COMPENSATION &

BENEFITS MANAGEMENT
OUR ASSETS WALK OUT OF THE DOOR
EACH EVENING. WE HAVE TO MAKE
SURE THAT THEY COME BACK THE
NEXT MORNING.

--NARAYANA MURTHY
Executive Chairman – INFOSYS
 History of Compensation

Barter Exchange System

Prior to the introduction of

money, trade was carried out
by barter i.e. exchange of
goods for goods.

Due to the wasteful nature of

barter, the amount of trade that
could be carried out by this
method of exchange was
limited.
 Let’s Discuss

• Salary
• Wages
• Compensation
 Salary

• Regular money received by an

employee from an employer on
a weekly, biweekly or monthly
basis.

• It includes employee benefits

such as health and life
insurance, saving plans and
Social Security.
 WAGES

Payment for a labour or a worker, especially

remuneration on an hourly, daily or weekly basis or by
the piece rate.
 Compensation

The sum of all forms of payments or rewards provided to

employees for performing tasks to achieve organizational
objectives
Compensation is the process of providing adequate, equitable
and fair remuneration to the employees.
It is a comprehensive term which includes pay, incentives and
benefits offered to the employees.
Compensation is a systematic approach to providing monetary
value to employees in exchange for work performed.
 PURPOSE OF COMPENSATION

Contribution based
Remuneration Ensure Equity

Effective
Attract Compensation
Efficient
Talent Administration

Motivate & Reward

Retain Staff Valued
Behaviour
 TOTAL COMPENSATION

Employee Satisfaction

Supportive Corporate
Rewards Culture
Benefits
• Bonus Executive Sponsorship
• Health Plans

• Salary Increases • Retirement Plans

• Promotions • Vacation/ time off

• Equity Offerings • Paid Training

Salary • Working Hours
• Awards
• Pay
• Recognition
•Overtime (if in non-
• New job assignments exempt classification –
Fair Labor Standards Act)
 COMPENSATION STRATEGY

Business Compensation Contingent

Strategy Strategy Factors

Defines the intentions of the organization on reward policies,

processes and practices required to ensure that it has the skilled,
competent and well-motivated workforce it needs to achieve
business goals.
 (cont.)
Business Strategy:
• The direction in which organization is going in relation to its
environment in order to achieve its objectives.

Compensation Strategy:
• The intentions of the organization on reward policies, processes
and practices required to ensure that it has the skilled, competent
and well-motivated workforce it needs to achieve its business
goals.

Contingent Factors:
• Legal requirements or Government Policies, Strength of Trade
Union, Labour Market conditions and Capacity to Pay.
COMPONENTS OF COMPENSATION & BENEFITS

Incentives

Reimbursement Benefits
(Tax Free)

C&B

Allowances
Perquisites
(Taxable)

Basic Pay
 CLASSIFICATION OF REWARDS

TOTAL COMPENSATION

Financial Non-Financial
(Extrinsic Rewards) (Intrinsic Rewards)

Direct Indirect Praise &

Satisfaction
derived from Job Rewards
COMPONENTS OF FINANCIAL
COMPENSATION
COMPONENTS of FINANCIAL
COMPENSATION

Direct Indirect

Base Pay Variable Pay Benefits

• Wages Incentives
• Salaries • Individual
• Group/Team
• Organizational Mandatory Voluntary
• Provident Fund • Vacations
• Gratuity Leave • Breaks
• Health Plans • Holidays
• Medical Leave Security Plans
• Pension
Employee Compensation Breakup

EMPLOYEE
COMPENSATION BREAKUP

Compensation Benefits Performance &

• Base Pay Talent Management
• Health / Medical
• Wages Insurance • Human resource
• Salaries • Life/ disability development
• Variables Insurance • Career & succession
Pay • Paid time off Planning
• Bonuses • Retirement • Performance appraisals
• Incentives • Educational • Goal Setting
assistance • Training
• Work-life Support
Employee Compensation
Breakup
EMPLOYEE
COMPENSATION
BREAKUP

Performance
Compensa Benefits & Talent
tion
• Base Pay • Health / Medical
Management
• Human
• Wages Insurance resource
• Salaries
• Life/ disability developm
• Variables Insurance ent
Pay • Paid time off • Career &
• Bonuses • Retirement succession
• Incentives • Educational Planning
assistance • Performance
• Work-life Support appraisals
• Goal Setting
• Training
 BASE PAY

The direct financial compensation an individual receives based on the time

Worked.

Bases of calculation:
• Hourly/wage: payment for the number of hours worked.

• Salaried: receive consistent payments at the end of specific period

regardless of number of hours worked Nature.

Generally Market Driven:

(Demand > Supply = Increase in Pay)

Job Evaluation:
• The formal systematic means used to identify the relative worth of jobs
within an organization.
 VARIABLE

Variable Pay/ Incentives

• Any plan that ties pay to productivity or profitability (i.e.) the standard by
which managers tie compensation to employee effort and performance.

• It is linked to individual, group, or organizational performance and not

to time worked.

• Establish a performance “threshold” to qualify for incentive payments.

• Emphasize a shared focus on organizational objectives.

• Create shared commitment in that every individual contributes to

organizational performance and success.
 IMPLEMENTING EFFECTIVE INCENTIVE PLAN

• Link the incentive with your strategy.

• Make sure effort and rewards are directly related.

• Make the plan easy for employees to understand.

• Get employees’ support for the plan.

• Use good measurement systems.

• Emphasize long-term as well as short-term success.

• Adopt a comprehensive, commitment-oriented

approach.
 NON FINANCIAL COMPENSATION

Are most effective as motivators when the award is

combined with a meaningful employee recognition program.

• Intrinsic motivators are worthwhile as financial package

• Organization reward high performing employees
• Psychological rewards thatemployees receive in recognition of
their skills and contributions
 TYPES of NON FINANCIAL COMPENSATION

Awards
• Often used to recognize productivity gains, special contributions or achievements,
and service to the organization.
• Employees feel appreciated when employers tie awards to performance and deliver
awards in a timely, sincere and specific way.

Recognition Awards
• Recognition has a positive impact on performance, either alone or in conjunction with
financial rewards.
• Combining financial rewards with nonfinancial ones produces performance
improvement in service firms almost twice the effect of using each reward alone.
• Day-to-day recognition fromsupervisors, peers, and teammembers is important.
• Best performer of the month awards in Blue Dart, ALACTEL, XANSA etc.

Service Awards
• Award for the length of service and exactly not on performance
• IBM: thanks award
• IDEA: appreciation card
 EQUITY AND MOTIVATION OF EMPLOYEES

Pay Equity (also Distributive Fairness)

• An employee’s perception that compensation received is equal to the value of

the work performed.

• A motivation theory that explains how people respond to situations in which

they feel they have received less (or more) than they deserve.

• Individuals form a ratio of their inputs to outcomes in their job and then
compare the value of that ratio with the value of the ratio for other individuals
in similar jobs.
RELATIONSHIP BETWEEN PAY EQUITY AND MOTIVATION
DETERMINANTS OF COMPENSATION
INDIAN ARMY PAY SCALE STRUCTURE
RANK PAY BANDS/SCALE GRADE PAY MSP

LIEUTENANT PB-3/15600-39100 5400 6000

CAPTAIN PB-3/15600-39100 6100 6000
MAJOR PB-3/15600-39100 6600 6000
LT COLONEL PB-4/37400-67000 8000 6000
COLONEL PB-4/37400-67000 8700 6000
BRIGADIER PB-4/37400-67000 8900 6000
MAJOR GENERAL PB-4/37400-67000 10000 NIL
LT GENERAL / 67000 - (annual NIL NIL
HAG SCALE increment @ 3%) -
79000

HAG + Scale * 75500 - (annual NIL NIL

*Admissible to increment @ 3%) -
1/3rd of total 80000
strength of Lt Gens

VCOAS / Army 80000 (fixed) NIL NIL

Cdr / Lt Gen (NFSG)

COAS 90000 (fixed) NIL NIL

 Allowances
Field Area Allowance
High Altitude/ Uncongenial
Climate Siachen
Flying Pay
Parachute Pay
Special Forces Allowance
Transport Allowance
House Rent Allowance
Kit Maintenance Allowance
Uniform Allowance
(Outfit Allowance)
Qualification Pay/ Grant for Service
Courses
Instructional Allowance
To Whom Applicable Rates
Officers Posted to Fd Area Rs. 4200/-PM
Officers Posted in High Rs. 11200
Attitude/Uncongenial
Climate
Officers Posted in Siachen
Rs.14000/-PM
Officers Posted as Army 9000PM
Aviators
Officers Posted in Active Parachute BNs/Regt 1200PM
Officers posted in Special Forces 9000PM
Officers Posted in Rs3200/-+DA PM in A1/A
Peace Stations cities and
Rs 1600+DA PM at other
places
To officers not provided 10-30% of Basic Pay (Pay
Govt. Accommodation Band + Grade Pay + MSP)
All officers 400/-PM
All officers Initial 14000/- and
3000/- every Three Years
All officers undergoing specified courses Rs 6000 to 20000/-
All Officers Posted as 1800/-
Instructors
THANK
YOU!!!