Total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.

Constitutes a large part of the operating costs of a firm. Biggest factor affecting industrial relations. Majority of union management disputes are because of remuneration. Impossible to retain employees without fair pay.

Attract

Retain

Stimulate

Base pay

Allowance

incentive pay

Fringe benefits

Objectives Types Process components

Time Wage Payment Piece Wage system Balance or debt method

Easy and Simple

Earnings are regular and fixed

Economical

No pressure to speed up production

Avoids wasteful handling of materials

Calculate the wage bill in advance

No incentive for better performance

Control over labour cost becomes difficult

Makes workers indifferent and complacent

Fair to all

Cost of supervision low

Society gains on a whole

Difficult to fix piece wage rates

Employees feel insecure and dissatisfied

Clerical work increased

May lead to industrial disputes

Employee appraisal Wage administration Wage survey and structure Job evaluation Job Analysis

Minimum wage

Fare wage

Living wage

DEARNESS ALLOWANCE
cost of living adjustment allowance paid to Government employees and pensioners in India. As of June 2012, the Dearness Allowance is calculated as a percentage of an Indian citizen's basic salary to mitigate the impact of inflation on people belonging to the low income group.[ Indian citizens may receive a basic salary or pension that is then supplemented by a housing or a dearness allowance, or both

FLAT RATE A loan of $1,200 can be structured with 12 monthly repayments of $100, plus interest, due on the same dates, of 1% ($12) a month, resulting in a total monthly payment of $112

D.A linked to Index and pay scale A higher rate of D.A is prescribed for lower pay scales and a lower rate for higher pay scales. 1) Government offices 2) Public Sector Undertakings

Methods
Index based D.A if Rs. 1.50 is the rate Rs. 15 will be paid as D.A. whenever the All India Consumer Price Index (AICPP) increases by 10 points.

Graduated Scale D.A. increases with each slab of salary. Therefore, D.A. as a percentage of basic pay decreases steadily.

Some other allowances and bonus

Bonus pay is compensation over and above the amount of pay specified as a base salary or hourly rate of pay.

Bonus

It began to be paid as an ex-gratia to Textile Mill workers in Mumbai and Ahmedabad after 1st world war. Bonus pay is used by many organizations as a thank you to employees or a team that achieves significant goals. Bonus pay is also used to improve employee morale, motivation, and productivity. As long as bonus pay is discretionary by the employer, it is not considered to be a contract. If the employer promises a bonus, however, the employer may be legally liable to pay the bonus.

Indirect Compensation
A broad range of benefits and services is provided by an employer to his employees in addition to wage or salary.

Criteria
Should be computable in terms of money

Amount of benefit not generally predetermined

No control as to when are benefits available

Need
Incentives Motivation
Standard of Living

Better talent

Reduce labour turnover

Reduce overtime costs

Discourage labour cost

Executive Compensation
Straight salary

Fringe benefits

Components

Bonus based on companys profit

Stock options

Wage Incentives
The offer of additional compensation for better performance.

Directly or Indirectly linked to profitability of employees.

Managerial device of increasing a workers productivity.

Types Of Incentive Plans

Time based
Halsey or Weir Plan Under this plan, a standard time is fixed on the basis of past performance records. A worker who completes his job within or more than the standard time is paid a guaranteed time wage. A bonus (usually 50 per cent) of the time saved is paid to a worker who completes his job in less than the standard time. The bonus is calculated o the basis of time rate.

 Rowan Plan

This is a modified form of Halsey Plan. It was developed by James Rowan of England. Under it, a minimum time wage4 is guaranteed to every worker. A standard time is determine in advance. The bonus is that proportion of the wages which the time saved bears to the standard time.

Ex: Let us use the data given under the Halsey Plan

Emerson Efficiency Plan

This plan was developed by Harrington Emerson. Under this plan, standard time for the job is determined scientifically and a minimum time wage is guaranteed to all wo4rkers. Bonus is given at an increasing percentage beyond the prescribed level of efficiency (usually 66.67 per cent). Efficiency is measured by comparing the actual time taken with the standard time.
Ex: Standard Time (S) = 10 hrs. Time Taken (T) = 8 hrs. Time Wage (R) = Rs. 20 per hr. Bonus = 10 % upto 75% efficiency = 20% for 75% -100% = 30% beyond 10 Total Wages = (T R ) + (Percentage of bonus T R)

Bedeaux Point Plan Under it, standard time for the job is set scientifically and it is expressed in terms of B. For instance, a standard time of 240 B means the job should be completed within 240 minutes. In determining the Bs, the time of operation and the rest time both are taken into account, minimum time wage is guaranteed to all workers. The workers who complete the job within or more than the standard time are paid at the normal time rate. Those who complete the job in less than the standard time are paid bonus for the time saved. Generally, 75% of the wages for the time saved are paid as bonus to the worker and 25% of the foreman: Total Wages = S R + 75% of R ( S T)

Output based
1. Taylors Differential Piece Rate Plan F.W. Taylor, the Father of Scientific Management devised this plan. Under this system, standard task is established through time and motion study. Two piece rates are laid down. The lower rate for those workers who fail to complete the standard task within the allotted time and the hither rate for those who completer the task within or less than the allotted time. The objective is to provide sufficient incentive to workers to work hard and achieve the standard. Ex- Suppose the standard output is 50 units per day. The piece rates fixed are Rs. 4.00 and Rs. 3.00 per unit. Three workers A, B and C produce 40, 50 and 60 units respectively during a day. Their total wags will be as follows: Worker A : 40 Rs. 3.000 = Rs. 120 Worker B : 50 Rs. 4.00 = Rs. 200 Worker C : 60 Rs. 4.00 = Rs. 240 In this way, an inefficient worker is penalized as he gets a lower rate per unit.

 Merricks Multiple Piece Rate Plan This plan was developed to overcome a drawback in Taylors plan. This drawback relates to an abrupt change I piece rate. Under it, three graded piece rates are prescribed. Workers producing less than 83% of the standard output are paid at a basic piece rate. Those producing from 83% to 100% of the standard output are paid 110% of the basic piece rate. Workers producing more than the standard output are paid at 120% of the basic piece rate. Gantts Task and Bonus Plan This plan was developed by Henry L. Gantt, a close associate of F.W. Taylor. Under it, standard time for every task is fixed through time and motion study. Minimum time wage is guaranteed to all workers. A worker who fails to complete the task within the standard time receives wage for actual time spent at the specified rate. Workers who achieve or exceed the standard get extra bonus varying between 20% to 50% of the hourly rate for the time allowed for the task. Ex: Suppose the standard time fixed for the job is 8 hours and the time rate is Rs. 20 per hour and the rate of bonus is 25 per cent. A worker, who completes the task in 10 hours, will be paid Rs. 160 (8 Rs. 20) only. On the other hand, the worker who completes the task in 6 hours will receive Rs. 200 (Rs. 160 + 25% of Rs. 160).

Group Incentive Plans

Under such a scheme, the bonus is calculated for a group of workers and the total amount is distributed among the group members in preparation to the wages earned by each. ADVANTAGES DISADVANTAGES An efficient worker may be penalized for the inefficiency of some inefficient members of the group.

Earned by each

Need for supervision reduced Skilled and experienced workers train inexperienced.

Teamwork and cooperative spirit

The incentive for an individual worker may not be strong enough to motivate.

Favouritism less likely to occur.

Rivalry among the members of the group may defeat the very purpose of team work and cooperation.

Types

Priestman Bonus Plan

Townes gainsharing

Scanlon Plan

Group incentive plans

1. Do you agree with the managing directors approach? 2. Do you think Mr. Alok had reasons to be aggrieved or was he trying to exploit his expertise? 3. What would be your solution to this case?

If you pick the right people and give them the opportunity to spread their wings - and put compensation and rewards as a carrier behind it you almost dont have to manage them. Jack Welch