1. Compensation
Cash, Bonuses, Insurance,
Vacation, Holidays
Perks, Recognition

2. All forms of
financial return,
tangible services and
benefits
that employees receive as part of their
employment relationship

3. 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.

4. High compensation and
appealing benefits attract
employees .
Some workplace benefits are
required by law and others are
offered as a job perk.

5. ‘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.

6. Components of compensation
EXTERNAL ENVIRONMENT
INTERNAL ENVIRONMENT
COMPENSATION
FINANCIAL
DIRECT
INDIRECT
NON-FINANCIAL
THE JOB
THE ENV.

7. FINANCIAL
Direct
wages, salaries, commissions, bonuses
Indirect
insurance plans
life, health, dental, disability
social assistance benefits
retirement plans, social security.
paid absences
vacations, holidays, sick leave

8. Non-Financial
The Job
interesting, challenging, responsible
opportunity for recognition, advancement,
feeling of achievement
Job Environment
policies, supervision, co-workers, status
symbols, working conditions, flextime,
compressed work week, job sharing,
telecommuting, flexible benefits programs

9. Factors that Influence Wage Levels
CONDITIONS
OF LABOR
MARKET
AREA
WAGE
RATES
EMPLOYER’S
ABILITY TO PAY
WAGE
MIX
COST OF
LIVING
WORTH OF JOB
EMPLOYEE’S
RELATIVE WORTH
COMPENSATION POLICY OF
ORGANIZATION

10. COMPENSATION PACKAGE OF ASHOK LEYLAND

11. CLASSIFICATION OF REWARDS
TOTAL Compensation
Financial
Direct
Monthly
Salary
Annual
Incentives
Bonus
Indirect
Non - Financial
Job Satisfaction
Provident Fund
Gratuity
Travel allowance
Mobile expense
Sales Promotional Expense
Praise / Rewards

12. PRAISE/REWARDS
Future Leadership Program (FLP): Executives earmarked
and declared future leader based on their competency
Development 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 Award
Company Jeep at individual level
Foreign Tour with family for the team achieving their
yearly target
Major medical claim for self and dependant

13. 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.

14. 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.

15. Theory Behind Compensation
Equity Theory
Comparing inputs and outputs of
a similar co-worker
Perceived inequity affects
employee effort

16. 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.

17. Types of Base Pay Systems
Job-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)

18. Job Based Pay
Attraction
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

19. 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

20. Strategic Issues in Compensation
Determining compensation relative to
the market.
Striking a balance between fixed and
variable compensation.
Deciding whether or not to utilize teambased versus individual pay.

21. CONT……..
Creating the appropriate mix of
financial and non-financial
compensation.
Developing a cost-effective
compensation program that results
in high performance.

22. New Thinking for the New Millennium
Pay the person .
Reward excellence .
Individualize the pay system .