Compensation management, with overview of principals of compensation.

1. MODULE 3
COMPENSATION AND REWARD MANAGEMENT
TOPIC
ESSENCE OF
COMPENSATION
PRESENTED BY :-
GANESH DUTTA(PGCM4 1411)

2. 1.Definition:- “Compensation management is a process of
determining cost effective pay structure, designed to
attract and retain, provide an incentive to work hard, and
structured to ensure that pay levels are perceived as fair.”
(Stephen P. Robbins, David A DeCenzo, Robin Stuart-Kotze
and Eileen B. Stewart)
2 Definition:- According to Kressler , “whatever the
individual and culture variations, reward along with the
strategies and systems related to it, forms a significant part
of a business’s personal policy. It can appeal to both the
material and immaterial values of employees.
Entrepreneurs and manager perceive in reward strategies
a unique challenge and opportunity to make the most of
what employees can contribute and be offered in return in
order to increase the potential of the net product”.

3. OBJECTIVES OF COMPENTATION MANAGEMENT
1. To attract highly capable and efficient employees so that their
efforts produces organizational performance.
2. To increase the motivation and morale of employees.
3. To elicit need and desirable behaviors from employee.
4. To retain talented employees for continuance of organization
performance and attainment of higher levels of work.
5. To maintain market competitiveness In order to reduce or
control employee attrition which can affect organizational
function.
6. To help employee meet his economic, personal, material,
social, and psychological needs and aspirations.
7. To integrate employee efforts with organizational performance
management systems for increased effectiveness.

4. PRINCIPLES OF COMPENSATION MANAGEMENT
PRINCIPLES OF
COMPENSATION
MANAGEMENT
NON-DISCRIMINATORY
EQUITY
CONSIDERATIONS
PERFORMANCE
ORIENTATION
EMPLOYEE
DEVELOPMENT
SIMPLE
FLEXIBLE
LEAGEL
COMPLIANCE
ABILITY TO PAY

5. 1.Ability to pay: when the ability to pay term is arises, two
terms are basically used capacity and capability.
Organization should pay their employee as per their
financial capacity and capability. If an organization pays
more than its ability, then the organization may get bankrupt
and if organization pays much below its ability to pay, they
are not able to attract effective employees who can bring
effectiveness of the organization.

6. 2.Internal and external equity: Organizations must
compensate their employees according to their
qualification, experience, skills, knowledge, job
responsibilities and performance. This is called internal
equity.
Organization must pay their employees a compensation
which is at least comparable to their competitors or industry
standards. This is called external equity.

7. 3. Performance orientation: Performance orientation is
essential for creating a performance driven work
culture where every employee willingly assumes
responsibility and works with ownership. Therefore
compensation should be in commensuration with
individual and organizational performance.
4. Non-discriminatory: Organizations must pay their
employees without any discrimination on the ground of
race, religion, gender, nationality, and ethnicity.

8. 5. Legal compliance: Organization must pay as per the relevant
laws of the land.
For example: In India, the Minimum Wages Act, 1948 stipulates
the workers in unskilled, semi-skilled, and skilled jobs must be
paid a minimum wage.
6. Simplicity and flexibility: compensation systems should be
simple to design, understand and administer. Compensation
plans and policies must be flexible to adapt with ease to the
changing of workforce, needs of the individual employees,
organizational goals and objectives and labour market
conditions.
7. Fosters employee development: Compensation should be such
so as to motivate employees to acquire, sharpen and develop
their skills and competencies in conjunction with changing
technology

9. QUOTES
“If you pick the right people and give them the
opportunity to spread their wings and put compensation
as a carrier behind it you almost don't have to manage
them.”
-(Jack Welch)
Note to salary setters: “Pay your people the least possible
and you’ll get from them the same.”
-(Malcolm Fobers)