By,

Abhishek Pradhan

Monika Sodhi

Ramya

Snegaa

Praveen Nanadagobal

Shrutika nardekar

Group - 2, Sec - B

COMPENSATION MANAGEMENT&

INCENTIVES AND PERFORMANCE BASED PAY

Compensation Management

Components of compensation

• Wage & Salary

1. Wages – hourly rate

2. Salary – monthly rate

3. Annual increments

4. DA forms a part.

• Incentives

1. Payment by results

2. Addition to wages/salary.

3. Individual/group incentive schemes.

• Allowances

1. HRA

2. Conveyance

3. Leave travel allowance.

• Claims

1. Telephone/mobile allowance

2. Medical allowance

3. Subject to a limit.

• Gratuity

1. Paid at the time of employee’s exit after serving for more than 5 years.

• Taxes

1. Levied according to the laws.

2. Employer deducts from salary.

3. Remits it to tax departments.

• Fringe Benefits

1. PF , insurance , canteen , uniform , recreation.

• Perquisites

1. Allowed to executives.

2. Company car , club membership , paid holidays.

• Non-monetary benefits

1. Challenging jobs, recognition of merit, growth prospects.

Theories of Compensation

• Reinforcement theory:

1. Behaviour having a rewarding experience will repeat itself.

2. High performance not following a reward will affect future performance.

• Expectancy theory:

1. Link between rewards & performance.

2. Remuneration systems impact motivational levels.

• Equity theory:

• Agency theory:

1. Stakeholders – employers & employees.

2. Agency cost – conflicting goals.

Perception of

fairness

Internal Equity

External Equity

IndividualEquity

Performance

Commitment

Motivation

Factors influencing employee compensation

1. External

• Labour market –

o Demand & supply

o Going rate of pay

o Productivity of labour

• Cost of living

• Labour unions

• Labour laws

• Economy

2. Internal

• Business strategy

• Job evaluation & performance appraisal

• Employee

Devising a compensation plan

Job Description Job Evaluation

Job Hierarchy

Pay Survey

Pricing Jobs

Challenges of compensation

Skill based pay• Paid on

capabilities.• Depth of

knowledge.• Motivate

employees.

Pay reviews• Pay shouldn’t

remain constant.• Fixed date

reviews.• Anniversary date

reviews.

Pay secrecy• To avoid

comparisons.

Comparable worth• Equal pay for

equal work.• Equity between

men & women,

Employee participation• Involve employees

in the plan.• Job evaluation

committees.• Employee surveys.

Eliticism vs. Egalitarianism• Egalitarian –Same

remuneration plans for most employees.

• Offers flexibility

Below market vs. above market• Firm’s ability to

attract talent.• Cost component.

Comparable worth• Equal pay for equal

work.• Equity between men

& women,

Challenges of compensation

Wage Policy

• Minimum Wage

o Not only for bare sustenance but for preservation of efficiency of the worker.

o Provide for education , medical requirements.

o Determined by an agreement between management & workers.

o Factors – needs of workers , nature of jobs.

o Minimum wages act , 1948.

• Fair Wage

o Equal to prevailing wage rate in the country.

o Equal to prevailing wage rate for similar type of work.

o Factors – industry and bargaining power of employees.

• Living Wage

o One which enables wage earner access to bare essentials but also frugal

comfort.

o Education for children , protection against ill health.

o Factors – economic conditions of the country.