investigation and research
• Ealuation safety effort
• Governmental support

28. Legal provision for Safety (Sec 20 to 40)
• Fencing of machinery
• Work on near machinery in motion
• Employment of young persons
• Striking gear and devices for cutting off
power
• Self acting machines
• Casing new machinery
• Employment of women and children

29. • Hoists and lifts
• Lifting machines chains and ropes
• Revolving machinery
• Pressure plant
• Floors, stairs and means of access
• Pits sumps opening in floors
• Excessive weights
• Protection of eyes

30. • Dangerous fumes and gases
• Precautions with regard to portable
electrical light
• Explosive or inflammable gas or dust
• Precautions in case of fire
• Safety of building and machinery
• Safety officers

31. Bonus Act 1965
• It shows prosperity of the company
• Sense of belonging to the company
• Bonus is allocated on surplus
• Bonus is 8.33 % of salary or maximum
20% of the salary (Basic + DA)
• It is paid upto salary 2500/-
• All companies covered under the factories
act supposed to pay bonus

32. Profit Sharing
• Seager “profit sharing is an arrangement
by which employees receive a share fixed
in advance of the profits”
• The percentage to be shared is
determined in advance at the beginning of
the work period and is communicated to
the workers”

33. Features of Profit Sharing
• Agreement is Voluntary on joint consultation
• Payment may be in cash or stock
• Employee should have minimum qualification
• Agreement is mutually accepted
• Sharing Formula is pre set
• Distribution depends on the profit
• Proportion of profit is predetermined

34. Objectives of Profit Sharing
• Better employee relations
• Mutual acceptance
• Co operation and unity

35. Benefit Administration
• Benefits administration involves the
creation and management of employee
benefits, as well as providing a means
for employees to be trained in
understanding how the benefits work,
and what types of standards
employees must meet in order to
qualify for the benefits

36. • Benefits administration involves spending
a lot of the day making sure benefit plans
are running smoothly. This will often
include review of accumulation of personal
days, vacation days, and sick days
• Benefits administration often involves
overseeing the health insurance coverage
for qualified employees

37. • Benefit program includes an investment or
retirement program
• Benefit Program includes wherein employee
should be able to meet with an administrator and
obtain the latest information regarding the status
of his or her benefits.
• Benefits administration is involved in not only
seeing to the welfare of the employee, but also
the well being of the company