11)compensation

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Compensation is the remuneration received

by an employee in return for his/hercontribution to the organization. (Mousumi S.

Bhattacharya & Nilanjan Sengupta, 2009)

Compensation is a systematic

approach to providing monetary

value to employees in exchange for

work performed. Compensation may

achieve several purposes assisting in

recruitment, job performance, and

job satisfaction. (Milkovich, 2011)



Compensation is the remuneration received by an employee in return

for his/her contribution to the organization. It is an organized practicethat involves balancing the work-employee relation by providing

monetary and non-monetary benefits to employees.(Deloitte 2010)

Compensation is the system designed to attract and retain

employees as well as to motivate them to improve their skills

and efficientcy towards the achievement of organizational

goals

Compensation is the human resource management function that

deals with every type of reward individuals receive in exchange for

performing organizational tasks. (Ivancevich 2013)



The Workmen's Compensation Act 1952.

Provides for the compensation payment to an injured

employee or worker arising out of and in the course

of employment or contracting occupational disease.

Where the employee or worker dies in the event of

fatal accident or contracting an occupational diseaseor in the course and arising out of performing his duty

or work, the Workmen's

Compensation Act 1952 provides for the

compensation payment to the worker's dependants.Administered by the Department of Labour and

applies throughout Malaysia.



WHO IS COVERED UNDER

THE WORKMEN'S

COMPENSATION ACT 1952



IMPORTANCE OF

COMPENSATIONMANAGEMENT (HAY

GROUP, 2009)



TYPES OF COMPENSATION



COMPENSATION

DIRECT

BASE PAY INCENTIVE

PAY

INDIRECT

LEGALLY

REQUIREDOPTIONAL

(MILKOVICH, 2011)



COMPONENTS OF COMPENSATION

(MCCLUNE 1997)



EVOLUTION OF COMPENSATION (MALAYSIA

PAYROLL SERVICE, 2010)



EXTERNAL INTERNAL

DOMESTIC LABOUR MARKET

COST OF LIVING

LABOUR UNION GOVERNMENT

LEGISLATION

SOCIETY

ECONOMY

BUSINESS

STRATEGY

JOB EVALUATION PERFORMANCE

APPRAISAL

INTERNATIO

NAL

PARENT NATIONALITY

LABOUR MARKET

CHARACTERISTIC

LOCAL CULTURE

HOME AND HOST

COUNTRY

GOVERNMENT ROLES

INDUSTRY TYPE

COMPETITORS

GOAL

ORIENTATION

CAPACITY TO PAY

COMPETITIVE

STRATEGY

ORGANIZATIONAL

CULTURE



THE COMPENSATION SYSTEMS IN THEDIFFERENT COUNTRIES (DELOITTE, 2013)



CRITERION MALAYSIA JAPAN RUSSIA MIDDLE EAST

Orientation Performance -

Oriented

Seniority -

based

Job – level

Based

Nationality group

and

job level

Link with

performance

Excellent linkage Moderate

linkage

Poor linkage Moderate Linkage

Basis of

Increase

Annual merit

increase

Seniority and

age,

performance

ratings, spring

wage

negotiation

Seniority in

Job level

Job Level

Influencing

Cultural

variables

Achievement –

orientation

Material

ossession

Hierarchy;

Patience

Material

Possessions

Material

Possessions

Status seniority



STEPS TO

DESIGNING A PAYSTRUCTURE

(MILKOVICH &

NEWMAN (2008).



STEP 5: PAY STRUCTURE CREATION

STEP 4: PAY SURVEY ANALYSIS

STEP 3: PAY POLICY IDENTIFICATION

STEP 2: JOB EVALUATION

STEP 1: JOB ANALYSIS



COMPENSATION STRUCTURE

(ADECCO, 2012)



The documents, usually produced and

maintained by human resource (HR)

departments, establish salary ranges for each

paid position.

The configuration and scale of pay are dependent

on the specific duties to be performed as part ofeach position.

The scale for workers at every level includes

minimum and maximum amounts that are

outlined in the structure, and pay variations on

the scale often take skill level and experience into

account.



EXAMPLE COMPENSATION STRUCTURE IN MALAYSIA

(Adecco Salary Guide,Malaysia,2012)

Position Job Description Qualification Experience Minimum

Salary

Maximum

Salary

Assistant

HR

Manager/

HR Manager

Responsible for the planning and

control of the full spectrum of HR

duties - that includes recruitment,

training and labour relations etc.

Likely to have supervisory

experience.

Diploma/Degree 5-10 5,000 12,000

Compensati

on &

Benefits

Manager

Responsible for the overall

compensation and benefits structure

for

an organisation. Will likely work

closely with the HR Manager.

Degree with

Specialist /

Diploma in

Compensation

and Benefits

5-10 7,000 12,000



THE IMPORTANCE OF COMPENSATION

STRATEGY FOR HR PROCESSES (HAY 2009)



METHODS OF COMPENSATION (DELDOT

PROFESSIONAL SERVICES

PROCUREMENT MANUAL, 2009)

Method No. 1: Cost Plus Fixed-Fee

Method No. 2: Lump Sum

Method No. 3: Cost per Unit of WorkMethod No. 4: Specific Rates of

Compensation



EMERGING PAY SYSTEMS

(MILKOVICH 2011)

COMPETENCE

BASEDJOB BASED

SKILL BASED



JOB BASED SKILL BASED COMPETENCE BASED

WHAT IS VALUE? COMPENSABLE

FACTOR

SKILL BLOCK COMPETENCIES

PAY STRUCTURE BASED ON JOBPERFORMED /

MARKET

BASED ON SKILLCERTIFIED / MARKET

BASED ONCOMPETENCY

DEVELOP / MARKET

PAY INCREASES PROMOTION SKILLS ACQUISITION COMPETENCIES

DEVELOPMENT

ADVANTAGES CLEAR EXPECTATION

SENSE OF PROGRESS

PAY BASED ON

VALUE OF WORK

PERFORMED

CONTINOUS

LEARNING

FLEXIBILITY REDUCE

WORK FORCE

CONTINOUS

LEARNING FLEXIBLE

LATERAL

MOVEMENT

DRAWBACK POTENTIAL

BUREAUCRACY AND

INFLEXIBILITY

HIGHER COST FOR

CONTINOUS

TRAINING

PROGRAM

FAVOURITISM



BROADBANDING(MILKOVICH, 2011)



BROADBANDING IS CREATING A SALARY STRUCTURE

THAT CONSOLIDATES THE RELATIVELY LARGE

NUMBER OF RANGES FOUND IN A TRADITIONAL

STRUCTURE INTO FEWER RANGES.

BROADBAND STRUCTURES ARE CHARACTERIZED BY

FEWER SALARY RANGES THAT HAVE WIDER RANGE

SPREADS, LARGER MIDPOINT DIFFERENTIALS AND A

LESSER DEGREE OF OVERLAP.



BROADER

WORKFORCE

SKILLS

CAREER

DEVELOPMENT

AMONG

EMPLOYEES

SUPPORT ANEW CULTURE

OR FLATTER

ORGANIZATION

STRUCTURE



ADVANTAGES



FACILITATES PAY FOR PERFORMANCE

SUPPORTS DUAL CAREER LADDERS,

PERMITTING SUPERVISORY AND SUBJECT

MATTER EXPERTS (TECHNICAL EXPERTS)

TO BE RECOGNIZED. FACILITATES CAREER DEVELOPMENT BY

ENABLING EMPLOYEES TO MOVE WITHIN

THE SAME BAND WHILE RECOGNIZINGACHIEVEMENTS WITH PAY ADJUSTMENTS



NOT EQUIPPED OR FIT FOR EVERY

ORGANIZATION

STRUCTURE MAY CONFLICT WITH AN

ORGANIZATION’S WAY OF CONDUCTING

BUSINESS

AN EMPLOYEE CAN NOT RECEIVE MOREPAY THAN THE MAXIMUM RANGE

WITHIN THEIR BAND.



COMMON ELEMENTS

BENEFITS

BASE SALARY

ALLOWANCES

INCENTIVES

TAXES

11)compensation

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