1. Basis for Compensation fixation
Submitted By :
Pravin Pathrabe 8364
Anuja Kharote

2. Flow Of Presentation What is Compensation ?
Nature &Purpose Of Compensation.
Compensation Dimensions
3-P Compensation Concept.
Strategic Compensation Policies.
Basis For Compensation Fixation.

3. What is Compensation ?
Defined as money received in the performance of work plus the many kinds of benefits &services that organization provide their employees.
Compensation Provides
Reward for past service
Stimulus for performance in future
The progressive organization utilizes compensation as effective tool to develop, build & maintain human capital for Competitive Advantage.

4. Types Of Compensation Direct Compensation Indirect Compensation
Money in the form of wage & Salaries.
E.g.- D.A., Travelling Allowance Commission, Bonus.
Indirect Compensation
Health insurance
Mediclaim
provident fund
Gratuity
Pay for vacation & illness

5. Nature & Purpose….
To establish &maintain equitable wage & salary structure.
Maintain equitable labour cost structure.
Conflict minimization & Optimal balancing of personnel interest.
Compensation with financial aspect of need, motivation and reward.
To retain employees in Organization & attract qualified applicant to organization.

6. Compensation Dimension
Pay for work & performance.
Pay for time Not worked.
Continuation of income in event of physical disability.
Differed income.
Spouse(family)income continuation.
Health, Accident & Liability protection.
Income Equivalent payments.

7. 3-P Compensation Concept
Pay for Position
Pay for Person
Pay for Performance

8. Strategic Compensation Policies
Basic Work of Top Level Executives
Internal Consistency
External Competitiveness
Employee Contribution
Administration

9. Basis for Compensation Fixation
Organizations ability to pay.
Supply & Demand of labour.
Prevailing market rate.
Trade unions bargaining power.
Job requirements.
Managerial attitudes.
Cost of living.
Productivity

10. Continue…….. Pay for performance. Skills level available in market.
Psychological & Sociological factors.
Region & Area in practice.
Attraction & Retention.
Merit & Seniority progression.

11. 1.Organization’s ability to pay
Companies with good sales & profits tends to pay higher compensation.
In the long run it is important because in prosperity time ,employers pay high to carry profitable operation. But in depression wages & compensation are cut down due to non availability of funds.
Where ever minimum wages legislation is applicable organization should pay, irrespective of their capacity to pay.

12. 2.Supply & Demand of labour
Labour market condition always operate at National, Regional& local level.
Higher demand & low supply of skilled person results in rise in compensation.
Lower demand & higher supply results in decrease in compensation.

13. 3. Prevailing Market rates
Also known as Comparable wage or Going wage rate.
Going rate system involves fixing wage/salary rate in tune with what is paid by different units of an industry in a locality.
Going rates are generally paid in the initial day of company and plant operation.

14. 4. Trade Unions Bargaining Power
Generally stronger & more powerful the trade union ,higher the wages and compensation.
But the concept is changing with collective bargaining and strong Industrial relation.

15. 5. Job Requirements
More difficult the job, Higher the Wages & Compensation.
Measure of Job difficulty, used with relative value of job to another Organization (Comparison).
Job Grading
Relative Skills
Efforts
Responsibility
Job Conditions

16. 6. Managerial Attitude Decisive Influence on Compensation Management
Whether Firm should pay
Below Average Rate
Above Average Rate
What Job Factors used to reflect Job Worth
Performance or Length of Service
These matters requires approval of Top Executives.

17. 7. Cost of Living Known as Automatic Minimum Equity Pay Criteria
Based on Cost of Living Index
DA and CCA are the Integral Part of it
Negative Effect
Increase in Cost of Living usually possess additional burden on Employer without corresponding improve in Productivity

18. 8. Productivity Measured in terms of Output per hour Negative
Technical Improvement
Better Organisation & Management
Better Methods of Production
Greater Skills by Labour
Negative
Productivity Calculation & Definitional Measurement and Conceptual Issues

19. 9. Pay for Performance Linking Pay to Performance Jobs & Work Flows
Continues Appraisal
Incentive Methods

20. 10. Skills level available in market
With growth of Industries, Business & Trades all over the world results in Shortage of Skilled Resources
Technological Advancement
Automation of Work Process
Computerization

21. 11.Psychological & Sociological factors
These determine significant measures
How hard a person work for Compensation
What Pressure he exerts to get increased Compensation
Psychological
Level of Wages as success of Life
Feeling of Security
Sociological
No distinction on the basis of Colour, Caste, Religion

22. 12. Region & Area in practice
Differentiation on the basis of various Cities
Metro
Tier 1
Tier 2
Landscape and Hardship of Living
Hilly Region

23. 13. Attraction & Retention
Employee Retention Strategy through Perks & Fringe Benefits
Policy of Wage Leaders in the Organization

24. 14.Merit & Seniority progression
Practice of Rewarding according to one’s Contribution
Based on Annual Performance Appraisal
Include Production Incentive
Profit Sharing Scheme
Bonus & Promotion
Logic for Seniority Progression is that Person gains Experience, his skills get sharpened

25. Thank You