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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

Published by Lecturesheet.iiuc28a9.com

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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

– International Compensation.

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

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

Human Resource Management

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Building Blocks of Direct Compensation1. 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 Recognition

Feelings of accomplishment Fringe Benefits

Informal Recognition Incentive Payments

Job Satisfaction Pay

Personal growth Promotion

Status Social Relationships

Work Environment

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Remuneration & Its Components

Hourly Hourly and and

monthly monthly Rated Rated Wages Wages

and and SalariesSalaries

Hourly Hourly and and

monthly monthly Rated Rated Wages Wages

and and SalariesSalaries

Direct Indirect

RemunerationRemunerationRemunerationRemuneration

FinancialFinancialFinancialFinancial Non FinancialNon FinancialNon FinancialNon Financial

Incentives Incentives

Individual Individual PlansPlans

Group Group PlansPlans

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

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

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 Content

Challenging job, Challenging job, Responsibilities, Responsibilities,

Recognition, Recognition, Growth Growth

prospects, prospects, Supervision, Supervision,

Working Working conditions, Job conditions, Job

sharing, etc.sharing, etc.

Job ContentJob Content

Challenging 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:

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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

FactorFactorComparisonComparison

FactorFactorComparisonComparison

RankingRankingRankingRanking ClassificationClassificationClassificationClassification

PointPointMethodMethod

PointPointMethodMethod

Job Job Evaluation Evaluation MethodsMethods

Job Job Evaluation Evaluation MethodsMethods

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

Methods of Job Evaluation

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Developing Pay Surveys

Select Employers with Comparable JobsSelect Employers with Comparable JobsSelect Employers with Comparable JobsSelect Employers with Comparable Jobs

Determine Jobs to be SurveyedDetermine Jobs to be SurveyedDetermine Jobs to be SurveyedDetermine Jobs to be Surveyed

Decide What Information Is NeededDecide What Information Is NeededDecide What Information Is NeededDecide What Information Is Needed

Conduct SurveyConduct SurveyConduct SurveyConduct Survey

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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

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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 commissions

2. 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

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

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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 ?”)