COMPENSATION MANAGEMENT

OURASSET WALK OUT OF THE DOOR

EACH EVENING. WE HAVE TO MAKE
SURE THAT THEY COME BACK THE
NEXT MORNING.
 Introduction
Compensation is a systematic approach to
providing monetary & non monetary value to
employees in exchange for work performed.

Compensation may be defined as money

received in performance of work and many
kinds of benefits that an organization provides
to their employees.
 What is the meaning of.

Salary

Wages

Compensation
 Salary

Regular wages received by an employee from

the employer on weekly or monthly basis. It
includes employee benefits such as health &
life insurance savings plans and social security.
 Wages

Payment for labor or services to a worker,

especially remuneration on an hourly, daily or
weekly basis or by the piece.
 Compensation

Direct & Indirect monetary & Nonmonetary

rewards given to employees on the basis of
the value of the job, their personal
contributions and their performance. While
making this payments one should be alive to
the governing legal regulations.
 Objectives

To recruit & retain qualified employees.

To increase or maintain morale.
To determine basic wage & salary.
To reward for job performance.
Components
Direct Compensation:
It refers to monetary benefits offered and provided
to employees in return of the services they provide
to the organization. The monetary benefits include
basic salary, house rent allowance, conveyance, leave
travel allowance, medical reimbursements, special
allowances, bonus, PF/Gratuity, etc. They are given at
a regular interval at a definite time.
Indirect Compensation:
It refers to non-monetary benefits offered and
provided to employees in lieu of the services
provided by them to the organization. They include
Paid Leave, Car / transportation, Medical Aids and
assistance, Insurance (for self and family), Leave
travel Assistance, Retirement Benefits, Holiday
Homes.
 Compensation Models
Traditional:
Company has a fixed salary structure with
bands based on the employees grade. An
employee has no choice.
Cafeteria:
Employee has a flexibility to choose his/her
salary components from the basket of
components offered by the company.
Combined:
A combination of Traditional & Cafeteria.
 Component of compensation System
Job Description:
A critical component of both compensation and
selection system, job descriptions define in writing
the responsibilities, requirements, functions,
duties, location, environment, conditions and
other aspects of jobs. Descriptions may be
developed for jobs individually or for entire job
families.
 Job Analysis:
The process of analyzing job from which job
descriptions are developed. Job analysis
techniques include the use of interviews,
questionnaires and observation.
Job Evaluation:
A system for comparing jobs for the purpose of
determining appropriate compensation levels for
individual jobs or job elements. There are four main
techniques: Ranking, Classification, factor
comparison and point Method.
 Pay Structure:
Useful of standardizing compensation
practices. Most pay structures include several
grades with each grade containing a minimum
salary/wage and either step increments or
grade range. Step increments are common
with union positions where the pay for each
job is pre-determined through collective
bargaining.
 Salary Surveys:
Collection of salary and market data, may include
average salaries, inflation indicators, cost of living
indicators, salary budget averages. Companies may
purchase result of surveys conducted by survey
vendors or may conduct their own salary survey.
When purchasing the survey form the vendor,
note that it may be conducted within a
specific industry or across industries as well as
within one geographical region or across
different geographical regions.