Ch 4 Compensation Management
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Transcript of Ch 4 Compensation Management
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Compensation Management
Dr. Naveed Akhtar
Ph. D Management Sciences
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DESIGNING A STAFF BUDGET PROGRAMME
The goal of the budget process is to make sure the organization has the appropriate-sized staff at the most cost-effective salary level to accomplish its goals of objectives
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Five Major reasons for a wage and Salary budget:
1. To make policy decisions in advance2. To encourage organizational Planning3. To foster a bottom-line approach4. T share human resources expertise throughout the
organization5. To provide training opportunities for line managers
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To make policy decisions in advance:
Identifying the salary increases and proposalsGet approval of each salary increase
To encourage organizational Planning
Encourage planning for business purposesLink organizational objectives to staff planningBudget give entire overview of the organization(any dept is not planning to increase staff but want to increase ranks)
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To foster a bottom-line approach
Ensures design and implementation of staff budget (with salaries and staffing requirements)
Make it clear to HRM – How HR-planning is affecting budget and expenses of the organization
HRM and other department understand the budget language
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To share human resources expertise throughout the organization
HR (wage & salary department is working with line managers throughout the organization to help them plan staff allocation effectively
Only variations and changes will need one-on-one approval
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To provide training opportunities for line managers
Training element of staff budget should not be overlooked
The budget process provides an opportunity for managers to sharpen their skills on human resources issues
Enable managers to focus their attention on staff size and performance instead of performing only routine activities
Help reveal the number of personnel required
Reveals differences between people and positions
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Assignment
An organization’s expense ledger contains four items related to wage and salary:
Payroll expensePayroll-related expensesBenefit expensesPension and retirement expenses
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Seven steps to complete the budget process:
a. Accuracy of the data during staff budget processb. After verification data compilation of data takes placec. Compiled forecasts are analyzed to identify any
difference or match with senior management suggestions
d. Determine which budget require additional work or revision. Meet the managers of those functions to find solutions within guidelines given by managers
e. After adjustment of numbers after final adjustment report of final budget is submitted
f. Reporting back to unit heads after approval by sr. managers
g. Throughout the year managers should monitor the budget. Unit heads must report the impact of each section on the staff budget
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Few Budget Issues
Impact of “anniversary date of appointment” on salary increases
-Increase will be the subject of only pay the service period in a year (until the following calendar year)-Formula used to calculate the anticipated salary of any period:
X + M (INC) = Budget salary Expense
X = current rate of payM= no. of months from anniversary date to end of budget yearINC= monthly amount of increase (Annual salary X Annual increase /12)
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Employee A’s current annual salary = $30,000Anniversary date = AprilIncrease in salary = 8%
$30,000 + 9 (30,000 x 0.08)/12
= $30,000 + 9(200) = $31,800
Impact of staff changes on salary expenses
-Affects only the year in which staff changes take place
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Auditing and Reviewing Wage & Salary Programme for
Overall EffectivenessPurpose:
-To review policies & practices within organization relative to wage and salary issue-To interface with the financial planning areas of the organization through budgetary review, and-To recognize issues that may be potential problems, either financial or legal
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Performing Wage & Salary Audit
Prime issues to consider during Audit:
-Financial/budgetary aspects of wage and salary decision-External and internal equity factors of the program itself (including legal discrimination based on performance)
Determining if budget guidelines are being met
- Auditing actual payroll performance-month to month-Actual-to-budget
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