COMPENSATION

MANAGEMENT

OUR

ASSET WALK OUT OF THE

DOOR EACH EVENING. WE
HAVE TO MAKE SURE THAT
THEY COME BACK THE NEXT
MORNING.

Introduction
Compensation
is
a
systematic
approach to providing monetary &
non monetary value to employees in
exchange for work performed.
Compensation may be defined as
money received in performance of
work and many kinds of benefits that
an organization provides to their
employees.

What is the meaning of.

Salary
Wages
Compensation

Salary

Regular wages received by an

employee from the employer on
weekly or monthly basis. It includes
employee benefits such as health &
life insurance savings plans and
social security.

Wages

Payment for labor or services to a

worker, especially remuneration on
an hourly, daily or weekly basis or by
the piece.

Compensation
Direct & Indirect monetary &
Nonmonetary rewards given to
employees on the basis of the value
of
the
job,
their
personal
contributions and their performance.
While making this payments one
should be alive to the governing legal
regulations.

Objectives
To recruit & retain qualified
employees.
To increase or maintain morale.
To determine basic wage & salary.
To reward for job performance.

Components

Direct Compensation:
It refers to monetary benefits offered and
provided to employees in return of the
services they provide to the organization.
The monetary benefits include basic
salary, house rent allowance, conveyance,
leave travel allowance, medical
reimbursements, special allowances,
bonus, PF/Gratuity, etc. They are given at
a regular interval at a definite time.

Indirect Compensation:
It refers to non-monetary benefits offered
and provided to employees in lieu of the
services provided by them to the
organization. They include Paid Leave, Car
/ transportation, Medical Aids and
assistance, Insurance (for self and family),
Leave travel Assistance, Retirement
Benefits, Holiday Homes.

Compensation Models
Traditional:
Company has a fixed salary structure
with bands based on the employees
grade. An employee has no choice.
Cafeteria:
Employee has a flexibility to choose
his/her salary components from the
basket of components offered by the
company.
Combined:
A combination of Traditional &

Component of compensation
System
Job Description:
A critical component of both
compensation and selection system, job
descriptions define in writing the
responsibilities, requirements, functions,
duties, location, environment, conditions
and other aspects of jobs. Descriptions
may be developed for jobs individually
or for entire job families.

 Job Analysis:
The process of analyzing job from which
job descriptions are developed. Job
analysis techniques include the use of
interviews,
questionnaires
and
observation.
Job Evaluation:
A system for comparing jobs for the
purpose
of
determining
appropriate
compensation levels for individual jobs or
job elements. There are four main
techniques: Ranking, Classification, factor
comparison and point Method.

 Pay Structure:
Useful of standardizing compensation
practices. Most pay structures include
several grades with each grade containing
a minimum salary/wage and either step
increments
or
grade
range.
Step
increments are common with union
positions where the pay for each job is
pre-determined
through
collective
bargaining.

 Salary Surveys:
Collection of salary and market data, may
include average salaries, inflation
indicators, cost of living indicators, salary
budget averages. Companies may
purchase result of surveys conducted by
survey vendors or may conduct their own
salary survey.

When purchasing the survey form

the vendor, note that it may be
conducted within a specific industry
or across industries as well as within
one geographical region or across
different geographical regions.