A return in exchange between an

employer and employees, as an

entitlement for being an employee of
the company or as a reward for a job
well done
A Compensation Program must be
tailor made to meet the needs of the
organization and its employees.
 Globalisation
Employees are being exposed to the latest
trends in global practices in compensation
Compensation structures are becoming
flatter and simple
With global downturn there has been a
pressure on increasing productivity.
In India there is a move towards total
rewards structure
Stock options The sheen and the tarnish
 Attract capable employees
Reward employees for past
performance
Retain present employees and
reduce
unnecessary turnover
Maintain equity - both internal
and
external
Maintain budgets
Comply with legal regulations
Maintain competitiveness in the
Market
Organisation
Forces
Policy

Work Individual
Value Performance
Market Forces

Labour supply & demand

Different industries
Organisation Policy
What do we want to pay
What can we afford to pay
Ratio of labour costs to total costs
Do we provide remuneration by way of benefits
Will we have an incentive/bonus scheme
Collective bargaining agreement
Work Value
Knowledge and experience
Task complexity
Responsibility
Interpersonal skills
Other ability and skill levels
Individual Performance/Merit
Bargaining power
Actual achievements of the individual
 Labour Market Business Strategy
Cost of living Job Evaluation
Labour Unions Performance
Government Appraisal
legislation Employee
Society
Economy

FACTORS INFLUENCING EMPLOYEE REMUNERATION

 Minimum Wages Act, 1948
Payment of Wages Act, 1936
Adjudication of Wage Disputes
Wage boards
Pay Commissions
Payment of Bonus Act, 1965
WAGE is the
remuneration paid for the
service of labour in
production, periodically to
an employee or worker.
Wages normally refer to
SALARY
hourly rate paid to such usually refers to
groups as productivity and the weekly or
maintenance employees monthly rates
paid to clerical,
administrative
employees
TOTAL COMPENSATION --- Is the package of
quantifiable rewards an employee receives for his /
her labour or contribution

BASE PAY The fixed pay the employee receives on

a regular basis

PAY INCENTIVES Rewards the employee receives

for good performance

BENEFITS / INDIRECT COMPENSATION

Perquisites
 Total
Compensation

Indirect
Base Compensation/
Incentives
Compensation Benefits
 TOTAL
TOTAL COMPENSATION
COMPENSATION

Direct
Direct Indirect
Indirect

Wages Time
TimeNot
NotWorked
Worked
Wages//Salaries
Salaries Vacations
Vacations
Breaks
Breaks
Holidays
Commissions
Commissions Holidays

Insurance
InsurancePlans
Plans
Bonuses Medical
Medical
Bonuses Dental
Dental
Life
Life
Gainsharing
Gainsharing Security
SecurityPlans
Plans
Pensions
Pensions

Employee
EmployeeServices
Services
Educational
Educationalassistance
assistance
Recreational programs
Recreational programs

2007 Thomson/South-
915 Western. All rights reserved.
 NON
NONFINANCIAL
FINANCIALBENEFITS
BENEFITS

JOB
JOB ENVIRONMENT
ENVIRONMENT

Interesting
Interestingwork
work
Good
GoodPolicies
Policiesand
and
Practices
Practices
Challenging
Challengingwork
work

Responsibility
Responsibility Competent
CompetentSupervision
Supervision

Recognition
Recognition Congenial
Congenialwork
work
Environment&
Environment &Fair
Fair
Treatment
Treatment
Career
CareerProspects
Prospects
Safety
Safetyand
andHealth
Health

2007 Thomson/South-
916 Western. All rights reserved.
Job Analysis
Write job descriptions
Determine job specification
Rate worth of all jobs. Done by either :
Non Quantative methods - Ranking
- Classification
Quantitative methods - Factor comparison
- Point rating
Check for both external as well as internal equity
through market surveys
Establish final pay policy and rules of administration
Determine wage / salary structure
Fix individual pay levels
Comparison of jobs by use of systematic
procedures to determine relative worth.
Creating internal equity
Jobs evaluated grouped into classes,
familiar or grades
Within grades,jobs arranged in order of
importance.
Salary surveys organisations salaries to those
offered in other organisations compare an.
Does the organisation want to
compare itself with :-
Organisations in the same or related industries?
Organisations in the same geographic area?
Best Practice Companies?
Domestic Companies?
Multinationals?
Group similar jobs into Pay Grades or Job Classes
Jobs of equal difficulty.
Establish the Wage Curve
Wage Curve shows relationship between value of job
and average wage paid for the job.
is valuable in
providing
information that
makes comparison of
jobs possible. It is a
process of analyzing
and assessing the
various jobs
systematically to
 Objectives of Job Evaluation

Job Analysis

Job Description Job Specification

Job-evaluation Programme

Wage Survey

Employee Classification

Job Evaluation Process

QUANTITATIVE NON- QUANTITATIVE

Point Ranking Method Ranking Method

Factor Comparison Job Grading Method

Method

METHODS OF JOB EVALUATION

 Obtain job information
Select raters and jobs
Rank jobs
Combine ratings

Try not to rely on guesstimates

Best for small organizations
The evaluators rank the jobs from
most valuable to least valuable

Rank Job
1 General manager
2 Marketing manager
3 Production manager
4 Accounting manager
5 Plant engineer
6 Accountant
7 Sales representative
8 Plant supervisor
9 Receptionist
Based on a job
as a whole
Job classes or
grades are pre
established
and jobs fitted
in based on
their relative
 Decide how many classes the job structure
should be broken into

Write definitions of each class

Compare jobs with definitions and place into

the appropriate class
CL. DESCRIPTION
I Simple work, no supervisory responsibility,
no public contact
II Simple work, no supervisory responsibility,
public contact
III Work of medium complexity, no
supervisory responsibility, public contact
IV Work of medium complexity, supervisory
responsibility, public contact
V Complex work, supervisory responsibility,
public contact
 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.
The job is placed in a
particular grade,
 A number of factors common to all jobs are
selected
Relative weights are assigned to each factor
Each factor is broken down into degrees,
defined and a point value assigned to each
Point scores for jobs can then be calculated
FACTOR Educat Experie Job Relation Working
ion nce complexity with others Condition

WEIGHT 50% 25% 12% 8% 5%

1st 50 25 12 8 5

2nd 100 50 24 16 10

3rd 150 75 36 24 15

4th 200 100 48 32 20

5th 250 125 60 40 25

Experience: 1st upto 3 mths. 25

2nd 3 mths - 6 mths 50

3rd 6 mths - 1 yr. 75

4th 1 yr. - 3 yrs. 100

5th 3 yrs & more 125
o Factors for comparison are
first
selected (usually 5 : mental
requirement,physical
exertion,
skill requirement,
responsibility
and job conditions)
o Each factor is ranked
individually
with other jobs
o Total points are then assigned
to
are the monetary benefits
paid to employees in
recognition of their outstanding
performance. They are defined
as variable rewards granted
according to variations in the
achievements of specific
results.
INDIVIDUAL GROUP ENTERPRISE
Piecework
Team Profit Sharing
Standard Hour compensation
Plan Employee
Bonuses Gainsharing stock
ownership
Lump sum merit Scanlon Plan
pay
Plans (ESOP)
Improshare
Sales incentives
 Piece Rate -
Straight Piecerate Employee receives a
certain rate for each unit produced

Differential Piecerate- Employee whose

production exceeds the standard amount
of output receives a higher rate for all of
their work than the rate paid to those
who do not exceed the standard amount
 Standard Hour Plan -
Sets rates based on the completing of a job
in a predetermined standard time.
Bonus Payment that is supplemented to
the base wage
Lump Sum Merit Pay

Employee receives a year end merit

payment which is not added to the base
pay
Sales Incentive Plan

Can be straight commission or combined

salary and commission
 Scanlon Plan
Bonus incentive plan using employee
and management committees to gain
cost reduction improvements. Financial
incentives are provided based on an
established formula.
Improshare
Gainsharing program where bonuses are
based on the overall productivity of the
work team
EMPLOYEE BENEFITS
Employee benefits and services include
any benefits that the employee
receives in addition to direct
remuneration

It is the benefits and services that

employees received as a part of their
total compensation package, pay or
direct compensation, is based on
critical job factors and performance.
Benefits and services, however, are
indirect compensation because they
 An employee enjoys them in addition to the
salary he/she receives.
They are not given for specific jobs
performed but to make jobs more attractive.
They are not linked to productivity so do not
reward performance in any way, criteria
used is other than performance.
They have an indirect impact on workers
efficiency. If impact is direct, it is not a
fringe benefit.
EMPLOYEE WELFARE
is the services,
facilities and amenities
a may be established
in or in the vicinity of
an undertaking to
enable the persons
employed in them to
perform their work in a
healthy , congenial
surroundings and to
provide them with
amenities conducive to
good health and high
 Inside the work place Outside the work
place
Conditions of the Housing
work environment Water, sanitation, waste disposal
Conveniences Roads, lighting, parks, recreation,
parks, etc
Workers health Schools
services Markets, co-operative
Women and Child Bank
welfare Transport
Communications
Workers reunion
Health and Medical services
Employment follow Indoor Recreation
up Security
Economic service Community leadership
Labour development
management
participation
Loans
Education of Children
Fair price shops
Leave Travel concession