It is all about People

“Take our 20 best people and virtually overnight we become a mediocre company.”

- Bill Gates, Microsoft

“Take my assets, leave my people, and in five years I will have it all back.”

- Alfred Sloan, General Motors

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We will cover the following:– Remuneration & its Components– Compensation Administration Process– Wage & salary Administration– Different types of Incentives and Incentives Plan

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• Wage, Salary and Wage, Salary and Reward AdministrationReward Administration

Human Resource Management

Building Blocks of Direct Compensation

1. The Foundation: A Compensation Philosophy

2.The Basics: Elements of Base Pay Administration

3. The Glue: Pay for Performance Programs

4. The Future: Effective Compensation Management

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The Organizational Reward System• Results from employment with the organization• Includes all forms of financial returns and tangible services &

benefits employees receive as part of employment relationship:

Intrinsic ExtrinsicAchievement Formal RecognitionFeelings of accomplishment Fringe BenefitsInformal Recognition Incentive PaymentsJob Satisfaction PayPersonal growth PromotionStatus Social Relationships

Work Environment

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Remuneration & Its Components

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Hourly Hourly and and

monthly monthly Rated Rated Wages Wages

and and SalariesSalaries

Direct Indirect

RemunerationRemuneration

FinancialFinancial Non FinancialNon Financial

Incentives Incentives

Individual Individual PlansPlans

Group Group PlansPlans

Fringe Fringe BenefitsBenefits

P.F, P.F, Gratuity, Gratuity, Medical Medical

Care, Care, Accident Accident

Relief, Relief, Health and Health and

Group Group insuranceinsurance

PerquisitesPerquisites

Company Company Car, Club Car, Club

Membership, Membership, Paid Paid

Holidays, Holidays, Furnished Furnished

House, Stock House, Stock option option

scheme, etcscheme, etc

Job ContentJob ContentChallenging job, Challenging job, Responsibilities, Responsibilities,

Recognition, Recognition, Growth Growth

prospects, prospects, Supervision, Supervision,

Working Working conditions, Job conditions, Job

sharing, etc.sharing, etc.

Definition: Remuneration' is a general term covering the monetary and related entitlements of employees - paid by employers in return for the work of employees.

Components:

Compensation Administration Process

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Job Analysis

It contains two parts: Job Description & Job Specification. This can help to know about the duties and responsibilities will be covered by the specific job and also the quality of the people engaged in that job. This is necessary to set a rationale pay structure for a specific position.

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Job Evaluation

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FactorFactorComparisonComparison

RankingRanking ClassificationClassification

PointPointMethodMethod

Job Job Evaluation Evaluation MethodsMethods

Job Evaluation: The systematic determination of the relative worth of jobs within an organization.

Methods of Job Evaluation

Developing Pay Surveys

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Select Employers with Comparable JobsSelect Employers with Comparable Jobs

Determine Jobs to be SurveyedDetermine Jobs to be Surveyed

Decide What Information Is NeededDecide What Information Is Needed

Conduct SurveyConduct Survey

Pay Structures• Common Pay Structures–Hourly and salaried–Office, plant, technical, professional, managerial– Clerical, information technology, professional,

supervisory, management, and executive• Factors that affect Remuneration/Pay Structure:– External: • Labor market• Cost of Living• Society• The economy• Geographic Location

– Internal Factor:• Business Strategy• Job Evaluation & Performance Appraisal• The employee• Kind of business 10

Wage & Salary• Wages: Wages are compensation. This includes basic

wages, allowances, bonuses etc. On the employers’ points of view, wages form that part of cost of production which is attributed as compensation paid to labor. Wages are paid in the form of time rate or piece rate to the workers, who are directly involved in the production or commercial activities.

• Salary: This is compensation paid to the indirect labor in the form of cash. Indirect labor involves supervisors, managers and supporting staff like office assistants, clerks, etc. Salaries are paid in the form of time rate, mostly on monthly basis.

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Wage & Salary• On the basis of the employee needs and ability of the

organization, there are various kinds of wages. Wages are generally four types:– Subsistence wages– Minimum Wages– Fair Wages– Living Wages

• Subsistence wages: This is level of wage below the minimum level which can lead inhuman life to the employees.

• Minimum Wages: This is a wage level fixed by government which is considered adequate, taking into account the cost of living. All the organizations are bound to follow this direction so that no employee is paid a wage less than the minimum wage fixed by government irrespective of grade, class or nature of work.

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Wage & Salary• Fair Wages: This is fixed by employer. This level of

wage varies from industry to industry. The main criteria are the capacity of payment. Fair wage is a wage above the minimum wage but below the living wage.

• Living Wages: Living wage is one which should enable the earner to provide for himself and his family not only the bare essentials of food, clothing and shelter, but a measure of frugal comfort, including education for his children, protection against ill health, requirement of essential social needs and a measure of insurance against the more important misfortune including old age.

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Incentive CompensationIncentives can be added to the basic pay structure to

provide rewards for performance. It may be 3 types:1. Individual Incentives include– merit pay plans (annual increase, based on

performance)– piecework plans (pay based on number of units

produced typically in a specified time period.)– time-savings bonuses and commissions2. Group Incentives : Incentives can be offered to groups,

rather than individuals, when employees' tasks are interdependent and require cooperation.

3. Plant-wide Incentives: Direct employee efforts toward organizational goals (such as cost reduction)

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4. The Future: Effective Compensation Management

• S = Strategically-based

• M = Market-driven

• A = Analyze Thoroughly

• R = Reward Results

• T = Transformation

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Compensation & Benefits Package

• Base Salary - the fixed amount to be paid • Incentives - additional variable pay based on performance

against objectives • Protectives - programs which insure employees against loss • Capital Accumulation – programs that provide the opportunity

to establish a personal estate (equity /stock plan)• Retirement Income - plans that defer income for services

rendered to a later payment date • Perquisites - company paid allowances beyond direct

pay(Housing,Car, Leave travel, etc.)• Paid Time Off - vacations, holidays, maternity leave, etc

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The C&B Cycle

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Operationalizing C&B

Corporation’s Strategy on C&B

COMPENSATION POLICY/DESIGN• Policies Designed/Reviewed•Compensation Structure/Design Issues•Annual/Cyclical actions (TIR/Bonus/SPP)•Employee Communication strategy

IMPERATIVES•Top Management Inputs•Market Drivers•HR Strategy

Tracking C&B Info - GEMS, HRIS

Benefits Administration

Gauging employee satisfaction

Employee getting the C&B package

PayrollHR OPERATIONS

Fixed Cash

• Base Salary

• Housing Assistance/HRA

• Conveyance Allowance (Q/R/S)

• Leave Travel Allowance

• Medical Allowance

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Benefits• Company Housing

• Company Car (grades T & above)

• Furnishing program

• Housing Loan• Personal loans• Car Loan • Tuition Refund Plan• Professional Body Membership

• Retrials or Parachute Payments – Provident Fund – Gratuity – Superannuation (for certain grades)

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Variable Pay

• Individual Performance Award/Annual Bonus

• Sales Incentive Plans

• Golden Handcuffs

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EMPLOYEE COMMUNICATION - taking C&B to the people

• During all C&B actions (e.g., Annual Salary Increase letters , SPP roll-out)

• Through the HR web-site

• Through online addressal of employee queries– payroll & benefits related (HR Ops)– policy related (Regional HR/Compensation Unit)– through supervisors (queries of the type - “how does my salary

increase stack-up vis-à-vis my peers ?”)

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