Compensation

Management
 Human Resource Management System

Responsibilities Of
HRM

Orientation, Performance Compensation

Human Recruitment
Training Appraisal &
Resource &
& And Benefits
Planning Selection
Development Management Management
Pay
Pay is a statement of an employee’s worth by
an employer
Pay is a perception of worth by an employee
Job Pricing
Pay is a statement of an employee’s worth by
an employer
Pay is a perception of worth by an employee
 Pay Grades
 Wage Curve
 Pay Ranges
 Broad Banding
 Single-Rate System
 Adjusting Pay Rates
Compensation
The total of all rewards provided employees
in return for their services.
 Direct Financial Compensation
 Indirect Financial Compensation
 Non-financial Compensation
Equity in Compensation

 Equity
 External Equity
 Internal Equity
 Employee Equity
 Team Equity
Determinants of Individual Compensation

 The Organization,
 The Labor Market,
 The Job, and
 The Employee
Determinants of Organization Compensation

 Compensation Policies
 Pay Leaders
 Market Rate or Going Rate
 Pay Followers
Determinants of Organization Compensation

 Compensation surveys
 Benchmark job
 Cost of Living
 Labor Unions
 Society
 Economy
 Legislation
The job as a determinant of financial
compensation

 Job Analysis and Job Descriptions

 Job Evaluation
The employee as a determinant of financial
compensation
 Performance Based Pay
 Merit Pay
 Bonus
 Skill-based Pay
 Competency-Based Pay

Seniority
 Experience
 Membership in the Organization
 Potential
 Luck
 Special Employees Class
Executive Compensation

 Executive skill largely determines

whether a firm will prosper, survive, or
fail. Therefore, providing adequate
compensation for these managers is vital.
 A critical factor in attracting and
retaining the best managers is a
company’s program for compensating
executives.
Types of Executive Compensation

 Base Salary
 Short-Term Incentives or Bonuses
 Long-Term Incentives
 Capital Appreciation Plans
 Executive Benefits
 Perquisites
Compensation For

 Professionals
 Sale People
BENEFITS

 Total Compensation
Total compensation constitutes of two
types of the rewards which are direct
rewards and indirect rewards.
• Direct rewards include the salaries wages,
commission, bonuses and gain sharing all
of these rewards are directly paid to
employees in monetary or financial terms
• Second type of the rewards are benefits
provided by organization. Benefits are not
direct payments in financial terms.
EMPLOYEE BENEFITS

 Benefits (Indirect Financial

Compensation)
 Mandated Benefits (Legally Required)
 Discretionary Benefits (Voluntary)
Incentive Compensation

 Individual Incentive Plans

 Team-Based Compensation Plans
 Companywide Plans
Company-wide Plans

 Profit Sharing
 Employee Stock Options
The Job as a Total Compensation Factor

 Skill Variety
 Task Identity
 Task Significance
 Autonomy
 Feedback
 Cyber-work
The Job Environment as a Total Compensation
Factor
 Sound Policies
 Competent Employees
 Congenial Coworkers
 Appropriate Status Symbols
 Working Conditions
Workplace Flexibility

 Flextime
 Compressed Workweek
 Job Sharing
 Flexible Compensation (Cafeteria
Compensation)
 Telecommuting
 Part-Time Work
 Modified Retirement