Garima Sharma C53 Gauri Singh C54 Harsha Tandure C55 Indira Tata C56 What Employee compensation refers to all forms of pay going to employees and arising from their employment Includes all the direct and indirect financial compensations Benefits Employees today are not willing to work only for the cash alone, they expect 'extra'. This extra is known as employee benefits. Employee benefits are non-financial form of compensation offered in addition to cash salary to enrich workers lives. Why Attract & retain talent in firm Job Satisfaction Motivation Low absenteeism Low Turnover
Compensation Total Compensation Package Financial Direct Fixed Pay Base Pay Differential Pay Overtime On Call Shift differential Pay Variable Pay Annual Incentive/ Bonus Profit sharing Achieve ment Award Indirect Pay for Time Work Pay for Time Not at work Sick Leave Holiday Annual Leave Income Protection program Health Insurance Life Insurance Pension Gratuity Non - Financial Recognition Work Life Balance Alternative Work On The Job Training Career Development opportunity
Components of Compensation
Typical Pay Slip
Theories of Compensation Reinforcement & Expectancy Equity Agency Reinforcement & Expectancy Equity Agency Behavior Rewarded Positive Experience Behavior repeated Individual Equity External Equity Internal Equity Motivation Commitment Performance Perception Of Fairness Reinforcement & Expectancy Equity Agency Reinforcement & Expectancy Equity Agency Stakeholders In the organizations employer and employees are two main stakeholders
Employer act as principals and employees assume the role of agent Cost The remuneration of employee is agency cost
Principal tries to decrease agency cost and agent expect to have more agency cost Align The principal should try to choose remunerating schemes that align its own interest with expectation of agents Basis
Behavior oriented (merit based pay)
Outcome oriented (profit sharing, commission)
Employee sets expectations & Goals Performance is rewarded Employee considers equity of rewards Feedback to employees Rewards Employees sets new expectations
Motivation & Performance Model Desire for more pay Performance Strikes Grievances Search for other job Absenteeism Turnover Pay Dissatisfaction Lower attractiveness of job Job Dissatisfaction Psychological Withdrawal Visits to Doctor Poor mental health Absenteeism
Consequences of Pay dissatisfaction C Remuneration Cost of Living Labour Markets L a b o u r
U n i o n s
E c o n o m y
Society Legislations Business Strategy Job Evaluation E m p l o y e e
P e r f o r m a n c e
A p p r a i s a l
Factors influencing employee compensation Business Strategy Market Position & Maturity Compensation Strategy Blend of Compensation Invest to Grow Growing Rapidly Stimulate Entrepreneurialism Modest Benefits High cash with above average incentive Manage Earnings Protect Markets Normal Growth to Maturity Reward Management Skills Standard benefits Average cash with moderate incentives Harvest Earnings Reinvest Elsewhere No real growth / Decline Stress on Cost Control Standard benefits Below average cash with small incentive
Compensation Plans & Business Strategy Job description Job Evaluation Job Hierarchy Pay Survey Pricing Jobs Pay levels Pay Grades
Challenges of Compensation Factors Job Based Skill Based Pay Structure Based on job performance Based on ability to perform Employers Focus Employee linked to job Employee linked to skills Employee Focus Job promotion to earn greater pay Skill acquisition to earn greater pay Procedures Required Assess job content Assess skills Advantages Value of work performed Flexibility; Reduced workforce Disadvantages
Inflexibility Cost controls
Skill Based pay & Job based pay Wage Policy Objectives To set minimum wages Abolish malpractices in wage payments Efficient allocation and utilization of human resources
Disparities Disparity in remuneration of government sector and private sector Disparity in remuneration of organized sector and unorganized sector Disparity in remuneration as per industry
Wage policy in India Team Based Pay Remunerating Professionals Contract Employees Expatriates & Executives SPECIAL GROUPS
Compensating special groups
INCENTIVES N a t u r e
Incentives payments are monetary benefits paid in recognition of outstanding performance Also called variation rewards or payment by results Varies from to time to time and from individual to individual A d v a n t a g e s
Inducement and motivation of workers Increase in productivity Reduced lost time Reduced supervision Reduced absenteeism and turnover D i s a d v a n t a g e s
Deterioration in quality of products Error in estimating bonus rates Disregarded safety regulations Jealousy amongst workers
Nature, drawbacks, importance of incentives Employees cooperation and participation Realistic standards and necessary tools and facilities Easy to understand and calculate Commitment of top management
Indirect workers should also be given benefit of incentive system
Setting and reviewing specific objectives and incentives of each employee periodically Careful Planning (well prepared and implemented) Clear link between output and reward
Pre-requisites for an effective incentive system Variation Vary from industry to industry and also from one plant to another Modification Laws are modified to suit the local requirement Coverage Schemes in public sector have extremely varied coverage From day rated workers to top level management Inflation Due to inflation, the incentives must be substantial to motivate employees to work
Incentive Schemes in Indian Industry Incentive Scheme Vary in same proportion as Output Straight piece work Standard Hour Vary less proportionately than output Halsey Plan Rowan Plan Barth Scheme Bedaux Plan Vary proportionately more than output High Piece Rate High Standard Hour Differ at different levels Taylors Differential Piece Rate Merrick Differential Piece Rate Gantt Task System Emersons Efficiency Plan
Types of incentive schemes Vary in same proportion as Output Rate per unit is fixed Total earnings depend on output of worker
Vary in less proportion as Output Barth variable sharing system Workers pay is equal to square root of time taken and standard time
Vary in more proportion as Output High piece rate Increment and earnings for each unit of output above standard is greater Earnings differing in differential level of output Merrick Differential piece rate system INCENTIVE SCHEMES
Nature of Benefits & Services Cost effective Benefit should satisfy real need Bargaining power of union need to be considered Administration of benefits need to be preceded by sound planning Employees need to be educated to make use of benefits Legally Required Payments Old age, Survivors, Disability Workers Compensation Unemployment Compensation Contingent & Deferred benefits Pension Plans, Life Insurance, Guaranteed annual wage Leaves Tuition aid, Service awards Payments for time not worked Vacation Holidays Other Benefits Travel allowances Moving expenses Meal Expenses
Principle of fringes T r e a t s
K n i c k
K n a c k s
A w a r d s
T o k e n s
O n
T h e
J o b
O f f i c e
E n v i r o n m e n t
Free Lunch Festival Bash Coffee Breaks Picnics
Desk Accessories Company Watches T Shirts Wallets Calendars
More responsibility Job Rotation Special Assignments Training Movie Tickets Vacation Trips Early time offs Trophies Citations Certificates Letter of Appreciation
Re decoration Office with a window Flexible Hours
Non Monetary Rewards Benefits Strategy Establish Benefits Objectives Assess Environmental Factors Assess Competitiveness Communicate Business Information Control Benefits Costs and Evaluation