Compensation

Cash, Bonuses, Insurance, Vacation, HolidaysPerks, Recognition

All forms of financial return, tangible services and benefits

that employees receive as part of their employment relationship

COMPENSATION

Compensation refers to wages, salaries or tips while benefits describes job extras provided by the employer.

Benefits might include health care packages, dental and life insurances, and paid time off.

High compensation and appealing benefits attract employees .

Some workplace benefits are required by law and others are offered as a job perk.

‘COMPENSATION’ in other terms also called as ‘employee remuneratioN’

Remuneration is the compensation; an employee receives in return of his or her contribution to the organization. His or her standard of living, status in the society, motivation, loyalty and productivity depends upon the remuneration he or she receives.

Components of compensation

EXTERNAL ENVIRONMENTINTERNAL ENVIRONMENT

COMPENSATION

FINANCIAL

DIRECT INDIRECT

NON-FINANCIAL

THE JOB THE ENV.

COMPONENTS OF COMPENSATIONFINANCIALDirectwages, salaries, commissions, bonuses

Indirectinsurance plans

life, health, dental, disabilitysocial assistance benefits

retirement plans, social security.paid absences

vacations, holidays, sick leave

Non-Financial

The Jobinteresting, challenging, responsibleopportunity for recognition, advancement,feeling of achievement

Job Environmentpolicies, supervision, co-workers, status symbols, working conditions, flextime, compressed work week, job sharing, telecommuting, flexible benefits programs

Factors that Influence Wage Levels

WAGE MIX

CONDITIONS OF LABOR MARKET

AREA WAGE RATES

COST OF LIVING

WORTH OF JOB

EMPLOYER’S ABILITY TO PAY

EMPLOYEE’S RELATIVE WORTH

COMPENSATION POLICY OF ORGANIZATION

COMPENSATION PACKAGE OF ASHOK LEYLAND

CLASSIFICATION OF REWARDS

TOTAL Compensation

Financial Non - Financial

Direct Job Satisfaction Praise / RewardsIndirect

Monthly SalaryAnnual IncentivesBonus

Provident FundGratuityTravel allowanceMobile expenseSales Promotional Expense

Future Leadership Program (FLP): Executives earmarked and declared future leader based on their competencyDevelopment based Career Plan (DLCP): Competent executives committing 5 years service to company in the form of bond will be given minimum 2 elevation during the bond period.Executive of the year AwardCompany Jeep at individual levelForeign Tour with family for the team achieving their yearly targetMajor medical claim for self and dependant

PRAISE/REWARDS

Aims of employee compensation

Attract capable employees to the organization.

Motivate them towards superior performance.

Retainment of their services over an extended period of time.

The Importance of Compensation

Impacts an employer’s ability to attract and retain employees.

Ensure optimal levels of employee performance in meeting the organization’s strategic objectives.

Theory Behind Compensation

Equity Theory

Comparing inputs and outputs of a similar co-worker

Perceived inequity affects employee effort

Expectancy Theory

People are motivated by intrinsic and extrinsic outcomes they desire.

People will only be motivated if outcome is possible.

People will only be motivated if outcome is contingent.

Types of Base Pay SystemsJob-based

oPay the job (not the person)oMarket-based (external equity

focus)oPoint factor-based (internal equity

focus)

Skills / knowledge-based

oPay the person (not the job)

Job Based PayAttraction Depends on market pricing

Motivation No performance impact

Skill Development Learn job-related and upward mobility skills

Culture Bureaucratic, hierarchical

Structure Hierarchical, individual jobs and differentiation

Cost Good control of individual pay

Knowledge Based Pay

Attraction Attracts learning-oriented individuals, high skills individuals

Motivation Little performance impact

Skill Development Motivates needed skill development

Culture Learning, self-managing

Structure Flat or team-based

Cost Higher individual pay

Strategic Issues in Compensation

Determining compensation relative to the market.

Striking a balance between fixed and variable compensation.

Deciding whether or not to utilize team-based versus individual pay.

Creating the appropriate mix of financial and non-financial compensation.

Developing a cost-effective compensation program that results in high performance.

CONT……..

New Thinking for the New Millennium

Pay the person .

Reward excellence .

Individualize the pay system .

THANK YOU