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Published by Lecturesheet.iiuc28a9.


It is all about People

Take our 20 best people and virtually overnight we become a mediocre company. - Bill Gates, Microsoft

Take my assets, leave my people, and in five years I will have it all back. - Alfred Sloan, General Motors

Human Resource Management

Wage, Salary and Reward Administration

We will cover the following:

Remuneration & its Components Compensation Administration Process Wage & salary Administration Different types of Incentives and Incentives Plan International Compensation.

Building Blocks of Direct Compensation

1. The Foundation: A Compensation Philosophy 2.The Basics: Elements of Base Pay Administration 3. The Glue: Pay for Performance Programs 4. The Future: Effective Compensation Management

The Organizational Reward System

Results from employment with the organization Includes all forms of financial returns and tangible services &

benefits employees receive as part of employment relationship:

Achievement Feelings of accomplishment Informal Recognition Job Satisfaction Personal growth Status

Formal Recognition Fringe Benefits Incentive Payments Pay Promotion Social Relationships Work Environment

Remuneration & Its Components

Definition: Remuneration' is a general term covering the monetary and related entitlements of employees - paid by employers in return for the work of employees. Components:
Fringe Benefits Incentives Individual Plans P.F, Gratuity, Medical Care, Accident Relief, Health and Group insurance

Non Financial Perquisites
Company Car, Club Membership, Paid Holidays, Furnished House, Stock option scheme, etc Indirect

Hourly and monthly Rated Wages and Salaries

Job Content
Challenging job, Responsibilities, Recognition, Growth prospects, Supervision, Working conditions, Job sharing, etc.

Group Plans


Compensation Administration Process

Job Analysis
It contains two parts: Job Description & Job Specification. This can help to know about the duties and responsibilities will be covered by the specific job and also the quality of the people engaged in that job. This is necessary to set a rationale pay structure for a specific position.

Job Evaluation
Job Evaluation: The systematic determination of the relative worth of jobs within an organization.

Methods of Job Evaluation


Job Evaluation Methods

Factor Comparison Point Method

Developing Pay Surveys

Select Employers with Comparable Jobs

Determine Jobs to be Surveyed

Decide What Information Is Needed

Conduct Survey

Pay Structures
Common Pay Structures

Hourly and salaried Office, plant, technical, professional, managerial Clerical, information technology, professional, supervisory, management, and executive Factors that affect Remuneration/Pay Structure: External: Labor market Cost of Living Society The economy Geographic Location Internal Factor: Business Strategy Job Evaluation & Performance Appraisal The employee Kind of business


Wage & Salary

Wages: Wages are compensation. This includes

basic wages, allowances, bonuses etc. On the employers points of view, wages form that part of cost of production which is attributed as compensation paid to labor. Wages are paid in the form of time rate or piece rate to the workers, who are directly involved in the production or commercial activities.
Salary: This is compensation paid to the indirect

labor in the form of cash. Indirect labor involves supervisors, managers and supporting staff like office assistants, clerks, etc. Salaries are paid in the form of time rate, mostly on monthly basis.

Wage & Salary

On the basis of the employee needs and ability of the

organization, there are various kinds of wages. Wages are generally four types: Subsistence wages Minimum Wages Fair Wages Living Wages Subsistence wages: This is level of wage below the minimum level which can lead inhuman life to the employees. Minimum Wages: This is a wage level fixed by government which is considered adequate, taking into account the cost of living. All the organizations are bound to follow this direction so that no employee is paid a wage less than the minimum wage fixed by government irrespective of grade, class or nature of work.

Wage & Salary

Fair Wages: This is fixed by employer. This level

of wage varies from industry to industry. The main criteria are the capacity of payment. Fair wage is a wage above the minimum wage but below the living wage.
Living Wages: Living wage is one which should

enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter, but a measure of frugal comfort, including education for his children, protection against ill health, requirement of essential social needs and a measure of insurance against the more important misfortune including old age.

Incentive Compensation
Incentives can be added to the basic pay structure to provide rewards for performance. It may be 3 types: 1. Individual Incentives include
merit pay plans (annual increase, based on performance) piecework plans (pay based on number of units produced typically in a specified time period.) time-savings bonuses and commissions 2. Group Incentives : Incentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation. 3. Plant-wide Incentives: Direct employee efforts toward organizational goals (such as cost reduction)

4. The Future: Effective Compensation Management

S = Strategically-based M = Market-driven A = Analyze Thoroughly R = Reward Results T = Transformation

Compensation & Benefits Package

Base Salary - the fixed amount to be paid Incentives - additional variable pay based on performance against

objectives Protectives - programs which insure employees against loss Capital Accumulation programs that provide the opportunity to establish a personal estate (equity /stock plan) Retirement Income - plans that defer income for services rendered to a later payment date Perquisites - company paid allowances beyond direct pay(Housing,Car, Leave travel, etc.) Paid Time Off - vacations, holidays, maternity leave, etc


The C&B Cycle

Corporations Strategy on C&B IMPERATIVES Top Management Inputs Market Drivers HR Strategy COMPENSATION POLICY/DESIGN Policies Designed/Reviewed Compensation Structure/Design Issues Annual/Cyclical actions (TIR/Bonus/SPP) Employee Communication strategy

Gauging employee satisfaction

Operationalizing C&B


Benefits Administration

Employee getting the C&B package

Tracking C&B Info - GEMS, HRIS 17

Fixed Cash
Base Salary Housing Assistance/HRA

Conveyance Allowance (Q/R/S)

Leave Travel Allowance Medical Allowance


Company Housing Company Car (grades T & above) Furnishing program

Housing Loan Personal loans Car Loan Tuition Refund Plan Professional Body Membership

Retrials or Parachute Payments

Provident Fund Gratuity Superannuation (for certain grades)


Variable Pay
Individual Performance Award/Annual Bonus Sales Incentive Plans

Golden Handcuffs


EMPLOYEE COMMUNICATION - taking C&B to the people

During all C&B actions (e.g., Annual Salary Increase

letters , SPP roll-out)

Through the HR web-site Through online addressal of employee queries
payroll & benefits related (HR Ops) policy related (Regional HR/Compensation Unit) through supervisors (queries of the type - how does my salary increase stack-up vis--vis my peers ?)