Employee Compensation

and Benefits

Prof. Dr. F. A. Sobhani

PhD (USM), MS (Belgium), MBA, BBA (CU)
Director, MBA & MIHRM Programs, United International University
Visiting Professor, Universiti Teknologi Mara, Malaysia
Research Coordinator (South Asia), AABL, Australia
Founding Chairman, BSHRM, Chattagram
Secretary General, FBHRO, Dhaka

drsobhani@uiu.ac.bd
Compensation & Benefits

11–2
How Would You Define Benefits?

• Rewards
• Incentives
• Things of value

9- 3
 Benefits

Financial Benefits Non-Financial Benefits

[Direct & Indirect] [Example, Appreciation]

11–4
 Mandated Benefits

• Social Security provides limited income to

retired individuals.

• Workers’ Compensation is insurance that

covers individuals who suffer a job-related
illness or accident.

9- 5
 Non-mandated Benefits

• Private Pension Plans are administered by the

organization and provide income to the
employees at their retirement.

• Defined benefit plans: a private pension plan

where the benefit is precisely known based on a
simple formula such as years of service.

• Defined contribution plans: a private pension

plan in which the size of the benefit depends on
how much money is contributed to the plan.
9- 6
Additional Benefits

• Wellness programs
concentrate on keeping
employees from becoming sick
rather than simply paying
expenses when they do
become ill.

• Child care programs assist

parents with child care
expenses.

• Cafeteria-style benefits allow

employees to choose the
benefits they really want.

9- 7
Executive Compensation

Most senior
executives receive
their compensation
in 2 forms:
1. base salary
2. a form of incentive pay
(usually a bonus
which is based on
company
performance)

9- 8
 Wage and Salary Administration

• Wage and salary administration is the

ongoing process of managing a wage and
salary structure.

• All managers must be sensitive to these

costs and must be vigilant about managing
them properly.

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Wages Versus Salaries

• Wages generally refer to

hourly compensation paid
to operating employees.
The basis for wages is
time.

• Salary is income paid to an

individual on the basis of
time.

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 Equity in Pay Rates

Forms of Equity

External Internal Individual Procedural

Equity Equity Equity Equity

11–11
 Addressing Equity Issues

Pay/Salary Surveys

Job Analysis and

Job Evaluation
Methods to
Address Equity
Issues Performance Appraisal
and Incentive Pay

Communications, Grievance
Mechanisms, and Employees’
Participation

11–12
Pay/Salary Surveys

• Pay Surveys are surveys of compensation paid

to employees by other employers in a particular
geographic area, industry, or occupational
group.

9- 13
 Sources for Salary Surveys

Sources of Wage and

Salary Information

Employer Self-
Consulting Professional Government The
Conducted
Firms Associations Agencies Internet
Surveys

11–14
 Determining What to Pay

• Job evaluation is a method for determining the

relative value or worth of a job to the organization
so that individuals who perform that job can be
compensated adequately and appropriately.

• Classification system attempts to group sets of

jobs together into clusters, which are often called
grades.

• The point system requires managers to qualify, in

objective terms, the value of the various elements
of specific jobs.
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 Pay-for-Knowledge and Skill-Based Pay

• Pay-for-knowledge
involves compensating
employees for learning
specific information.

• Skill-based pay rewards

employees for acquiring
new skills.

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 Compensable Factors

Skills

Effort
Identifying
Compensable Factors
Responsibility

Working Conditions

11–17
Pay Secrecy

Pay secrecy refers to the

extent to which the
compensation of any
individual in an
organization is secret or
the extent to which it is
formally made available
to other individuals.

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Pay Protection

Pay protection is a way of safeguarding the pay

and conditions of service of employees
whose pay is adversely affected by organisational
change and decision, i.e. revision of pay scale. It
is meant to allow the individual to find another post
at their original pay band or to adjust to the lower
salary within the protection period.

9- 19
Legal Issues in Compensation

• The Labor Act includes provisions for the

minimum wage, overtime, and child labor.
• HR managers must
adhere to overtime
laws.

Copyright ©2012 by Cengage Learning. All rights reserved. 9- 20

 Issues in Compensation

Contract & Agreement Minimum Wage

Earned Leave Gratuity

Group Insurance
Employee Provident Fund
Compensation

Equal Pay Fair Treatment

Medical Leave Maternity Leave etc.

Bangladesh Labor Act 2006

 KEY TERMS

employee compensation compensable factor

direct financial payments ranking method
indirect financial payments classes
Salary grades
wage point method
salary compression factor comparison method
honorarium pay grade
bonus wage curve
remuneration pay ranges
payroll competency-based pay
increment competencies
incentive broadbanding
salary survey comparable worth
benchmark job job evaluation