Compensation and Benefits

WHAT IS AN ORGANIZATION
What are its features?
Which is its core function?

How does this core function perform its activities? What is the essence of the core function? What resources does the core function utilize? Which resource is the most important? Does the Organization have a context? What is it?
Compensation and Benefits
Organization
Definition Management is the process of designing and maintaining an environment in
which individuals, working together in groups, efficiently accomplish selected

aims.
Main task of Management is getting things done through and with people Main job of Management is to maximize profit with limited resources at a minimum cost.
The sub-functions of Management are: Managing the Business Managing Managers Managing Worker and Work Managing Time
Compensation and Benefits 3
Organization
Production Finance Functional areas in Business Organizations
Marketing
Sales
Human Resource
Personnel Management
Definition of PM- Institute of Personnel Management (IPM) 1963
Personnel Management is the responsibility of all those who manage people, as well
as being a description of the work of those who are employed as specialists. It is that part of management which is concerned with people at work and with their relationships within an enterprise. Personnel Management aims to achieve both efficiency and justice, neither of which can be achieved without the other. It seeks to bring together and develop into an effective organization the men and women who make up an enterprise enabling each one to make his best contribution to its success as an individual and as a member of a working group. It seeks to provide fair terms and conditions of employment, and satisfying work for those employed.
Functions of Management
Planning function determine an organizations objectives and establish the appropriate strategies for achieving those objectives
Organizing function creates a structure of task and authority relationships that serves this purpose
Controlling function requires three elements (a) Established standards of performance (b) Information that indicates deviations between actual and the established standards (c )Action to correct performance that does not meet the standards Staffing function is the management of the human resource including recruiting, appraising, training and developing, motivating and separating. Leading function is the process that integrates the functions as planning, organizing, and controlling
Functions of Management (contd)

Planning determines what results the organization will achieve Organizing specifies how the results will be achieved Controlling determines whether the results are achieved Staffing provides the human resource requirement for achieving the target.
Through planning, organizing, staffing and controlling, managers exercise leadership

HUMAN RESOURCE MANAGEMENT

Definition Of Human Resource Management - Torrington & Hall98
Human Resources Management is resource-centered, directed mainly at management needs for human resources( not necessarily employees) to be provided and deployed. Demand rather than supply is the focus of the activity.
There is greater emphasis on planning, monitoring and control, rather than

mediation. Problem- solving is undertaken with other members of management on human resources issues rather than directly with employees or their representatives. It is totally identified with management interests, being a general management activity, and relatively distant from the workforce as a whole.
Functions of Management
Acquisition
Fairness Human Resource Management (HRM)
Training
Health and Safety
Appraisal
Labor Relations
Compensation
COMPENSATION & BENEFITS INTRODUCTION

Compensation is what employees receive in exchange for their contribution to the organization. Generally speaking, employees offer their services for three types of rewards.
Pay Benefits
: includes base wages and salaries : are indirect type of compensation including facilities such as insurance, medical, recreation, retirements etc
Incentives : includes bonuses, commissions and profit sharing plans
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Objectives of Compensation Planning
The most important objective of any pay system is fairness or equity.
Three dimensions of equity are as follows:

Internal Equity External Equity : Ensures that more difficult jobs are paid more : Ensures that jobs are fairly compensated in comparison to similar jobs in the labour market.
Individual Equity : Ensures equal pay for equal work i.e each individuals pay is fair in comparison to other doing either the same/similar jobs.
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Objectives of Compensation Planning (contd)
The ultimate goal of a companys compensation programme is to reward desired behaviours and encourage people to do well in their jobs.
Important objectives that are sought to be achieved through effective compensation management are as follows:
Attract talent : Compensation offered should be high enough for

hiring the services of competent people Retain talent : Fall in compensation level below expectations of employees will lead to attrition. Control costs : Effective compensation management ensures that employees are neither over paid nor under paid
Objectives of Compensation Planning (contd)
New and desired behaviour : Pay should reward employees desired

behaviours such as loyalty, commitment, experience, risks taking, initiative etc Ensure equity Comply with legal rules Ease of operation : Pay should equal the worth of a job. : Compensation programmes must satisfy governmental rules : Compensation management system should
be easy to understand and operate
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Equity and Pay Rates

The need for equity is the most important factor in determining pay rates.
Equity in pay rates could be achieved through the following steps: Find the worth of each job through job evaluation. Conduct a salary survey to find what other employers are paying for comparable jobs. Group similar jobs into pay grades. Price each pay grade by using wage curves. Fine tune pay rates.
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JOB ANALYSIS
Process of defining a job in terms of its component tasks or duties and the knowledge or skills required to perform them.
Job Analysis
Job Description
Job Specification
Job Evaluation
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Products of Job Analysis

The three most important elements of Job Analysis are as follows:
Job Description Is an organized, factual statement of the duties and responsibilities of a specific job. It should tell what is to be done , how it is done and why.
Job Specification Is a statement of the minimum acceptable qualities necessary to perform a job properly.
Job Evaluation Is a systematic and orderly process of determining the worth of a job in relation to other jobs. Is used to establish compensation rates.
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JOB EVALUATION
Job analysis offers valuable information for developing a compensation system in terms of what duties and responsibilities need to be undertaken.
Job evaluation helps in: Reducing the inequalities in salary structure Selection of employees Maintaining harmonious relationship between employees and management Standardization of salary structure
Job evaluation process is largely subjective, a committee is appointed to collect information and come up with hierarchy of jobs according to their value.
Prof. Jairaj Kochavara
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Methods of Job Evaluation

There are three basic methods of Job Evaluation:
Ranking Method Classification Method Factor Comparison Method
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Methods of Job Evaluation (contd.)

RANKING METHOD:
In ranking method, jobs are arranged from highest to lowest, in order of their value or merit to the organisation. Jobs can also be arranged according to the relative difficulty in performing them. Ranking method is the simplest method of job evaluation.
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RANKING METHOD The following table is a hypothetical illustration of ranking of jobs: Rank 1. Accountant Monthly salaries Rs. 3000
2. Accounts clerk
3. Purchase assistant 4. Machine-operator 5. Typist 6. Office boy
Rs. 1800
Rs. 1700 Rs. 1400 Rs. 900 Rs. 600
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RANKING METHOD
Ranking method is best suited for small organisation

Rankings are difficult to develop in a large, complex organisation
Ranking is highly subjective in nature and may offend many

employees. Therefore, a more scientific and fruitful way of job evaluation is called for.
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CLASSIFICATION METHOD
This method places groups of jobs into job classes or job grades. Separate classes may include office, clerical, managerial, personnel, etc.
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Following is a brief description of such a classification in an office:
Class I Executives
Class II Skilled workers

Purchasing assistant
Class III Semiskilled workers
Class III Semiskilled workers
Office Manager
Stenotypists
Daftaris
Deputy office manager Cashier Office superintendent Departmental supervisor Receipts clerk
Machineoperators
File clerks
Switch board operator
Office boys
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FACTOR COMPARISON METHOD
Factor comparison method is more systematic and scientific method

of job evaluation. Under this method, instead of ranking complete jobs, each job is ranked according to as series of factors. These factors include mental effort, physical effort, skill needed, responsibility, supervisory responsibility, working conditions and other such factors (know-how, problem solving abilities, accountability, etc)
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FACTOR COMPARISON METHOD
Key Job /Factors
Daily Wage Rate
Physical effort
Factors mental effort
Skill
Respon sibility
Working condition
Electrician Fitter
Weider Cleaner Labourer
60 50
40 30 25
11(3) 14(1)
12(2) 9(4) 8(5)
14(1) 10(2)
7(3) 6(4) 4(5)
15(1) 9(2)
8(3) 4(5) 6(4)
12(1) 8(2)
7(3) 6(4) 3(5)
8(2) 9(1)
6(3) 5(4) 4(5)
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WHAT IS AN ORGANIZATION

What are its features?

Which is its core function?