COMPENSATION

MANAGEMENT

Presented By-
SANDHYA KHALKHO
MBAAB1907
COMPENSATION MANAGEMENT-
 It is a systematic approach to providing monetary
and non monetary value to employees in exchange
for work performed.
 It may be defined as money received in
performance of work and many kinds of benefits
that an organization provides to their employees.
OBJECTIVES/IMPORTANCES
COMPONENTS OF COMPENSATION
DIRECT
COMPENSATION
 Base pay-Wages are hourly
rates of pay(Blue collar
workers).Salary are monthly
rate of pay(White collar
workers)
 Incentives-It is additional to
wages and salary. It depend
upon productivity ,profit or
cost reduction efforts. It
may be individual or group
incentives.
INDIRECT
COMPENSATION
 Allowances-Dearness Allowance(DA)-cost of
living adjustment paid to employees, House
rent allowance(HRA),Conveyance allowance-
Home to work and then back that is travel
,Leave travel allowance.
 Claims-Telephone or mobile allowance,
Internet allowance, medical allowance
 Gratuity-Sum of money paid to employees for
services rendered in company. It is paid to
employees who had complete 5 years or more
with company.
 Taxes-Employer duty is to deduct taxes from.
employee’s salary.
 Fringe benefits-employee benefit for longer
duration of time like Provident fund, medical
care, canteen, health etc.
 Perquisites -Allowed to executives like
company car, club membership ,paid holidays
etc.
REAL LIFE SCENARIO OF A EMPLOYEE
COMPENSATION IN SAIL MTI,RANCHI
 THEORIES
 Reinforcement and expectancy theory-
Reinforcement is assumption that the reward
earning behaviour is likely to be repeated.
Vroom’s expectancy theory is employee is
motivated to do a particular work for which
employee is expected for a definite rewards.
 Adam’s Equity Theory-Its states equity in pay
structure of employees by employers according to
inputs like experience, skills, time etc. and
outcomes like pay, benefits etc. It depend upon
internal organization, external organization as
well as individual equity.
 Agency Theory-Employers and employees are
stakeholders of the company and remuneration
paid to employee is agency cost.
INTERNAL FACTORS
 Business Strategy-To achieve
rapid growth, remuneration
should be higher than what
competitors pay.
 Job evaluation and Performance
appraisal –It establish
satisfactory wage and award
pay increase to employees who
show improved performances.
 Employee-According to
Performance, seniority,
experiences, potential
EXTERNAL FACTORS
 Labour market-Demand for supply
influence base pay.
 Going rate- Labour related factors
like locality influence compensation
 Productivity-It can increase by
increased efforts of worker.
 Cost of living-Rising prices
 Labour unions-Presence or absence
determine the quantum of wages
paid to employees.
 Labour laws-The central and state
government to fix minimum rates
of wages payable to employees.
 Society-Organization fixes prices for
goods and services and consumers
consume them by their interests.
 CHALLENGES
 Skill based -Employees paid on the
bases of the job they do.
 Pay Reviews-Once pay determined
its remains constant for several
years.
 Pay secrecy-Avoid pay comparison.
 Comparable worth-Equal pay for
equal work.
 Employee participation-To increase
participative management .
 Eliticism Vs Egalitarianism-More
flexibility to deploy employees in
different areas without changing
their pay levels..
 Monetary Vs Non monetary-It is
partially or fully exempted from
taxes.