Introduction:

Compensation administration is one of the most important areas of human resource management because
sound compensation policies, programmers and their effective execution are essential to procure,
maintain and develop the human resource of the organization to get effective result from them. It involves
the selection, designing, development and direction of programmers designed to implement compensation
or incentive policy through financial rewards.
Beach has defined wage and salary administration as follows: "wage and salary administration refers to
the establishment and implementation of sound policies and practices of employee compensation. It
includes such areas as job evaluation, surveys of wages and salaries, analysis of relevant organizational
problems, development and maintenance of wage structure, establishing rules for administering wages.
Wage payments, incentives, profit sharing, wage changes and adjustments, supplementary payments,
control of compensation costs and other related items". The traditional concept of wage and salary
administration emphasized on only determination of wage and salary structures in organizational settings.
In simple words, "compensation administration is a systematic procedure for establishing a sound
compensation structure."" The term compensation is used to mean employees' gross earnings in the form
of financial rewards and benefits as part of employment relationship. In terms of human resource
management, compensation is referred to as money and other benefits received by an employee for
providing services to his employer. Compensation management, also known as wage and salary
administration, remuneration management, or reward management, is concerned with designing and
implementing total compensation package or salary structure.

In manufacturing organizations compensation management varies from one to another. Many

organizations prefer to give more basic with less benefit and other options but believe in giving highest
non-monetary benefits to the employees. On the contrary, some organizations believe in giving average
basic pay but highest portion of benefits and also other services from the competitors. This term paper
will help to find out the compensation system performed by Pran-RFL Group.

In the present days to acquire the ultimate success every company needs to follow a competitive
compensation policy. The policies regarding compensation which will help the company to attract the
qualified, talented employees, to motivate and retain them for the better purpose need to be accepted.
For all these reasons we decided to study on this.

Objectives
To explore the detailed concept about compensation and compensation management. To examine the
importance of compensation management among organizations. To explore the impact/ effects of
compensation management in the organizations. To identify the limitations that compensation
management hold in the organizations
Methodology:
This report is on the basis of Compensation Management System in Pran RFL and Akij Food and
Breverage. All the information of this report is the original practiced scenario and also it can be helpful
for later use.
Primary Data:
Primary information were collected by the following process-
1. By made a one to one conversation with the Junior Officer of Compensation Management of Pran RFL
and Akij Food and Breverage.
2. Survey (questionnaire)
History of the organization
PRAN-RFL GROUP:It is one of the largest conglomerates and agro producer in Bangladesh. Basically it
is a manufacturing company which started their journey since 1981.Major General Amjad Khan
Chowdhury was the owner of the company.Its 1st industry park was in Rangpur.Now it has 13 industral
parks through Bangladesh.
AKIJ GROUP: Akij Group was established in the 1940s by industrialist Sheikh Akijuddin as a jute
trading business, before moving into cigarettes and other areas of business. Akij Group is the largest
Bangladeshi industrial conglomerates. The industries under this conglomerate include textiles, tobacco,
food & beverage, cement, ceramics, printing and packaging, pharmaceuticals, consumer products etc.
Vision,mission and goal
PRAN-RFL GROUP:Mission statement of PRAN-RFL Group is Poverty and hunger are curses so
PRAN-RFL group aims to "to generate employment and earn dignity and self respect for our competitors"
through profitable enterprise. From the mission statement of Pran group it is clear that they work for the
eradication of poverty and hunger. They already export their products to 140 countries and they are the
highest tax paid institution in Bangladesh.Now their vision is export their products all over the world
that's why they can make them a strong brand. Improving livelihood is also a vision of them.
AKIJ GROUP: The mission of Akij Group is to be the market leader through their best effort, suitable
and competitive marketing strategy and the consumers support. Now they are in the position of challenger
and their vision focuses on those missions, goals and objectiveswhich will make them able to be the
leader from the challenger to the leader in the market.

Analysis
Milkovich and Newman (1999) stated that, Compensation refers to all forms of financial returns and
tangible services and benefits employees receive as part of an employment relationship. The Journal of
Global Business and Economics (2010) also defines compensation as "the combination of all cash
incentives and the fringe benefits mix that an employee received from a company which constitutes an
individual's total compensation." (Chabra 2001) refers to Compensation as a wide range of financial and
non-financial rewards given to employees in exchange for their services rendered to the organization.
Similarly, we can say that compensation is a systematic approach to provide extrinsic and intrinsic
benefits, monetary and nonmonetary benefits to the employees. It is also considered as measurement how
employees are being treated in an organization. Each and every organization has their own compensation
planning where they specify what facilities are going to provide their employees, how it should be
provided and based on what category. I have selected two company to know about the real scenario of
compensation practices and how it is being implemented in their company. Based on the survey we
analyses compensation management practices in both company which are given below.
Compensation management practices of Pran-RFL Group

Compensation system procedures:

Pran-RFL Group has a compensation and benefit policy- the main objective is to motivate and retain
employees for increasing maximum performance. For fixing the pay rates for employees they conduct a
job analysis of all positions. After conducting job analysis they evaluate jobs so that they can determine
grades aftermath. Then they establishes grade pricing and salary range which helps them to determine
appropriate salary structure. Finally, they communicates the final program to employees and managers.
For developing the incentive program for employees they have a policy to pay employees based on target,
performance, achievement, cost savings, revenue generated etc. Their revenue is the result of employee's
high diligence.
For practicing the benefit package Pran-RFL group investigate the market to see what competitors have
set for their employees. Then they decide and create the list of monetary and nonmonetary benefits. They
recognize the job specific benefits based on nature of job, like they provide transportation facility to all
factory employees. Also they determine some common benefits for all employees as like- medical support
etc. It is certain that they evaluate and adapt the benefit package as per market trend.
They manage the total compensation system by creating proper balance between cost and contribution.
They communicate with employees in written way.
Compensation objectives, policy and techniques:
According to the given information, compensation and benefit scheme in this organization comply with
government regulations. Compensation system has a positive impact on quantitative

Pay for performance, financial incentives and benefit options:

Pran-RFL provides merit pay program as pay for performance and financial incentives. Profit sharing
program is provided by a portion accordingly. However, they do not offer stock option scheme and also
gainsharing plans for employees. They do pay for overtime. Generally, they do not provide leave
encashment facility. If valid reason can be shown, it might be provided.
In terms of benefit options they provide sick leave, life insurance, pension and gratuity, vacation leave,
maternity leave. Other benefits are-
Medical support- Pran-RFL offers a range of services designed as a safeguard of their health regardless
home and abroad. This range from health screenings to wellness program.
Pran scholarship scheme- In order to encourage and patronize meritorious children of employees, they
provide financial support on a regular basis. Starting from class 6 to post graduation level. Students with
good academic result get under this scholarship scheme.
Transport and Canteen facilities- They offer transportation facilities to all factory employees. In addition
to that, employees from head office and factory get high quality canteen facilities that make them highly
satisfied.
Recognition and Career growth- Based on key performance indicator (KPI) they recognize the
performance of employees. They have monthly recognition scheme named "Employee of the month" that
truly motivate them. In addition to that, they offer smooth and long term career growth to the deserving
candidates.
Employee Training and Development- To make employees more productive, they regularly organize
training and development session by renowned professionals both inside and outside the country.
The compensation and benefit package facilitate HR functions in terms of motivating employees for
increasing productivity. Current salary is also rated favorable. They do not face problem in administering
and managing the current compensation and benefit packages. Overall, current compensation and benefit
practices of Pran-RFL Group is good.

To compare with other local companies, they are following lead pay policy. For fixing the pay rates for
employees they conduct job analysis and prepare job description, conduct job evaluation to get the value
of each for internal pay structure, conduct market survey also. They develop policy line for pay grades
and ranges. They adapt the changes according to the market trends. Moreover, they review benefit
packages once in a year. They conduct performance evaluation twice in a year as well.
They manage total compensation system by adopting periodical change with the arising new situation and
creating proper balance between cost and contribution. Also, they implement effective compensation plan
after overall assessment to achieve the objective of compensation system. They communicate with
employees by giving exact information.
Compensation objectives, policy and techniques:
Similarly, like any other organizations, their compensation and benefit scheme comply with government
regulations. This compensation system is able to attract, motivate and retain talent employees. Also it has
a positive impact on quantitative and qualitative employees' performance which helps to reduce turnover,
absenteeism and conflicts. The compensation system is linked with the business strategic plan and able to
create shareholder's value. It has been designed to ensure equity and employee satisfaction.
Pay for performance, financial incentives and benefit options:
There is a provision regarding bonus which is based on the performance of the employees. However, it
depends on the performance of the branch which means if a branch performs well as a whole, all
employees of that branch will get bonus based on their performance.
Provident Fund and Gratuity: The employees are entitled with the provident fund. They provide
contributory provident fund to the employees. In addition, they provide gratuity which has a handsome
amount apart from the basics. The employees who completed 10 years are used to get a gratuity
equivalent to the basics of 3 months.
Annual Increment: There is a provision of annual increment of AFBL which is 10%-20% sometimes 25%
increment based on the performance. It works as a motivating factor to the employees to perform well.
Allowances: They also provide travel allowance to their employees if they travel in Bangladesh regarding
company's prospect. House rent allowances is also given to the managerial level. Other benefits are-
Employee Loan: They provide a great scheme of loans to employees. Permanent employees can get loan
from their provident fund. From the executive level employees are qualified for home loans, car loans.
Medical Facilities: The medical facility given by AFBL is quite different from others. They have their
own medical team to look after their employees in case of any medical assistance. They have their
nursing home as well. However, employees do have the opportunity of life insurance.

FINDINGS
Learnings from analysis:
Figure the pay structure: Pay structures are a necessary part of effective management. They help make
sure that the pay levels are externally competitive and internally fair. Pay structures also allow companies
to reward performance and development while controlling cost.
• Provide Incentives & Benefit packages: Incentives should be given to employees based on target,
performance, achievement, cost savings, revenue etc. For benefit packages market trend should be
followed which is also followed by our competitors.
Motivate Employee: Employee motivation works when compensation and benefits are given properly. So
compensation and benefits are the reason of their main motivation. So to get these benefit or reward they
will work hard. • Balancing Cost & Contribution: By balancing total cost and contribution, compensation
system can be set.
Time to update: Compensation system should be updated by time to time. Mostly it could be changed
within 1 or 2 years. Compensation can never less than previous scale.
• Provide pension system: As per rule pension system should be provided. A minimum salary should be
kept from per month salary, which is to included for pension system. So employee can enjoy the pension
benefit even after their retirement
Strengths of the Compensation Management of Pran-RFL Group
• Appropriate Salary Structure: After conducting job analysis Pran-RFL evaluate jobs so that they can
determine grades aftermath. Then they establishes grade pricing and salary range which helps them to
determine appropriate salary structure.
· Individual Merit Pay: Pran-RFL provides individual merit pay based on performance and financial
incentives.
Compensation and Benefit packages: Compensation and benefit scheme matches with government
regulation. Here benefits given by Pran-RFL are sick leave, life insurance, pension and gratuity, vacation
leave, maternity leave along with Medical support, Pran scholarship scheme, Transport and Canteen
facilities.

Provide Training Program: Pran-RFL provides proper training to employees by professional trainers to
increase the productivity of them. Which help employees to me more productive and experienced.
• Pension Program: Pran-RFL also has pension program for their empolyees. So that they can earn
pension after retiring from their job.
• Pran scholarship scheme: In order to encourage and patronize meritorious children of employees, they
provide financial support on a regular basis. Starting from class 6 to post graduation level. Students with
good academic result get under this scholarship scheme.
·

Weakness of the Compensation Management of PRAN-REL

No Study Leave: There are no study leave given to the employees of Pran- RFL. Which can cause their
employees to loss educational right from them. • No overtime payment: Pran-RFL do not provide any
overtime payment as they have controlled salary structure for each employee.
· No Accomodation System: Pran-RFL has no accommodation system for their employee. So their
employees from a far range has to manage their own accommodation.
·
No offer of stock option: Pran-RFL do not offer any stock option for their employees.

Recommendations

•
•
•
•
PRAN-RFL GROUP should ensure standard incentive policy to their employees for their high level of
satisfaction.
The organization should increase its compensation related benefits which are provided to the employees.
The organization should put more concentration on TA/DA which offered to their employees.
The organization should provide effective/acceptable insurance coverage to their employees.
Pran-RFL should also provide individual insurance benefit along with group insurance.
The organization's pension/ retirement plan should be modified in favor of their employees. The
organization may increase current salary structure of their employees.
References

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