IN TRO D U CTIO N

All employees work for certain

purpose and hence their efforts need

to be compensated.
Compensation refers to all forms of

financial returns, tangible services

and the benefits employees receive
as part an employment relationship.

O bjectives ofcom pensation m anagem ent

Establish fair and equitable pay system:

- similar pay for similar job within an organization

- similar pay for similar jobs in similar organization
Attract and retain competent human resources
Improve motivation and morale of employees
Obtain optimal performance from employees
Control costs by designing a lowest cost pay
structure.
Improve staff-management relations
Improve image of the organization
To retain present employs.

C O M P O N EN TS
O F PAY
S TR U C TU R E IN
IN D IA

Compensation
system

Indirect
compensation
Protectio
n
program
s

Pay for
time
not
worked

Direct
compensation
Services
&
perquisit
es

Base
pay

Incentiv
e pay

D IRECT CO M PEN SATIO N

Base pay
Includes wages & salaries
normally fixed
Based on position of an individual and

nature of job.

Incentives
Paid in addition to wages & salaries
Depends upon productivity, sales, profit,

or cost reduction efforts

Types ofincentives
1) Bonus
) Depends upon
Fixed percentage on basic wage
Individual performance
Proportion in profitability

2) Commissions
Fixed percentage on target achieved
Straight commission
Base salary plus commission

3) Piece rate
Based on productivity not quality

4) Profit sharing
Types of profit sharing plans
a) current distribution plans
b) Deferred payout plans
c) Combination plans

5) Employee stock option plans (ESOP)

IN D IRECT CO M PEN SATIO N

Protection programs
Medical
Insurance
Pension
gratuity

 Pay for time not worked

Vacations
Holidays
Sick leave

Service and perquisites

Recreational facilities
Car
Financial planning
Low cost or free meals

Process ofdeterm ination ofpay rates

Job analysis

Job evaluation

Pay survey

Pricing jobs

D eterm inants ofcom pensation m anagem ent

Legal framework
Union pressures
Job evaluation
Productivity
Prevailing wage rates

Factors infl
uencing com pensation level
1.Organizations ability to pay
2.Supply and demand for labour
3.Prevailing market rate
4. Sociological factors
5.Trade Unions bargaining power
6.Job requirements
7.Managerial attitudes

W AG E PO LICY O F IN D IA
Payment of Wage Act, 1936
Minimum Wages Act, 1948
Payment of Bonus Act, 1965
Workmens Compensation Act,

1923

TH AN K YO U