COMPENSATION MANAGEMENT :

CONCEPTS & COMPONENTS

AND
JOB EVALUATION
PRESENTED BY :
SATYA PRAKASH PATI
SUNIL PATNAIK
PRIYANKA AGRAWAL
RITURANI PRADHAN
COMPENSATION MANAGEMENT
MEANING :
 Compensation management is designing and implementing total compensation package with a
systematic approach to providing value to employees in exchange for work performance.

 Compensation is a systematic approach to providing monetary & non-monetary value to employee

in exchange for work performed. Compensation may be defined as money received in performance
of work and many kinds of benefits that an organization provides to their employees.

 It is also known as “wage and salary administration”.

DEFINITION : HARD
WORK
CREATIVE
INSIGHT
TEAMWORK

 According to S.P.Robbins, “the term ‘compensation administration’ or ‘wage and salary

administration’ denotes the process of managing a company’s compensation programme. The goals
of compensation administration are to design a cost effective pay structure that will attract, motivate
and retain competent employees.”
IMPORTANCE :
 Compensation
6
is an integral part of human resource management which helps in motivating the
employees and improving organizational effectiveness.

 Effectiveness
5 in terms of :
 attracting and retaining talent
 4motivating talent for better performance
Our
3
Projected
2
COMPENSATION Sales
1

PRIMARY SUPPLIMENTARY
0 COMPENSATION COMPENSATION
1 2 3 4
Series 3

Wages Incentives
Salaries Variable payments(bonus)
OBJECTIVES :
 To establish
6
a fair and equitable compensation offering similar pay to similar work.
 To attract competent and qualified personnel.
 To retain
5 the present employees by keeping wage levels in tune with competitive units.
 To improve motivation and morale of employees.
 To project
4 a good image of a company.
Our
 To minimize chances of favoritism while assigning the wage rates.
3
Projected
 To establish job sequences and lines of promotion wherever applicable.

COMPENSATION ON THE BASIS OF COMMITMENT

2
Sales :
High compensation – Low commitment e.g: hired person
1

High
0
compensation – High commitment e.g: professionals
1 2 3 4

Low compensation – Low

Seriescommitment
3 e.g: worker as commodity

Low compensation – High commitment e.g: family oriented org.

COMPONENTS OF COMPENSATION :
6
COMPENSATION
5

4
MONETARY Our
NON-MONETARY

3
Projected
DIRECT INDIRECT

2
Sales
 BASE PAY PAY FOR TIME
1 MERIT PAY

NOT WORK
(holidays, vacation,
 WAGE sick leave)
0
 SALARY
1 2  PROTECTION
3 4
 INCENTIVE PAY PROGRAM
Series 3
(medical, insurance,
pension etc)
DIRECT COMPENSATION :
6

It refers to monetary benefits offered and provided to employees in return of the

5 services they provide to the organization. The monetary benefit includes basic salary,

Our
house rent allowance, conveyance, leave travel allowance, medical
4 reimbursements, special allowance, bonus, PF, gratuity, etc. they are given at a

3
regular interval at a definite time.
Projected
INDIRECT COMPENSATION :
2
Sales
1
It refers to non monetary benefits offered and provided to employees in lieu of the
services provided by them to the organizations. They include paid leave, car/
0
transportation,
1 medical
2 aids3 and assistance,
4 insurance (for self and family), leave
travel assistance, retirement
Series 3 benefits, holiday homes.
PURPOSE OF COMPENSATION :

FOR EMPLOYER : Our Agency Locations

 motivating employees for higher productivity and performance
 retaining talents.
 consistency in compensation.
D.C.
BUSINESS
FOR EMPLOYEE : STRTEGY

 work-life balance
HOLLAND
PEOPLE
 recognition as tool to self esteem
 planning for better quality of life REQUIREMENT
TOKYO
COMPENSATION
MANAGEMENT
FACTORS AFFECTING COMPENSATION :
INTERNAL EXTERNAL

 ability to pay  labor market

 business strategy  productivity
 job evaluation & performance  cost of living
appraisal  labor union
 employee  labor laws

CONCLUSION :
Good compensation can increase the productivity of an organization because it
provides various rewards, bonus, schemes etc. and its compulsory for every
organization.
JOB EVALUATION
Meaning
Job evaluation is the process of analyzing and assessing the various
jobs systematically to ascertain their relative worth in an
organization. Job is evaluated on the basis of their content and is
placed in the order of their importance.

Definition

Job evaluation (or job rating) is a systematic procedure for

measuring the relative value and importance of occupations on
the basis of their common factors (skill, training, effort) for the
purpose of determining wage differentials.
 The role of job evaluation in organizations

 Job evaluation includes comparative processes due to the fact that the relations and
dependencies among the jobs have to be explained. This consists of an essential determinant
that allows the management (through the analysis of the targets, achievements and factors
that influence the requirements of the jobs) to assign the corresponding proportions of every
job. For this reason job evaluation usually includes an extensive analysis of the roles, the
objectives and the corresponding actions and achievements of the job.
 The outcome of this analysis is the establishment of structures that aid the comparison among
the jobs and support the evaluators to make consistent and reasonable judgments.
 Principles of job evaluation program

 Rate the job but not the employee. Rate the elements on the basis of the job demands.
 The elements selected for rating should be easily understood.
 The elements should be defined clearly and properly selected.
 Employees concerned and the supervisors should be educated and convinced about the
program
 Supervisors should be encouraged to participate in rating the jobs.
 Secure employee cooperation by encouraging them to participate in the rating program.
 Discuss with the supervisors and employees about rating but not about assigning money values
to the points.
 Do not establish too many occupational wages .
Ranking Method
• Simplest form
• Each job as a whole is compared with other and this
comparison of jobs goes on until all the jobs have been
evaluated and ranked.
• All jobs are ranked in the order of their importance from the
simplest to the hardest or from the highest to the lowest.
Ranking Order Annual Pay Scale

1. CEO 1.2cr
2. Senior Manager 36Lakhs
3. Engineer 9.6Lakhs
4. Jr. Engineer 4.8Lakhs
5. Worker 3Lakhs
Classification Method
Classification systems define the value of jobs, people or teams with written standards for a
hierarchy of classification level. It involves only matching a specific job with a list of tasks in a
predetermined labour grade. Each grade asset money rate.

Process:-
1. Develop descriptions for each category of job grade.
2. Develop standards for each category by describing the key characteristics of those jobs
in the category.
3. Match jobs to the categories based on the similarity of tasks.

Results:-
Job classes are classified like 1. Class I-Executives- manager, deputy manager
2. Class II- skilled workers- office clerk, cashier
3. Class III- Semiskilled workers- machine operators then jobs are assigned to these
classifications.
 Point Method
 The most widely used method
for job evaluation.
 The system starts with the
selection of job factors,
construction of degrees for
each factor, and assignment
of points to each degree.
Different factors are selected
for different jobs, with
accompanying differences in
degrees and points.
PROCESS:
A set of compensable factors are identified
'Assign points to these compensable factors based on the perceived importance to the job
Once this is dine for all compensable factors, evaluate the IeveI to which each of these factors
are present in the job and assign points(weights) accordingly.
The points for each factor are totaled to form a score for the job.

RESULT:
Jobs are then grouped by total score and assigned to salary grades so that jobs with the highest
points would have the highest pay.
The Factor Comparison Method
This method is based on the assumption that all jobs contain certain common
factors to determine the worth of jobs. These factors may differ in the degree to
which they are present in different jobs.

PROCESS:
Select the set of Benchmark Jobs
Rank the Benchmark jobs on the basis of each compensable factor.
For each Benchmark job, allocate market pay across the compensable factor
Determine the pay for each job by adding up the pay from each compensable
factor.

RESULTS:
Pay Range= Pay from skill + Pay from effort + Pay from responsibility + Pay from
working conditions