Introduction to Strategic Compensation Management: Part

IDr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)

Professor

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”

Components of Compensation

• Wage and Salary• Incentives• Fringe Benefits• Perquisites

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

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

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

BENEFITS

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

COMPENSATION AND REWARD MANAGEMENT

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"

Remuneration & Rewards

Financial Non-Financial

DIRECT(cash)

• Salaries• Incentives• Bonuses

INDIRECT(benefits)• Insurance• Holidays• Medical and health• Child care• Employee assistance

JOB• Interesting work• Challenge• Responsibility• Recognition• Advancement

ENVIRONMENT• Good policies and practices• Competent supervision• Congenial co-workers • Safe and healthy work environment• Fair treatment

Components of Employee Remuneration

The Elements of Total Compensation

Total Compensation

PayIncentives

IndirectCompensation/

Benefits

BaseCompensation

Total Compensation/Reward

Total Compensatio

n/ Reward

Total Non-FinancialCompensatio

n/ Reward

Total Financial

Compensation/

Reward

Factors Influencing Pay

Market

Forces

Work

Value

Organisation

Policy

Individual

Performance

Three Pay PoliciesThree Pay Policies

Pay Policy Attract Retain Motivate Control Costs

Lead + + ? ?

Match = = ? =

Lag - ? ? +

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

The Compensation Structure

Job Evaluation

Rate Ranges

Pay Grades

Issues Involved in

Setting Compensation

Structures

Issues Involved in

Setting Compensation

Structures

Wage and Salary Surveys

Concept of Different Wages

• MINIMUM WAGE• FAIR WAGE• LIVING WAGE (HIGHEST IN VALUE)

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.

 

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.

Concept of Wages

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

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.

Thank you