1.

INTRODUCTION :

Compensation is the most important part worth consideration in any employment exchange. It is
perhaps the only reason push people to be employed and employment relationship is characterized by
compensation (March and Simon, 1958). The understanding of the economic, political and social
conditions of the business where they are is vital to make sound compensation strategy in the
competing markets. Though compensation and reward system is used to motivate employees, but it
isn’t just used to attract and hold talents. It serves as a comparative advantage for companies if used
properly. Thus, the establishment of international compensation and reward system has been at the top
agenda of multinational giants. It becomes a new boom that many multinational giants try to establish
compensation and reward system in a perspective of global mind-sets rather than local. Global
knowledge and information are collected to overcome the limits of local experience. And the result is
that the integration of global mind-sets in the system contributes to the competitive advantage of those
brilliant companies.

CONCEPT AND APPLICATION:

A number of factors influence the remuneration payable to employees. They can be categorised into (i)
external and (ii) internal factors.

1.Internal Factors:

Employee Numerous employees related factors also influence his or her compensation. These include
the following:

 Performance: It is always rewarded with pay increase and as a result it motivates the workers to
do better in future.
 Experience: This makes a person perfect by providing valuable insights and thus rewarded also.
Today companies are demanding for 10 to 20 years experience candidates especially for the
executive positions. The companies presume that experience candidate posses leadership skills
which influence the other behaviour and performance. Generally experience candidate perform
the job without need of training which is time consuming and deals with matter of cost to
company. Hence the experience candidates demand more pay than an unexperienced
candidate.
 Seniority: In today’s environment seniority of employee making difference in payment of
compensation compared to Jr employees. Naturally senior employees demands for more salary
than fresher because of their hold on related job and its functions. Today many companies are
demanding senior employees for key positions by offering fat pay and even sometimes retired
employees are offered with handsome salary for key positions which deals with multitasking in
organisation. Trade unions always prefer this objective criterion for pay rises.
 Potential: Firms also pay their employees, especially young ones on the basis of their potential.
 Job requirement: Wages are also influenced by the requirements of a job such as physical and
mental requirement. Jobs, which demand more skill, responsibility, efforts and are of hazardous
in nature, will carry high wage tag with them.
  Job evaluation: Job evaluation establishes a consistent and systematic relationship among base
compensation rates for all jobs. In other words, it establishes the satisfactory wage differentials.
 Organisation’s strategy: The organisation’s strategy regarding wages also influences employee
compensation. For example, an organisation, which wants rapid growth, will set higher wages
than competitors. On the other hand, organisations that want smooth going and just maintain
the current earning will pay average or below average.

2. External Factors:

These factors include the following:

 Laws and Regulations: Laws and regulations impact the remuneration of employees in many
areas, such as: Work hours and compulsory time-off (paid and unpaid), Minimum wage,
Overtime, Compulsory bonuses, Employment at will.
 Labour market: Official laws on wage and salary, labour contract, payment time, wage payment
delay, working insurance, and so on. People’s standard of living in the areas where the offices of
the company are. People’s living and consuming customary.The average wage rate in the labour
market of similar work.
 Economy: The state of economy also influences the wage and salary-fixation. Wage rates will he
different in a stable economy than in a depressed economy. In case of depressed economy there
may be increase in supply of labour and this results in the fixation of lower wage rates.
 Inflation: Increase in the prices of commodities and decrease in value of the money is called as
inflation. The causes of inflation are many which are raising costs, fall in the currency value in
international markets, raising taxes by government and stagnation in the development of
economy, etc.
 Technological changes: Technological changes also influence the fixation of wage levels. Due to
the advancements in the technology there may be shortage of skilled manpower in that area.
So, the organisation will provide high wages for skilled personnel. For example, information
technology (IT) industry in India and abroad is suffering from the shortage of IT experts.
 Academic Institutions: Having good academic qualifications from Reputed and standard
educational institution influence the compensation of the potential candidate in their
recruitment in companies.

CONCLUSION:

Finally, after the study of compensation system, the nature of compensation management is worth to be
thought about before quick conclusion. A very persuasive argument can be said that the current
compensation system develops in a bit messed-up manner over time, due to various pressures,
administrative response, not in a rational analysis and objectives oriented process. If this is the case,
most of the above, it is very important to systematize the compensation system in a reasonable and
proper way. But before the success of the reforming of the current compensation system, it is wise to
treat the current conditions in a more accepted way. When “betters” has not come yet, it is better to
treat it in a development perspective. The corporate leaders should know that the difference and make
precautions about what the difference will bring to the result. Those differences will influence the
success of the company, which one needs to pay attention.
2.

INTRODUCTION:

International compensation can be defined as the provision of monetary and non-monetary rewards,
including base salary, benefits, perquisites, long- and short-term incentives, valued by employees in
accordance with their relative contributions to MNC performance. Compensation is a key economic
issue, which continues to assume an increasingly large share of its operating expenses. HR executives in
global firms spend a great deal of time and make a lot of effort in designing and managing compensation
programmes, because of their high cost and impact on corporate performance, employees commitment
and also their retention.

CONCEPT AND APPLICATION:

When a firm develops international compensation policies, it tries to fulfills some broad objectives:

 The compensation policy should be in line with the structure, business needs and overall
strategy of the organization.
 The policy should aim at attracting and retaining the best talent.
 It should enhance employee satisfaction.
 It should be clear in terms of understanding of the employees and also convenient to
administer.

Elements of International Compensation:

There are many complexities in the international compensation programme as all the objectives are
difficult to meet and require a high degree of expertise. The main elements are discussed as follows:

1. Base Salary:
Base pay is the primary component of a package of allowances and may be paid in-home or
local-country currency. The base salary is the foundation block for international compensation
whether the employee is a Parent Country or from any other country. It is the main element in
the compensation structure that decides the status, rank or grade. This is the basic element
upon which all the other components are built and retirement benefits calculated both in
domestic and international compensations.
2. Foreign Service Inducement Premium:
This is a component of the total compensation package given to employees to encourage them
to take up foreign assignments. This is with the aim to compensate them for the possible
hardships they may face while being overseas. In this context, the definition of hardship, the
eligibility criteria for premium and the amount and timing of this payment are to be carefully
considered. Such payments are normally made in the form of a percentage of the salary and
they vary depending upon the tenure and content of the assignment. In addition, sometimes
other differentials may be considered. For instance: if a host country’s work week is longer that
of the home country, a differential payment may be made in lieu of overtime.
3. Allowances:
Foreign service premiums: most common for employees on long-term assignments (over one
year). More often paid to parent country nationals (PCNs) than to third country nationals (TCNs).
 Hardship: in consideration of isolation, crime, natural hazards, political violence, based on
government data upon which rates can be provided by consulting organizations such as
International SOS, a global medical and security assistance company.
Relocation: compensation for costs such as transport, storage, temporary accommodation,
purchases of appliances and vehicles, associated with moving to the host country.
Education: for assignees’ children. This may involve compensation for language classes, books,
and school fees. Home country boarding school fees may also be involved for assignees who opt
not to take their children to isolated and or politically violent locations.
Home leave: provision for the assignee and family to return home periodically during the length
of the assignment.
4. Benefits:
These are also known to be indirect compensation and their purpose is to minimise the
payments and enhance quality of life. Benefits could include use of health clubs, medical
treatment to family, upkeep of house, servants etc.
5. Incentives:
In recent years some MNC have been designing special incentives programmes for keeping
expatriate motivated. In the process a growing number of firms have dropped the ongoing
premium for overseas assignment and replaced it with on time lump-sum premium. The lump-
sum payment has at least three advantages. First expatriates realize that they are paid this only
once and that too when they accept an overseas assignment. So the payment tends to retain its
motivational value. Second, costs to the company are less because there is only one payment
and no future financial commitment. This is so because incentive is separate payment,
distinguishable for a regular pay and it is more readily for saving or spending.
6. Taxes:
The final component of the expatriate’s compensation relates to taxes. MNCs generally select
one of the following approaches to handle international taxation.
Tax equalization: – Firm withhold an amount equal to the home country tax obligation of the
expatriate and pay all taxes in the host country.
Tax Protection :- The employee pays up to the amount of taxes he or she would pay on
remuneration in the home country. In such a situation, The employee is entitled to any windfall
received if total taxes are less in the foreign country then in the home country.
7. Long-term Benefits:
Employee Stock Option Plan (ESOP)- a certain nos. of shares are reserved for purchase and
issuance to key employees
Restricted Stock Unit (RSU) –Units of stocks are provided with restrictions on when they can be
exercised. It is usually issued as partial compensation for employees
Employee Stock Purchase Plan (ESPP) –Company sells shares to its employees at a discount.
Company deducts the purchase price of these shares every month from the employee’s salary

CONCLUSION:

International compensation applies when a specialist or manager is temporarily deployed at a work site
outside their own country where an employment contract is in effect. It may also apply when employees
are sourced from a market abroad and employed at a domestic site, and where the compensation level
has to be amended. International compensation therefore relates to international recruitment with
employment in a domestic location (international local hire). Other international forms of compensation
apply to other cross-border employment or work situations.

3.a.

INTRODUCTION:

Surveys collecting information about employee compensation, including salary and benefits, are
commonly called salary surveys. Salary surveys are conducted with numerous food & healthcare staff to
determine pay levels for specific job categories.

CONCEPT AND APPLICATION:

Objectives of Salary survey:

 To gather information regarding the food & healthcare industry standards

 To know about the remuneration patterns in the food & healthcare industry i.e. compensation
offered by the competitors.
 To understand the fair compensation system in the present food& healthcare scenario.
 To understand the most competitive reward strategies, both short term and in the long term.
 To benchmark the compensation strategies.

Compensation strategy:

The compensation strategy is derived from the food healthcare business strategy. The healthcare
organization’s goals and objectives are always aligned with HR strategies. Compensation strategy
depends on both internal and external factors as well as the culture and background of a
food&healthcare organisations.

Types of Compensation:

1. Direct Compensation: Monetary benefits offered and provided to employees in return for the
services they provide to food & healthcare organizations. They are given within a definite time
frame i.e. monthly, yearly, or end of the services.
2. Indirect Compensation: Non-monetary benefits offered and provided to staff costing food and
healthcare organisations in monetary terms.

Payroll outsourcing:

Involves an external organization, performing all the activities related to payroll management

Salary survey methodology:

1. Questionnaire Preparation: Questions form to understand the employee’s satisfaction towards

salary, compensation practices in a food& healthcare organisations
 2. Data Collection: It is the process of gathering and measuring information on variables of
interest, in an established systematic fashion. Data is collected or questionnaires are filled by
healthcare organizations Staff
3. Data Analysis: It is a process of inspecting, cleansing, transforming, and modeling data with the
goal of discovering useful information, informing conclusions, and supporting decision-making.
The collected data are analyzed using a suitable tools and evaluate outcomes.
4. Report Preparation: The report is prepared based on the analysis.
5. SGap Analysis: It is a method of assessing the differences in the level of salary satisfaction
among healthcare staff and to determine whether healthcare organization’s requirements are
being met and, if not, what steps should be taken to ensure they are met successfully.

CONCLUSION:

Salary Survey support for the new compensation system; pay innovations and market- and performance-
based reward systems; aligning benefits programs with the market; and attention to work-life balance
issues will continue to foster an environment in which food & healthcare staff can be successful and
engaged in serving a food & healthcare organization.

3.b.

INTRODUCTION:

Salary Surveys are tools used to determine the median or average compensation paid to employees in
one or more jobs. Compensation data, collected from several employers, is analyzed to develop an
understanding of the amount of compensation paid. Surveys may focus on one or more job titles,
geographic regions, employer size, and or industries. Salary surveys may be conducted by employer
associations, survey vendors, or by individual employers. Survey data is often time sensitive and may
become out-of-date quickly. Because of the time sensitive information, surveys are often identified by
the year or quarter in which the data was collected.

CONCEPT AND APPLICATION:

Types of Salary Surveys:

• Formal: It collects compensation information from other employers, asking about number of
employees, overtime policies, paid vacation and starting salaries.

• Informal: It is done over phone or internet. They are good for checking specific issues like how much
incentive is being paid for a job, salary at which a new job must be advertised etc.

Types of data gathered in a salary survey

Salary Surveys are analyses of compensation data. This data may include quantifiable aspects of
compensation such as:

 Base salaries
 Increase percentages or amounts
 Merit Increases
  Salary Ranges
 Starting Salary
 Incentives/Bonuses
 Allowances and Benefits
 Working Hours

Salary Surveys may also include non-quantifiable aspects of compensation such as:

 Educational Requirements
 Geographic Location
 Source of Hire (Internal/External)
 Working Conditions

Choosing the right survey for organization:

1. Benchmark Jobs: These refer to the anchor jobs around which the employers slot other jobs,
based on the jobs’ relative worth on the firm. Job evaluation helps in evaluating the net or
relative worth of a job
2. Recruitment: Most of the employers price around 20% of their jobs in the market place offering
a suitable pay, based on the informal and formal survey of what competitor firms are paying for
similar jobs.
3. Collect data: These surveys also helps the employer to collect other data like sick leave,
insurance and vacations which provides a base for decisions regarding what benefits to pay to
the employees

Commercial, Professional and Government Salary Survey:

Many employers use the secondary data available with the professional associations, consulting firms or
government agencies. Private consulting and/or executive recruiting companies like Hay Associates,
Hedrick and Struggles publish data covering compensation for top and middle management and
members of board of directors. Professional Organizations like the Society for Human Resource
Management and the Financial Executives Institutes publish surveys of compensation practices among
members of their associations.

CONCLUSION:

Salary Survey is step one in establishing pay rates while ensuring internal, external and sometimes
procedural equity. Pay rates can only be set if you know what other employees are earning in the same
industry for the same work done. So salary survey refers to carrying out surveys of determining what
others are paying. It plays a big role in pricing jobs. It’s the duty of every employer to conduct such
surveys- informal telephone, newspapers or internet salary survey.