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Remuneration Compensation
- 1. REMUNERATION
- 2. Benefits of Proper Compensation Compensation policy aims to attract talented employees and motivate them to put their efforts and commitment to work that increase job satisfaction work performance 2 Benefits of Proper Compensation Administration 1 2 3 4 5 Attracts talent Motivates Employees Rewards Performance Reduces Turnover Manages Compensation Budget
- 3. Consequences of Pay Dissatisfaction 3 grievances Desire for more pay Pay dissatisfaction performance strikes Search for new job Lower attractiveness of job absenteeism turnover Job dissatisfaction absenteeism Psychological withdrawal Poor health Visits to the doctors Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 289
- 4. 1. Minimum Wage – The minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period *The lowest remuneration that employers can legally pay their employees , assuming there is no other benefit of the job. *lower wage per hour that a worker may be paid as mandated by federal law. Concepts of Wages Fair Wage Living Wage Team based Pay Remunerating Professionals Contract Employees Expatriates and Executives 4
- 5. Components of Remuneration 5 Remuneration Financial Non Financial Wages and Salary Hourly wages and monthly rates salary Incentives Individual plans Group plans Fringe benefits CPF Gratuity Medical etc. Perquisites Company car Club membership Furnished house Stock option schemes etc. Job content Challenging job responsibilities Supervision Growth prospects Working conditions Etc. Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 286
- 6. Theories of Remuneration 6 Employee set expectations and goals Performance is rewarded Employee consider equity of reward and performance Feedback to employee Employee sets new goals and expectations based on experience
- 7. Theories of Remuneration 7 Positive Experience Behavior is repeated Behavior rewarded
- 8. Theories of Remuneration 8 Equity Theory • Adam’s equity theory emphasizes to have equity in pay structure of employee • If employee feel that their efforts are well rewarded they will put more efforts and will be satisfied with their job • In case of inequity feeling they will be de moralized and dissatisfied resulting into low productivity Individual equity Internal equity External equity Perception of fairness Motivation Commitment Performance
- 9. Theories of Remuneration 9 Agency Theory • In the organizations employer and employees are two main stakeholders • Employer act as principals and employees assume the role of agent • The remuneration of employee is agency cost • Principal tries to agency cost and agent expect to have more agency cost • The principal (Employer) should try to choose remunerating schemes that align its own interest with expectation of agents (employees) • Behavior oriented (merit based pay) • Outcome oriented (profit sharing, commission)
- 10. Factors Influencing Remuneration 10 Internal Factors External Factors Organization Strategy Economy Employee Society Job Evaluation Labour Market Performance Appraisal Cost of Living Labor Unions Legislation
- 11. Factors Influencing Remuneration 11 Business Strategy Market Position Remuneration Strategy Blend of Remuneration Invest to grow Merging or grow rapidly Encourage innovation and entrepreneurship High salary and incentives for performance. Modest benefits Manage earning Protect Markets Normal growth to maturity Reward management skills Average incentives with average Salary on unit and individual performance. Standard benefits Harvest earnings invest somewhere else Maturity or decline Focus on cost control Below average salary with few incentives that too tied with cost control efforts. Standard benefits
- 12. Remuneration Model 12 Job description Job evaluation Job hierarchy Pay survey Pricing Jobs Pay levels Pay grades
- 13. Challenges of Remuneration 13 Remuneration Salary Reviews Monetary and non monetary rewards Skill based pay Comparable worth Below market or above market pay Eliticism or Egalitarianism Employee participation Pay Secrecy
- 14. Skill Based and Job Based Pay 14 Factors Skill based Job based Pay structure Based on ability to perform Based on job performance Employer’s focus Employee carriers wages, Employee linked to skills Job carries wages. Employee linked to job Employee focus Skill acquisition for more pay Job promotion for better pay Procedures required Skills assessment, Value skills Job content assessment, Value jobs Advantages Flexibility, Reduced workforce Pay based on value of job and work performed Disadvantages Cost controls Inflexibility Compensation Benchmarking Process : 1. Planning Phase 2. Analyze Phase 3. Integration Phase 4. Action Phase
- 15. Elements of Employee Rewards in India: 15 1. Base/ Basic Pay ◇ 2. Individual Performance related pay ◇ 3. Bonus ◇ 4. Incentives ◇ 5. Commissions ◇ 6. Service related pay ◇ 7. Skill based pay ◇ 8. Competence related pay ◇ 9. Career Development pay ◇ 10. Allowances ◇ 11. Employee Benefits ◇ 12. Total remuneration ◇ 13. Non financial reward ◇ 14. Employee stock options