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COMPENSATION
 MANAGEMENT
   WHAT IS COMPENSATION PAYMENT
   PURPOSE AND OBJECTIVES OF COMPENSATION
   WHAT IS COMPENSATION MANAGEMENT
   NEED OF COMPENSATION MANAGEMENT
   TYPES OF COMPENSATION
   SALARY SLIP
   SALARY SLIP STRUCTURE
   EMPLOYEES COMPENSATION PACKAGES
   FRINGE BENEFITS
   TYPES OF FRINGE BENEFITS
   FEATURES OF FRINFE BENEFITS
   FRINGE BENEFITS IN INDIAN SCENARIO
   PERFORMANCE LINKED INCENTIVES
   MEANING OF INCENTIVES PLAN
   FEATURES OF GOOD INCENTIVE PLANS
   TYPES OF INCENTIVE PLAN
What is compensation payment
Cont……

  Is an integral part of human resource management which
  helps in.

  Motivating the employees and improving organizational
  effectiveness .

  If the compensation offered is effectively managed , it
  contributes to high organizational productivity .
Purposes and Objectives of Compensation
   The organization must provide appropriate and equitable rewards
    to employees .

   Individuals who work for organizations want to feel valued .

   Want to be rewarded at a level commensurate with their skills
    , abilities and contributions to the organization .

   Compensation serves a ( signaling ) function .

   Organizations signal to employees what they feel is important or
    the employee to focus on..

   (And what they feel is less important )by paying for certain kinds
    of activities or behaviors and not for others .

   Compensation can serve as an incentive to employees to increase
    their efforts along desired lines
What is compensation management

Is more than just the means to attract and retain talented
employees .

“Compensation management is a strategic activity that
helps an organization improve the effectiveness of its
employee reward processes. “

This requires integrating employee processes , information
and programs with organizational processes and strategies
to achieve optimal organizational results .
Need of compensation management


         MOTIVATION



                           NEED
        COMPENSATION
                       SATISFACTION


          EMPLOYEE
          RETENSION
Cont…

o A good compensation package is important to
  motivate the employees to increase the organizational
  productivity .

o The lucrative compensation will also serve the need for
  attracting and retaining the best employees .

o Unless compensation is provided no one will come and
  work for the organization .

o Thus , compensation helps in running an organization
  effectively and accomplishing its goals .
Cont…

o Unless compensation is provided no one will come and work
  for the organization .

o Thus , compensation helps in running an organization
  effectively and accomplishing its goals .
o Salary is just a part of the compensation system .

o The employees have other psychological and self
  actualization needs to fulfill , thus , compensations serves the
  purpose .

o The most competitive compensation will help the
  organization to attract and sustain the best talented
  employees
Types of compensation

 Direct Compensation
o Wages
o Salaries
o Commissions, Bonuses, Gainsharing, Profit Sharing


 Indirect Compensation
o Pay for Time Not Worked (vacation, sick leave, holidays,
o etc.)
o Insurance Coverage (medical, dental, life, etc.)
o Income Security (pensions and disability)
o Services(education assistance, child care, recreation,
  discounts, etc.)
Salary slip
o Pay slip is given monthly , with that particular months (Earning
  , Gross Earnings) and also (Deductions ,total Deductions) with
  total net pay.

o This structure of pay slip would let us know how much we have
  earned & how much it has been deducted category wise (basic
  ,HRA ,LTA ,Medical,PF,ESI,ITetc)from our monthly income.

o Pay slip is tabular representation of all salary/wage/compensation
  details. Every employer is bound to distribute the salary slip
  before disbursement of salary or on the day of issuing salary.

o Salary slip format may vary from employer to employer. it shows
  all deductions, taxes etc.

o Finally it shows the NET (ie. Take home salary )salary for
  employee.
SALARY SLIP STRUCTURE
               Pay slip for the month of April 2012
Emp. No. : L&T12             Name : Mr. Rane                 Days worked : 29

        INCOME                    DEDUCTIONS

Basic          3176 .00    Prov. Fund       301.00
H.R.A           159.00
                           E.S.I.C             60.00
                           Prof. tax           60.00
                           Loan                 0.00    NET SALARY PAYABLE : 2912
Conveyance         87.00   Advances             0.00
Medical            0.00    Income tax           0.00
Other allow.        0.00   Transport            0.00
                           Labour welfare       0.00

GROSS SALARY : 3422        TOTAL DEDUCT-       501.00
EMPLYOEES COMPENSATION
      PACKAGES


Wage/ Salary:
a) Dearness allowance(DA)
b) House rent allowance(HRA)
c) City Compensatory allowance (CCA)
d) Transport allowance (TA)

 Fringe benefit.
 Perquisites
 Incentives
 Non-monetary benefits
Fringe benefits

o Fringe benefits are compensations made to an employee beyond
  the regular benefit of being paid for their work.

o Some fringe benefits are fairly standard, such as offering a few
  days of sick time or paid vacation time.

o Key executives in large companies might also enjoy fringe benefits
  like use of time-share condominiums, paid continuing
  education, use of a company jet, use of a company credit
  card, discounted or free health club memberships, and a
  significant amount of paid vacation.

o Most people who work full time in the US could probably not get
  along without fringe benefits. For example, offering health
  insurance to employees, where the employer pays part of the
  insurance is a typical example of fringe benefits.
Cont…
o In fact, in fields where there is a high demand for workers, such as
  nursing and teaching, some unusual fringe benefits may be offered to
  attract employees.

o A few unusual fringe benefits offered by school districts have been paid
  housing, or use of private lakes for fishing.

o More likely are paid incentives for joining a teaching staff such as
  hiring bonuses, offers to fund continuing education so teachers get
  higher degrees and thus higher pay, or offering mentor programs for
  new teachers.

o Some companies also pay fringe benefits for those who work night or
  swing shifts. These fringe benefits may be in the nature of a 10—30%
  increase of base pay for working a non-standard shift.

o Blecher-has defined fringe benefits as “any wage cost not
  directly connected with the employees productive effort
  , performance , service or sacrifice”
Types of fringe benefits

o   For Employment Security :
o   For Health Protection:
o   For Old Age and Retirement:
o   For Personnel Identification, Participation and
    Stimulation:
o   For Transport Facilities
o   For Housing Facilities
o   Eating Facilities
o   For Child Care, etc

o The fringe benefits are categorized as follows:
o a)Payment for Time Not worked:
o b)Extra Pay for time Worked:
Features of fringe benefit


o Different from regular wages.

o Useful but avoidable expenditure.

o Not directly linked with effort

o Beneficial to all employees

o Voluntary to character.
Fringe benefit in Indian scenario


o With the technological developments taking place at a higher
  rate, the salary packages are too increasing at a much higher rate.
  Pay packages in India have witnessed an increase of more than 14%
  in 2006 over last year’s salary packages.

o The compensation package comprises of monetary and non-
  monetary benefits that includes salary, special allowances, house
  rent allowance, travel allowance, mobile allowance, employee stock
  options, club memberships, accommodations, retirement benefits
  and other benefits.

o Globalization is being considered as the cause for such salary hikes.
  The establishment of multi national companies and privatization
  has led the Indian industry to witness higher salary package.
Cont…

o With the immense competition of attracting and retaining
  talented human resource, compensation package is the
  only motivation factor available with the organizations
  be it Indian origin organizations or foreign-owned
  multinationals.

o With the high attrition rate organizations are increasing
  their salary packages to attract and retain talented
  human resource.

o In the race, India has begged first position followed by
  Lithuania and China.
Performance linked incentives

A Performance Linked Incentive (PLI) is a form of payment
from an employer to an employee, which is directly related to
the performance output of an employee and which may be
specified in an employment contract.

PLI may either be open ended (does not have a fixed ceiling) or
close ended (has an upper ceiling which is normally stipulated
in the employment contract)

Open ended incentives are normally applicable revenue
generating activities (e.g., Sales) and Close ended incentives
are associated to support functions (e.g., Operation, Human
Resources, Administration etc.)
Meaning of Incentives Plans
o An incentive program is a formal scheme used to promote or
  encourage specific actions or behavior by a specific group of
  people during a defined period of time.

o Incentive programs are particularly used in business
  management to motivate employees, and in sales to attract
  and retain customers.

o Scientific literature also refers to this concept as pay for
  performance

o According to G. K. Suri, “a wage incentives scheme is
  essentially a managerial device of increasing a worker’s
  productivity. Simultaneously, it is a method of sharing gains in
  productivity with workers by rewarding them financially for
  their increased rate of output.”
Features of good incentives plans


o   Simplicity :
o   Promote initiative :
o   Definiteness and Flexibility :
o   Prompt payment :
o   Properly communicated to employees :
o   Wide coverage and equitable :
o   Guarantee of minimum wage payment :
o   Justice to employer and employees :
o   Acceptable to workers :
o   Grievance procedure :
Types of incentives plans

(A)Individual Incentives Plans

o   Rowan plan
o   Hasely Plan
o   Emerson’s Plan
o   Tyalor Differentiate Rate System
o   Gnatt task and Bonus Plan
o   Bedeaux Point premium plan
o   Scaion plan
o   Haynes Plan
o   Merric’s Multiple Piece Rate plan

(B)Group Incentives plans

o   Profit sharing
o   Bonus payment
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Presentation1 (2)

  • 2. WHAT IS COMPENSATION PAYMENT  PURPOSE AND OBJECTIVES OF COMPENSATION  WHAT IS COMPENSATION MANAGEMENT  NEED OF COMPENSATION MANAGEMENT  TYPES OF COMPENSATION  SALARY SLIP  SALARY SLIP STRUCTURE  EMPLOYEES COMPENSATION PACKAGES  FRINGE BENEFITS  TYPES OF FRINGE BENEFITS  FEATURES OF FRINFE BENEFITS  FRINGE BENEFITS IN INDIAN SCENARIO  PERFORMANCE LINKED INCENTIVES  MEANING OF INCENTIVES PLAN  FEATURES OF GOOD INCENTIVE PLANS  TYPES OF INCENTIVE PLAN
  • 4. Cont…… Is an integral part of human resource management which helps in. Motivating the employees and improving organizational effectiveness . If the compensation offered is effectively managed , it contributes to high organizational productivity .
  • 5. Purposes and Objectives of Compensation  The organization must provide appropriate and equitable rewards to employees .  Individuals who work for organizations want to feel valued .  Want to be rewarded at a level commensurate with their skills , abilities and contributions to the organization .  Compensation serves a ( signaling ) function .  Organizations signal to employees what they feel is important or the employee to focus on..  (And what they feel is less important )by paying for certain kinds of activities or behaviors and not for others .  Compensation can serve as an incentive to employees to increase their efforts along desired lines
  • 6. What is compensation management Is more than just the means to attract and retain talented employees . “Compensation management is a strategic activity that helps an organization improve the effectiveness of its employee reward processes. “ This requires integrating employee processes , information and programs with organizational processes and strategies to achieve optimal organizational results .
  • 7. Need of compensation management MOTIVATION NEED COMPENSATION SATISFACTION EMPLOYEE RETENSION
  • 8. Cont… o A good compensation package is important to motivate the employees to increase the organizational productivity . o The lucrative compensation will also serve the need for attracting and retaining the best employees . o Unless compensation is provided no one will come and work for the organization . o Thus , compensation helps in running an organization effectively and accomplishing its goals .
  • 9. Cont… o Unless compensation is provided no one will come and work for the organization . o Thus , compensation helps in running an organization effectively and accomplishing its goals . o Salary is just a part of the compensation system . o The employees have other psychological and self actualization needs to fulfill , thus , compensations serves the purpose . o The most competitive compensation will help the organization to attract and sustain the best talented employees
  • 10. Types of compensation  Direct Compensation o Wages o Salaries o Commissions, Bonuses, Gainsharing, Profit Sharing  Indirect Compensation o Pay for Time Not Worked (vacation, sick leave, holidays, o etc.) o Insurance Coverage (medical, dental, life, etc.) o Income Security (pensions and disability) o Services(education assistance, child care, recreation, discounts, etc.)
  • 11. Salary slip o Pay slip is given monthly , with that particular months (Earning , Gross Earnings) and also (Deductions ,total Deductions) with total net pay. o This structure of pay slip would let us know how much we have earned & how much it has been deducted category wise (basic ,HRA ,LTA ,Medical,PF,ESI,ITetc)from our monthly income. o Pay slip is tabular representation of all salary/wage/compensation details. Every employer is bound to distribute the salary slip before disbursement of salary or on the day of issuing salary. o Salary slip format may vary from employer to employer. it shows all deductions, taxes etc. o Finally it shows the NET (ie. Take home salary )salary for employee.
  • 12. SALARY SLIP STRUCTURE Pay slip for the month of April 2012 Emp. No. : L&T12 Name : Mr. Rane Days worked : 29 INCOME DEDUCTIONS Basic 3176 .00 Prov. Fund 301.00 H.R.A 159.00 E.S.I.C 60.00 Prof. tax 60.00 Loan 0.00 NET SALARY PAYABLE : 2912 Conveyance 87.00 Advances 0.00 Medical 0.00 Income tax 0.00 Other allow. 0.00 Transport 0.00 Labour welfare 0.00 GROSS SALARY : 3422 TOTAL DEDUCT- 501.00
  • 13. EMPLYOEES COMPENSATION PACKAGES Wage/ Salary: a) Dearness allowance(DA) b) House rent allowance(HRA) c) City Compensatory allowance (CCA) d) Transport allowance (TA)  Fringe benefit.  Perquisites  Incentives  Non-monetary benefits
  • 14. Fringe benefits o Fringe benefits are compensations made to an employee beyond the regular benefit of being paid for their work. o Some fringe benefits are fairly standard, such as offering a few days of sick time or paid vacation time. o Key executives in large companies might also enjoy fringe benefits like use of time-share condominiums, paid continuing education, use of a company jet, use of a company credit card, discounted or free health club memberships, and a significant amount of paid vacation. o Most people who work full time in the US could probably not get along without fringe benefits. For example, offering health insurance to employees, where the employer pays part of the insurance is a typical example of fringe benefits.
  • 15. Cont… o In fact, in fields where there is a high demand for workers, such as nursing and teaching, some unusual fringe benefits may be offered to attract employees. o A few unusual fringe benefits offered by school districts have been paid housing, or use of private lakes for fishing. o More likely are paid incentives for joining a teaching staff such as hiring bonuses, offers to fund continuing education so teachers get higher degrees and thus higher pay, or offering mentor programs for new teachers. o Some companies also pay fringe benefits for those who work night or swing shifts. These fringe benefits may be in the nature of a 10—30% increase of base pay for working a non-standard shift. o Blecher-has defined fringe benefits as “any wage cost not directly connected with the employees productive effort , performance , service or sacrifice”
  • 16. Types of fringe benefits o For Employment Security : o For Health Protection: o For Old Age and Retirement: o For Personnel Identification, Participation and Stimulation: o For Transport Facilities o For Housing Facilities o Eating Facilities o For Child Care, etc o The fringe benefits are categorized as follows: o a)Payment for Time Not worked: o b)Extra Pay for time Worked:
  • 17. Features of fringe benefit o Different from regular wages. o Useful but avoidable expenditure. o Not directly linked with effort o Beneficial to all employees o Voluntary to character.
  • 18. Fringe benefit in Indian scenario o With the technological developments taking place at a higher rate, the salary packages are too increasing at a much higher rate. Pay packages in India have witnessed an increase of more than 14% in 2006 over last year’s salary packages. o The compensation package comprises of monetary and non- monetary benefits that includes salary, special allowances, house rent allowance, travel allowance, mobile allowance, employee stock options, club memberships, accommodations, retirement benefits and other benefits. o Globalization is being considered as the cause for such salary hikes. The establishment of multi national companies and privatization has led the Indian industry to witness higher salary package.
  • 19. Cont… o With the immense competition of attracting and retaining talented human resource, compensation package is the only motivation factor available with the organizations be it Indian origin organizations or foreign-owned multinationals. o With the high attrition rate organizations are increasing their salary packages to attract and retain talented human resource. o In the race, India has begged first position followed by Lithuania and China.
  • 20. Performance linked incentives A Performance Linked Incentive (PLI) is a form of payment from an employer to an employee, which is directly related to the performance output of an employee and which may be specified in an employment contract. PLI may either be open ended (does not have a fixed ceiling) or close ended (has an upper ceiling which is normally stipulated in the employment contract) Open ended incentives are normally applicable revenue generating activities (e.g., Sales) and Close ended incentives are associated to support functions (e.g., Operation, Human Resources, Administration etc.)
  • 21. Meaning of Incentives Plans o An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. o Incentive programs are particularly used in business management to motivate employees, and in sales to attract and retain customers. o Scientific literature also refers to this concept as pay for performance o According to G. K. Suri, “a wage incentives scheme is essentially a managerial device of increasing a worker’s productivity. Simultaneously, it is a method of sharing gains in productivity with workers by rewarding them financially for their increased rate of output.”
  • 22. Features of good incentives plans o Simplicity : o Promote initiative : o Definiteness and Flexibility : o Prompt payment : o Properly communicated to employees : o Wide coverage and equitable : o Guarantee of minimum wage payment : o Justice to employer and employees : o Acceptable to workers : o Grievance procedure :
  • 23. Types of incentives plans (A)Individual Incentives Plans o Rowan plan o Hasely Plan o Emerson’s Plan o Tyalor Differentiate Rate System o Gnatt task and Bonus Plan o Bedeaux Point premium plan o Scaion plan o Haynes Plan o Merric’s Multiple Piece Rate plan (B)Group Incentives plans o Profit sharing o Bonus payment