Human Resource is the most vital resource for any

organization.
It is responsible for each and every decision taken, each
and every work done and each and every result.
Employees should be managed properly and motivated
by providing best remuneration and compensation as
per the industry standards.
The good compensation will also serve the need for
attracting and retaining the best employees. .
Introduction

Compensation is the remuneration received by an
employee in return for his/her contribution to the
organization.
It is an organized practice that involves balancing the
work-employee relation by providing monetary and
non-monetary benefits to employees

Compensation

When managed correctly, it helps the organization achieve its
objectives and obtain, maintain, and retain a productive workforce.

Compensation is a key factor in attracting and keeping the best
employees and ensuring that your organization has the
competitive edge in an increasingly competitive world.

Without adequate compensation, current employees are likely to
leave and replacements will be difficult to recruit.

The outcomes of pay dissatisfaction harm productivity and affect
the quality of work life.

Contd.

Compensation management is an integral part of human
resource management which helps in motivating the
employees and improving organizational effectiveness.

The Compensation Management component enables you
to differentiate between your remuneration strategies
and those of your competitors while still allowing
flexibility, control and cost effectiveness.

It provides a toolset for strategic remuneration planning
that reflects your organization culture and pay strategies.
Compensation Management

Compensation provided to employees can direct in the form
of monetary benefits and/or indirect in the form of non-
monetary benefits known as perks, time off, etc.

Financial Compensation:

Total Financial compensation = Direct + Indirect Compensation

Direct Financial Compensation
pay received in forms of wages, salaries, bonuses and
commissions , fringe benefits
Types of compensation

Fringe benefits described as
Welfare expenses
Wage supplements
Perquisites other than wages
Sub wages
Social charges
Fringe Benefits


Indirect Financial Compensation(benefits)
- All financial rewards not included in direct
compensation. For examples workers compensation,
Family & medical leave, Disability Protection,

Nonfinancial Compensation
- Satisfaction person receives from psychological & or
physical environment in which person works. For
examples, skills variety, experiences, good working
conditions, flextime

Types of compensation (contd..)

A good compensation package is important to motivate the
employees to increase the organizational productivity.

Unless compensation is provided no one will come and work
for the organization. Thus, compensation helps in running an
organization effectively and accomplishing its goals.

Salary is just a part of the compensation system, the employees
have other psychological and self-actualization needs to fulfill.
Thus, compensation serves the purpose.

The most competitive compensation will help the organization
to attract and sustain the best talent. The compensation
package should be as per industry standards
Need of Compensation Management


Objective Of Compensation Management

To help the organization achieve strategic success while
ensuring internal and external equity.
Internal equity- ensures that more demanding positions
or better qualified people within the organization are paid
more.
External equity - assures that jobs are fairly compensated
in comparison with similar jobs in other firms
Attract qualified personnel
Retain current employees
Reward desired behaviour
Control costs
Facilitate understanding

Contd

Internal Factors:
Employers Compensation strategy
Worth of a Job
Employees Relative Worth
Employers Ability to Pay
DETERMINING COMPENSATION

External Factors:
Labor Market Conditions
Area Wage Rates
Cost of Living
Collective Bargaining
Contd

Wage and Salary Surveys
Collecting Survey Data
The Wage Curve
Pay Grades
Competency Based Pay

The Compensation Structure

Payment of Wages Act, 1936
Industrial Dispute Act, 1947
Minimum Wages Act, 1948
Equal remuneration Act, 1976
Payment of Bonus Act, 1965
Wage Board

Governmental Wage Policy of India

Wage boards consist of an impartial chairman , two
other independent members and two or three
representatives workers and employers each
The recommendations of the board are first submitted
to the government for the acceptance
After acceptance the government requests the parties to
implement them.
Wage boards

To establish good labor relations.
To decide on appropriate wages
To decide wages based on individuals capability
To develop a pre-determine scheme for payment of wages
To establish linkages of wages payment with performance
To provide for incentive payment
To guarantee minimum wages
To provide for neutralization of price rise
To develop a wage structure which can attract talent

Objective Of A Good Wage Policy


The Issue of Equal Pay for Comparable Worth
The Issue of Wage Rate Compression
Living Wage Laws
The Issue of Low Salary Budgets
Compensation Issues