Compensation mngt

7/30/2019 Compensation mngt

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Compensation Structure


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Salary Structure

Salaries in line with market rates

Provide internal equity in grading and

maintain competitive rates

Consider employee advancement

opportunities and motivational aspects

Graded salary structures

Salary progression curves


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Graded Salary Structures

Defines minimum and maximum range

Features

All jobs are allocated into a salary gradewithin the structure

Each salary grade should consist of salary

range or grade

Increase in the cost of living or in the marketrate are taken care


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The salary grade should be wide enough

The differential should be maintained between

the mid points of each salary grades

There can be overlap between salary grades

Progression within a grade depends on the

performance of an individual

The no. of salary grades will depend upon theno. of distinct levels of job in the hierarchy

Graded Salary Structures:

Feature


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Example: Pay Grade

Managerial and professional: 3500-300-

6500

Technical/supervisory: 3000-250-5500

Administrative and Clerical: 1800-1500-

3000-200-5800

Manual : 1800-100-2300-150-3050


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Make-up of a salary Grade

The learning zone

The qualified zone

The premium zone


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Salary Progression Curves

The salary ranges are divided into defines

zones

There should be incremental systems

merit/experience


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Incremental Systems

Rigid incremental systems

Flexible incremental systems

Semi-flexible incremental systems


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Pay Structure in Practice

Managerial and professional

Technical/supervisory

Administrative and Clerical Manual


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Basic Pay:

The degree of skill

The strain of work

The experience involved The training required

The responsibilities undertaken

The mental and physical requirements

The disagreeableness of the task

The hazard attendant on the work

The fatigue involved



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Basic Pay: the basis of differentials

Interpersonal differentials

Inter-occupational differentials

Inter-area differentials

Inter-firm differentials



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Dearness Allowance (DA)

allowance paid to enable employees to face

the increasing dearness of essential

commodities.

Also called as COLA



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Allowances Attendance

Books

Car

Cash

Computer Conveyance

Driver

Dust

Education

Family-planning

Graduate Leave travel

Medical

Night duty


Allowances Tiffin

Strain

Special

Shift

Paternity Uniform

Telephone

Heat

Lunch

Pension

PF Relocation

servent


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Overtime Payment

Virtually all hourly (nonexempt) employees

must receive overtime compensation for

working: More than 40 hours per week

More than 8 hours per day

Salaried employees do not receive overtime pay.



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Designing Pay Ranges and

Bands

Ranges

Salary Rs

Pay Structure

Grades

Pay Policy Line

Minimum

Minimum

Minimum

Minimum

Maximum

Maximum

Maximum

Maximum


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Bands

Designing Pay Ranges and

Bands

Associates

Professionals

Lead Professionals

Senior Professionals


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Variable Compensation

Variable pay is countercyclical

Employee goals and organizational goals

Motivated Employees Bonus/Incentive Plans


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Incentive Plans


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Individual Incentive Plans

Straight Piecework

An incentive plan under which employees receive a

certain rate for each unit produced.

Differential Piece Rate production exceeds the standard amount of output

Ex. Standard o/p = 10; rate per piece = re.1

Case 1: Out put 8; Earnings = 10X1 = 10

Case 2:Output 12hrs; Earnings = 10X1= 10DPR Earnings = 12X1= 12


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(contd)

Standard Hour Plan

An incentive plan that sets pay rates

based on the completion of a job in a

predetermined standard time.

Bonus: Halsey System

Total Earnings =time taken * hourly

rate + bonus ( bonus 50%of timesaved).

Rowan System


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Merit Pay Program (Merit Raise)

Links an increase in base pay to how

successfully an employee achieved some

objective performance standard.

Done on individual performance standards


(contd)


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Lump-Sum Merit Program Program under which employees receive a

year-end merit payment, which is not added

to base pay.

Advantages:

Provides a clear link between pay and

performance.


(contd)

I di id l I i Pl


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Awards

Often used to recognize productivity gains,

special contributions or achievements, and

service to the organization.

Non-cash Incentive Awards

Are most effective as motivators when the

award is combined with a meaningful

employee recognition program.


(contd)


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Group & team Incentive Plans

Team Incentive Plans

Compensation plans where all team

members receive an incentive bonus

payment when production or servicestandards are met or exceeded.


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Group Incentive Plans (contd)

Gain sharing Plans

Programs under which both employees and

the organization share the financial gains

according to a predetermined formula thatreflects improved productivity and profitability.

5-6% of the employee base salary


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Improshare (Improved productivitythrough sharing)

Based on overall productivity of the work

team.

Seen as a measure of the total ,finished

products.

Both production and non production

employees are given an incentive.

The employee and company each receive

a gain of 50% of improvement.


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Enterprise Incentive Plans

Profit Sharing Any procedure by which an employer pays, or

makes available to all regular employees, in addition

to their base pay, current or deferred sums based

upon the profits of the enterprise.


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Types of profit sharing plans:

Current distr ibut ion plans (cash plans):profitsharing paid as a bonus in the form of cash or

shares of the companys stock

Deferred payou t plans:profit sharing paid as abonus into a trust fund to be distributed to

employees at some time in the future (such as

when the employee retires, becomes disabled, or

dies)

E t i I ti Pl


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(contd)

Stock Options

Granting employees the right to purchase a

specific number of shares of the companys

stock at a guaranteed price (the option price)during a designated time period.

The value of an option is subject to stock

market conditions at the time that option is

exercised.

E t i I ti Pl


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(contd)

Employee Stock Ownership Plans (ESOPs)

Stock plans in which an organization contributes

shares of its stock to an established trust for the

purpose of stock purchases by its employees.


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Payroll Management

Gross pay

Deductions

Net pay


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Company LOGO

Company Name

Payslip for the Month August-2012

Total Working Days Days Present Paid Leave LWP Total days Payable

31 31.0 0.0 0.0 31.0

Employee Code: 123 PF No.: UP/32082/288 Bank A/c: 0200104000114691

Employee Name: ABC Designation: Deptt.:

Net payable: 53970.0 In Words: FIFTY THREE THOUSAND NINE HUNDRED SEVENTY ONLY

Earnings

Regula

r

Arrea

r

TotalTotal

Earnings

Basic19500.

00.0

19500.

0

D.A.19500.

00.0

19500.

0

H.R.A. 5850.0 0.0 5850.0

CITY ALL 300.0 0.0 300.0

S.F.ALL. 2500.0 0.0 2500.0B & P ALL. 2500.0 0.0 2500.0

CONVE ALL. 5000.0 0.0 5000.0

ACADEMIC GRADE

PAY7500.0 0.0 7500.0

Total: 62650.0

Deductions

Regular Arrear Total Total Deductions

P.F 4680.0 0.0 4680.0

INCOME TAX 4000.0 0.0 4000.0

Total: 8680.0

Compensation mngt

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