Introduction to compensation managementCompensation Management

Prepared By

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

Introduction to compensation management

• Different kinds of rewards.

• Intrinsic rewards

• Extrinsic rewards.

– Direct compensation.

– Indirect compensation.

– Non financial Compensation.

Intrinsic rewards

• Participative decision making.

• More responsibility.

• Opportunities for personal

growth.

• Greater job freedom and

discretion.

• Diversity of activities.

Extrinsic rewards – Direct Compensation

• Basic Salary or Wage.

• Overtime and holiday

premiums.

• Performance bonus.

• Profit sharing.

• Stock options.

Extrinsic rewards – Indirect Compensation

• Protection programmes.

• Payment for time not

worked.

• Services and perquisites.

Extrinsic rewards – Non financial Compensation

• Preferred office furnishings.

• Assigned parking spaces.

• Impressive designation.

• Preferred lunch hours.

• Preferred work assignments.

• Own secretary.

Purpose of reward systems

• Svensson summarizes the

purpose of reward systems

in the following seven

points.– Stimulate to increase effectiveness.

– Stimulate to improve quality.

– Give increased responsibility and

influence over the individuals own work

situations.

Purpose of reward systems

• Svensson summarizes the

purpose of reward systems in

the following seven points.– Stimulate personnel movement

internally and externally.

– Stimulate competence development.

– Stimulate new work forms.

– Support flexible management and work

forms.

Slope of compensation management

• Every person has a different

definition of compensation

depending on the life

experiences of that person. To

a watchman working in an

organization, the word

compensation is likely to mean

money.

Slope of compensation management

• To a manager or executive

concerned about paying for his

children’s college education and

saving for retirement,

compensation will mean money as

well as the organization's stock

options, performance bonus,

ownership stake, recognition,

career growth and many more.

Slope of compensation management

• To a social worker, it could

be the sense of satisfaction

one gets by serving the

disadvantaged people rather

than money, stock options or

performance bonus that is

more meaningful.

Slope of compensation management

• Thus compensation means not

just money but benefits like

employee development, even

though not necessarily viewed

by the employee as

compensation, is a substitute

for money and a major cost for

organizations.

Slope of compensation management