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UNIT 3 HR Subsystems III

Establishing strategic pay plans Pay for performance & financial incentives Managing global HR Managing Strategic organisational Renewal

Establishing strategic pay plans

What is Remuneration

Remuneration is the compensation an employee receives in return for his or her contribution to the organisation.

Components of Remuneration


Wages & Salary Incentives Fringe benefits Perquisites Challenging job responsibilities Recognition of merits Growth prospects Supervision Working conditions Job sharing

Non Financial/Non Monetary

Theories of Remuneration

Reinforcement & Expectancy Theories Equity Theory Agency Theory

Importance of Ideal Remuneration System

Do you think people work mainly for pay?

Consequences of pay dissatisfaction

Desire for more pay Performance Strikes Grievances Search for higher paying jobs

Absenteeism Turnover


Pay dissatisfaction Lower attractiveness of job Turnover Job dissatisfaction Psychological withdrawal Visits to doctors Poor mental health Absenteeism

Factors influencing employee remuneration

External factors

Labur Market

Demand for & supply of Going rate of pay Productivity Cost of living Labour unions Labour laws Society The economy

Internal factors Business strategy Job evaluation Performance appraisal The employee

Remuneration plans & business strategy

Business Strategy Invest grow Market Position & Maturity Remuneration Strategy Blend of Remuneration High cash with average incentives for individual performance. Modest benefits Average cash with moderate incentives on individual, unit, or corporate performance. Standard benefits

to Merging or Stimulate growth rapidly entrepreneurship

Manage earnings protect markets

Normal growth Reward to maturity management skill

Harvest No real growth Stress earnings or decline control reinvest elsewhere


cost Below average cash with small incentive tied to cost control. Standard benefits

Devising a remuneration plan

Job description Job evaluation Job hierarchy Pay survey Pricing jobs

Pay levels Determining pay grades

Challenges of remuneration

Skill based pay Pay reviews Pay secrecy Comparable worth Employee participation Eliticism v/s Egalitarianism Below market v/s above market Monetarty v/s non monetary

Concept of Wages

Wages represent hourly rate of pay Types of wages:

Minimum wage

Providing sustenance of life + efficiency of worker Equal to the rate prevailing in the same trade or equal to the predominant rate for similar work. Higher than fair wages. Provides for bare essentials plus comforts.

Fair wage

Living wage

Remunerating special groups

Team based pay Remunerating professionals Contract employees Expatriates & Executives