Compensation Management

Unit : 4
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Compensation Management
Dr.Anuradha Phadnis
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What is Employee Compensation

Dr.Anuradha Phadnis

• Employee compensation
▫ All forms of pay or rewards going to employees and
arising from their employment.

Two main components of Compensation are:

• Direct financial payments
▫ Pay in the form of wages, salaries, incentives,
commissions, and bonuses.
• Indirect financial payments
▫ Pay in the form of financial benefits such as
insurance, food coupons, club membership, etc.
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Types Dr.Anuradha Phadnis

• Skill based/ Competency based pay. (KSA)

• Incentives. (Monetary –Individual/Group)
• Fringe benefits. (Monetary: PF, Gratuity,
medical care, etc.)
• Non-Financial Benefits:
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Recent Trends: CM
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Cont.
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Example Dr.Anuradha Phadnis

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Performance Linked Pay ?

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Performance-Linked Pay Programs

Dr.Anuradha Phadnis

Merit Pay Programs

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Individual incentive programs

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Calculation / Benefit Details Dr.Anuradha Phadnis

• P.F: always calculated in the proportion

of 1:1 (equal contribution from employee and
employer).

• Bonus = (Basic+ DA)*12*8.33% or 11% or

20%.(whichever is applicable)

• Gratuity: It is paid to employee who has

completed continuous 5 years of experience in
the same organization.
• Gratuity =( Basic + DA)/26 * 15* No. of
years of service.
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…….Calculation / Benefit Details

Dr.Anuradha Phadnis

• Superannuation is a retirement benefit; it is just

like a pension scheme. To avail superannuation
an employee should have reached preservation
age i.e. between 55 to 60 years and permanently
retires or reaches 65 years whether working or
not.
• Superannuation = 50 % of last 10 months
average emoluments* qualifying
service/33.
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Dr.Anuradha Phadnis

……Calculation / Benefit Details

• VRS: to avail VRS scheme an employee should
have completed 10 years of continuous experience
at the same organization, and he should have
attained age of 40 years and above.

• In Lay-Off: an employee will get 50 % of salary

for every month for the period he is laid off.
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Advantages and Disadvantages

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Employees Separation
• Separation means cessation of service with the
organization for one or other reason.

• The employee may be separated from the pay

roll of a company as a result of :

• Death, Resignation, Discharge & Dismissal,

Suspension, Termination, Retrenchment, Lay –
off, Retirement-VRS- Voluntary Retirement
Scheme (Golden Hand Shake) & CRS-
Compulsory Retirement Scheme.
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Dr.Anuradha Phadnis

Employees Separation
• The employee may be separated from the pay
roll of a company as a result of:
1) Resignation
2) Discharge & Dismissal
3) Suspension & Retrenchment
4) Lay – off
5) VRS- Voluntary Retirement Scheme
(Golden Hand Shake)
6) Superannuation
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Dispute settlement mechanisms: Dr.Anuradha Phadnis

Collective
Bargaining Arbitration

Code of Dispute
discipline Settlement Conciliation

Grievance
Procedure Adjudication
Consultative
Machinery
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GRIEVANCE PROCEDURE Dr.Anuradha Phadnis

• A grievance may be understood as an employees

dissatisfaction or feeling of personal injustice relating to his
or her employment relationship. It is restricted to violations
of the terms and conditions of employment.
• Other conditions
1) Violation of law, 2) violation of the intent of the parties as
stipulated during contract negotiations, 3) a violation of
company rules, 4) change in working conditions / past
company practices & 5) violation of health & safety
standards.
Steps in grievance procedure: 1) how the grievance will be
initiated, 2) the no. of steps in the process, 3) who will
represent each party, 4) the specified no. of working days
within which the grievance must be taken to the next step in
the hearing.
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Dr.Anuradha Phadnis

Some general principles to guide the

procedure are:
• Grievance must be addressed promptly
• Procedures & forms airing grievances must be
easy to utilise and well-understood by
employees and their supervisors
• Ego-clashes should not be allowed to interfere
the resolution of disputes
• Occurrence of similar grievances must be
avoided.
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Expected Questions:
1) Define P.A. What are the methods of P.A.
• 2) Short Notes on:
- Rating Errors
3) Performance linked pay.
• Short notes on:
1. Golden hand shake / VRS.
2. Resignation.
3. Retrenchment & Layoffs.
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• References:

• HRM-Hand Book- Veera Kohli

• HRM – Aswathapa
• HRM- ICFAI
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•THANK
YOU….