1. Compensation Management  Compensation is what employee receives in exchange for their contribution to the organization.  Compensation management help the organization to obtain, maintain and retain a productive Workforce

2. Objectives of Compensation Management  Acquire Qualified Personnel  Retain Present Employee  Ensure Equity  Reward Desired Behavior  Control Cost  Comply with Legal Regulations  Facilitate Understanding  FURTHER Administration Efficiency

3. Types of Compensation Intrinsic Compensation Rewards once receives from job itself such as pride in One’s work, a feeling of accomplishment, or being a part of a team. Extrinsic compensation Rewards one gets from employer usually money, a promotion or benefits

4. Types of INTRINSIC Compensation  Participation in decision making.  Greater job freedom & Discretion.  More Responsibility.  More Interesting Work.  Opportunity to personal Growth.  Diversity of Activities.

5. Kinds of Extrinsic Compensation  Financial Rewards. ÙWages and salaries ÙIncentives  Gain sharing  Non Financial Rewards. ÙFringe benefits

6. Phases of Compensation Management  Phase 1  Phase 2  Phase 3  Phase 4 Evaluate every job, using job analysis information to ensure internal equity based on each job’s relative worth. Conduct wage and salary survey to determine external equity based on the rate paid in the labor market. Price each job to determine the rate of pay based on internal and external equity. Identify and study the job.

7. Job Analysis Job Evaluation Job RankingJob GradingFactor comparisonPoint System Salary & Wages Survey Dept. Of Labor Employee Associations Professional association Self Conducted Survey Pricing Job Job Evaluation worthMatch rate & range for Each Job Labor market worth Phase 1. Identity and study jobs. Phase 2. Internal equity Phase 3. External Equity. Phase 4. Matching internal and external work. Phase wise Model of Compensation Management Position DescriptionJob DescriptionJob Standard

8. JOB ANALYSIS Job Analysis is the process of compiling, maintaining, Reviewing & Modifying information about jobs for the purpose of developing JOB DESCRIPTION, JOB SPECIFICATION & JOB EVALUATION

9. Job Evaluation Systematically determining the relative worth of the jobs to create job structure OR in simple words Determining the worth of job for reward, benefits & compensation system

10. Job Evaluation Methods  Job Ranking method  Job Grading / Classification method  Factor comparison method  Point system

11. Job Ranking Method Arrangement of job in a simple rank order form highest to lowest or form lowest to highest  Raters examine the JD of the each job  Arrange in order according to value e.g. starting from lowest to highest Janitor ranked 1 Secretary gets 2 Office manager gets 3

12. Job Grading Method Assigned a grade or class for each job  Step 1: use a number of job related factors such as, education, experience and responsibilities to determine classes or grades of Job  Step 2: create benchmark job description for each grade or class  Step 3: compare job with the bench mark description for each of the grades, then assign appropriate one

14. Factor Comparison Method Compare critical or Compensable Job components The each compensable factor such as responsibility, skill, mental effort, physically effort and working conditions is compared one at time with the same factor for other key job and then evaluated.

15.  Steps of factor comparison method Ù Determine the compensable factor Ù Determine Key Jobs Ù Apportion present wages for key jobs Ù Place key jobs on a factor comparison chart Ù Evaluate other jobs

17. condition secretary Janitor File clerk

18. Point System Method An approach to job evaluation in which numerical values are assigned to specific job factors and the sum of those values provides a quantitative assessment of a job’s relative worth  Determine the Critical factor  Determine Sub-factor  Determine the levels of factors  Allocate points to factor under each level  Develop a point manual  Apply the point system

20. 1.Responsibility b. Equipment and materials: each employee is responsible for conserving the company’s equipment and material. This includes reporting mal functioning, equipment or defected material, keeping equipment and material clean or in proper order, and maintaining, repairing, or modifying equipment and materials according to individual job duty. The company recognizes that the degree of responsibility for equipment and material varies widely through out the organization Level1: Employee reports mal functioning equipment or defective materials to immediate superior Level 2: employee maintain the appearance of equipment or order of materials and has responsibilities for the security of such equipments and materials Level 3: employee performs preventive maintenance and minor repairs on equipment or corrects minor defects in materials Level 4: employee performs major maintenance or overhauls of equipment or is responsible for deciding type, quantity, and quality of material to be used. A Point Manual Description of “Responsibility: equipment and material”

21. Wage and Salary survey  A survey aimed at determining prevailing wage rates.  A good salary survey provides specific wage rates for specific jobs  Formal written surveys are the most comprehensive but the telephone and newspaper ads are also source of information  Other sources are ÙDepartment of Labour ÙEmployee associations ÙProfessional Association ÙSelf-Conducted Surveys

22. Pricing Job Allocate the Value to the job After matching the job evaluation worth with the market worth Steps in pricing Job  Establishment of Wage Curves  Establishment of Wage Structure

23. Wage Curves

24. Wage Structure

25. Incentive Systems and Gain Sharing  Incentive system links compensation and performance by rewarding performance instead of seniority or hours being worked.  Incentive system could be individual based  Gain sharing matches an improvement (gain) in performance with a distribution (sharing) of the benefits with employees

26. IncentivesDescription Piece work Compensates the worker for each unit of output Production bonuses Paid to workers for exceeding output goals Commissions The seller may be paid a percentage of selling price or a flat amount for each unit sold Merit raises Pay increases given after an evaluation of performance Pay for knowledge/pay for skills compensation Rewarding employees with higher pay as an incentive for increased knowledge or skills they acquire. Non monetary incentive e.g. recognition programs in which employee receives certificates, time off, vacations etc Executive incentive Stock option: the right to purchase the company’s stock at a predetermined price. Weighted incentive systems: reward executives on the basis of improvements in the multiple areas of business

27. Gain sharingDescription Employee ownership Many company have stock purchase plans that allow workers to buy shares in the company, so owing the fractional part of the firm and sharing its success Production sharing plans Allow groups of workers to receive bonuses for exceeding predetermined levels of output. Profit sharing plans Share profits with the employees Cost reduction plans Scanlon Plan: Employees aim to reduce costs and then share in the savings that result. Bonuses on improvements in quality of labor costs compared with the historical norms

28. Fringe Benefits  Indirect or non cash compensation items such as life insurance, medical benefits, additional sick leave and the like

29. Other Factors Determining Pay  Prevailing Wages  Ability to pay  Cost of Living  Productivity  Job Requirement  Govt. Laws

30. Equity Factor Approach  Pay should be based upon contribution Outputs of Individual Inputs Compare with Outputs of Individual Inputs

31. Relationship between Pay Equity and Motivation The greater the perceived disparity between my input/output ratio and the comparison person’s input/output ratio, the greater my motivation to reduce the inequity.

32. Market Rate & Compensation Plans  Pay Above the Market  Pay Market Rate  Pay Below the Market

33. Pay Above the Market Rate  Advantages Attracts better employees. Minimize voluntary turnover. Fosters Strong culture & competitive Superiority  Disadvantages Additional Compensation Cost Sense of entitlement

34. Pay Market Rate  Advantages Higher quality of Human Resource at midrange of market-driven Compensation.  Disadvantages Does not attract huge factor forever Turnover will vary with labour demand of competitively firms.

35. Pay below Market Rate  Advantages Lower Compensation Costs Useful in labor Market where Unemployment rate large  Disadvantages Lower Quality Employee Low Moral / Job Satisfaction High Turnover, Especially wage