COMPENSATION & REWARD STRATEGY

By:-

Deepak Angrish

Dheeraj

Kokil

Manisha

Rahul Tejyan

Prabhat Tomar

COMPENSATION AND REWARDS- NEW DEVELOPMENTS

Competency-based Pay and Rewards Progammes

•Steps in designing Competency-based Pay system:-

1. Identify competencies and distinguish between proficiency levels

2. Assess the competency level of job-holders

3. Create pay bands

4. Develop a pay delivery system

Team-based Pay and Rewards

Advantages

Disadvantages

Trends in Top-Level Executive Compensation

Components of Executive Compensation:-

Salary Short-term incentives Long-term incentives Benefits Perquisites

EXECUTIVE COMPENSATION PACKAGE

MEANING OF EXECUTIVE COMPENSATION

Executive compensation is how top executives of business corporations are paid.

The purpose of compensation of an executive is for an individual who is in a management position at highest levels.

This category includes presidents vice presidents managing directors and general managers.

FEATURES OF EXECUTIVE COMPENSATION

Managerial compensation cannot be compared to the wage and salary schemes meant for in other employees in organizations.

Secrecy is maintained in respect of executive compensation.

Executive pay is not supposed to be based individual performance rather on organizational performance

MEANS OF COMPENSATION

There are four basic tools executive compensation packages in organization. These are:

Base salary. Allowances. Incentives. Perquisites.

COMPENSABLE FACTORS

The US compensation institutes Phoenix plan uses compensable factors:

Job related experience. Training time required. Frequency of review of work. Utilization of independent choice. Frequency of reference to guidelines. Frequency of work transferred through supervisor Analytical complexity. Time spent in processing information.

INDIAN PRACTICES

Executive compensation in India is built around three important factors.

Job complexity. Employers ability to pay. Executive human capital.

PRIVATE SECTOR vs. PUBLIC SECTOR

The salary of top executives of public sector are miserable compared to private sector .

EXAMPLES: S B I of India chief is paid 10%of HDFC

Bank Managing Director BHEL’S chief is getting about 10 to 12

lakhs per annum as against ABB ‘S MD getting nearly 40 to 50 lakhs

Compensation System Components

Base salary Conveyance Special allowances Gratuity Hra(house rent allowances) Travelling allowances Provident fund Medical claim Bank facility Bonus Providing cars Stocks and share

EXECUTIVE COMPENSATION GIVEN IN DIFFERENT COMPANIES

EXECUTIVE COMPENSATION OF ORACLE

SALARY INCLUDES

Basic salary Conveyance Special allowances Gratuity Provident fund H R A( House Rent Allowances) Traveling Allowances Medical claim Bank facility

IBM EXECUTIVE COMPENSATION PACKAGE

Two main components of executive compensation package Base salary and Cash Incentive/ Bonus Long-term Incentive Compensation

Two main elements drive compensation package Competitive marketplace Complexity of leading IBM

Executive Compensation at Disney: Base Salary Performance base annual bonus

Net Income, ROE, ROA, EPS Stock or cash awards

Stock options Initial employment, promotion, renewal or fully

vested.

Business Strategy and Compensation

Dimensions of Compensation1. Bases for Determining Pay Levels Job or Skill Performance or Seniority Individual performance or Group performance Short-term vs. Long-term orientation Risk Aversion or Risk Taking Compensation Level or Market Internal Equity or External Equity Hierarchy or Egalitarianism Fixed Pay or Incentives Quantitative or Qualitative Measures of Performance

Contd.

2. Design of Compensation System Bonuses or Deferred compensation Intrinsic Rewards or Extrinsic Rewards

3. Administrative Framework Centralized pay administration vs. Decentralized Open pay or Secret pay Participation or Non-participation of employees in

Pay Decisions Bureaucratic pay or Flexible pay policies

Strategic Compensation Patterns

Basics for Pay Design to Pay Administrative

Framework

Basics for Pay Design to pay Administrative

Framework

Mechanistic Compensation Strategies

Organic Compensation Strategies

Business strategy and Compensation Strategy Linkage

Defender strategy

Prospector strategy

Analyzer strategy

Mechanistic strategy

Organic strategy

Mixed compensation strategy

Business Strategy Compensation Strategy

Compensation Strategies of High-technology Firms

Individual based compensation Risk sharing Market driven pay Higher discretion Aggregate incentives Time orientation

Reward System Components of Rapidly-growing Firms

Base pay/Salary

Benefits

Short-term pay incentives

Long-term pay incentives

Organizational Life Cycles and Compensation Strategy

At Start-up stage

At Growth stage

At Mature stage

At Decline stage

Total Compensation and Rewards Strategy

Components of total compensation and rewards strategy:-

a) Audit of current programmes

b) Internal business factors

c) External environmental and market factors

THANK YOU……!!