Compensation

and Benefits

Dr. N. Srividya PDF

How Would You Define Benefits?

Rewards
Incentives
Things of value
Pay Surveys

Pay Surveys are surveys of

compensation paid to employees by other
employers in a particular geographic area,
industry, or occupational group.
Wages Versus Salaries
 Wages generally refer to
hourly compensation paid
to operating employees.
The basis for wages is
time.
 Salary is income paid to an
individual on the basis of
time.
 A maturity curve is a
schedule specifying the
amount of annual
increases a person will
receive. 9- 4
Determining What to Pay
 Job evaluation is a method for determining the
relative value or worth of a job to the
organization so that individuals who perform that
job can be compensated adequately and
appropriately.
 Classification system attempts to group sets
of jobs together into clusters, which are often
called grades.
 The point system requires managers to
qualify, in objective terms, the value of the
various elements of specific jobs.
Pay-for-Knowledge and Skill-Based Pay

Pay-for-knowledge
involves compensating
employees for learning
specific information.

Skill-based pay
rewards employees for
acquiring new skills.
Wage and Salary Administration
Wage and salary administration is the
ongoing process of managing a wage and
salary structure.
 All managers must be sensitive to these
costs and must be vigilant about managing
them properly.
Issues in Compensation Management
 Internal Equity Versus External Equity
 Fixed Pay Versus Variable Pay
 Performance Versus Membership
 Job Versus Individual Pay
 Elitism Versus Egalitarianism
 Below Market Versus Above Market
Compensations
 Monetary Versus Non-Monetary Rewards
 Open Versus Secret Pay
 Centralisation Versus Decentralisation of Pay
Decisions
Pay Secrecy

 Pay secrecy refers to

the extent to which
the compensation of
any individual in an
organization is secret
or the extent to which
it is formally made
available to other
individuals.
Components of Compensation
Basic Pay
Allowances
House rent Allowances (HRA)
Dearness Allowance (DA)
Incentive Pay
Performance linked bonus
Share in Profit
Benefits or Perquisites
Company Accommodation Company Car
Paid Holiday Club Membership
Stock Options
Pay Compression and Pay Inversion

Pay compression occurs when

individuals with substantially different
levels of experience and/or performance
abilities are being paid wages or salaries
that are relatively equal.
Pay inversion occurs when the external
market changes so rapidly that the new
employees are actually paid more than
experienced employees.
Factors Affecting Wages
Factors Other Factors
Demand for and Workers’ Age and
Supply of Labour Potential
Ability to Pay Educational Qualifications
Labour unions Work Experience
Cost of Living Promotion Possibilities
Prevailing Wage Hazards involved in the
Rates job
Job Requirements Stability of Employment
Productivity Demand for the Product
State Regulation Industry’s Role in the
Economy
Methods of Wage Payment

Time Wage System

Piece Wage System
Process of Wage Determination

Job Analysis
Contents and Requirements of a job
Job Evaluation
Relative Value of Every Job
Wage Survey
Wage/salary levels prevailing in the region or
industry for similar jobs
Process of Wage Determination
Contd…
Developing Wage Structure
Legislation relating to Wages
Payments equal to, more or less than prevailing
wage rates
No and width of pay grades
Jobs to be placed in each grade
Provision for Merit Increases
Differentials between pay plan and
Dealing with wages/salaries that are not of line
with structure
Process of Wage Determination
Contd…

Wage Administration Rules

Length of Service or Merit
Employee Appraisal
Wage Curve
Wage Curve
Components of Compensation
Hard Variables
Salary
Augmented Pay- Overtime, Extra Pay, One-
Time Stuff
Indirect Pay – Fringe Benefits
Works Pay – Things needed for Work, Uniform
Allowance etc.
Perks Pay – Discount on Company’s Products
Components of Compensation
Soft Variables
Opportunity for Advancement
Opportunity for Growth
Psychic Income – Doing Personally Meaningful
Work
Quality of Life – Workplace Flexibility, Work-life
Balance
The X-factor – Special Individual Variables like
Bringing a Dog to Work.
  Wellness programs
Additional Benefits concentrate on keeping
employees from
becoming sick rather than
simply paying expenses
when they do become ill.
 Child care programs
assist parents with child
care expenses.
 Cafeteria-style benefits
allow employees to
choose the benefits they
really want. 9- 20
Executive Compensation

Most senior
executives receive
their compensation
in two forms:
1. Base salary
2. A form of incentive pay
(usually a bonus which
is based on company
performance)
Legal Issues in Compensation
The Minimum Wages Act includes
provisions for the minimum wage,
overtime, and child labor.
HR managers must
adhere to overtime
laws.
Wage Policy in India
Basic Wage
Minimum Wage
Sufficient to cover the bare physical needs of a
worker
Need Based Wage
The Standard working class family should be taken
to comprise 5 consumption units
2,700 calories of food, Clothing 80 yards, rent at the
cost of subsidized industrial housing scheme
Fuel etc at 20% of total min wage
Wage Policy in India
Fair Wage
Productivity of Labour
Prevailing Rates of Wages in the same or
similar occupations in the same region or
neighbouring regions
Level of National Income and its Distribution
The place of the industry in the economy of the
country
Employer’s capacity to pay
Wage Policy in India

Living Wage
Not only bare essentials
Frugal Comfort Living
Requirements of Social needs
Insurance including Old Age Requirements
State Regulations of Wages
The Minimum Wages Act, 1948
The Payment of Wages Act, 1936
The Equal Remuneration Act, 1976
Section 529-A of the Companies Act, 1956
The Industrial Disputes Act, 1947
Wage Boards
Pay Commissions
Wage Boards – Factors considered
Need Based Minimum Wages
Industry’s Capacity to Pay
Productivity of Labour
Prevailing Rates of Wages
Various Wage Legislation
Level of Income and its Distribution
Place of the Industry in the Economy
Requirements of Social Justice
Need to Provide Incentive for Improving
Productivity
Administration of Fringe Benefits

Establish Objective of Benefits

Assess Environmental Factors

Assess Competitiveness

Communication of Benefit Information

Evaluate Benefits and Control their

Costs
Thank You !!!!