2. Meaning of compensation
System of compensation
Objectives of compensation
Example of employee compensation plan
3. 1. A system of rewards that can motivate the
employees to perform.
2. A tool that is used to foster values and culture.
3. An instrument that enables an organization to
achieve its objectives.
5. 1. The compensation should be paid to each employee on the basis of their
abilities and training.
2. Compensation should be in the form of package.
3. It should motivate the employees towards increasing productivity.
4. It should be capable of taking care of employees for safety and security
needs also.
5. It should be flexible and clear.
6. It should not be excessive.
7. Compensation should be decided by the management as per the norms
fixed by the legislations in consultation with the union.
6. Hourly Wage-Employees classified as non-exempt receive
what employers usually call wages, which are calculated on an
hourly basis and require overtime payment for work in excess of
40 hours per week.
Annual Salary-An example of an employee compensation
plan for salary levels is one based on a salary scale that
considers education, years of professional experience,
credentials and qualifications such as job competency and
functional expertise.
Retirement Savings- For employees who contribute 5
percent of their gross salary or wages, the company matches 50
percent of the employee’s contribution. In other words, the
employer’s matching contributions equal 2.5 percent of the
employee’s gross salary
7. Raises, Bonuses and Incentives- An outstanding
performance appraisal could result in a 5 percent salary
increase. Sample employee bonus and incentive plans
include cash incentives based on a percentage of the
employee's gross salary
Group Health Benefits-A total compensation plan
may include group health-care benefits. Many
employers pay a sizeable portion of the total
monthly premium, leaving a portion of the
premium to be deducted from the employee’s pay.
Premiums for employer-sponsored health care
plans are deducted from pre-tax income, which are
gross earnings