1. COMPENSATION MANAGEMENT

2. Compensation
Pay is a statement of an employee’s worth by an employer.

3. Compensation is what employees receive in exchange for their contribution to the organization. Generally speaking, employees offer their services for three types of rewards
        Base pay
        Variable pay
        Benefits
The most important objective of any pay system is fairness or equity, generally expressed in three forms
Internal equity: where more difficult jobs are paid more
External equity: where jobs are fairly compensated in comparison to similar jobs in labour market
Individual equity: where equal pay is ensured for equal work

4. Total Compensation Direct Indirect Wages / Salaries Time Not Worked
Vacations
Breaks
Holidays
Commissions
Insurance Plans
Medical
Dental
Life
Bonuses
Gainsharing
Security Plans
Pensions
Employee Services
Educational assistance
Recreational programs 6

5. Components of Pay Structure
The two essential components of pay structure are; basic wages and dearness allowance
.the basic wage rate is fixed taking the skill needs of the job, experience needed, difficulty of work, training required, responsibilities involved and the hazardous nature of the job.
Dearness allowance it paid to employees in order to compensate them for the occasional or regular rise in the price of essential commodities.

6. Components of Pay Structure
The following, however, do not come under the term wages/salary
Bonus
Payments made under a profit sharing scheme
Value of house accommodation
Medical allowances
Travelling allowances
Any other sum paid to defray special expenses incurred by the worker
Contribution to pension, provident fund
Any amenity or service excluded from the computation of wages

7. Wage Policy In India
A wage policy offers certain guidelines for determining a wage structure. The term wage structure refers to various pay scales showing rages of pay within each grade. Three important elements of wage policy in India need to be elaborated here
Minimum wage: Wage sufficient to sustain and preserve the efficiency of the worker and offer basic amenities of life
Fair wage: It is above the minimum wage but below the living wage. It is fixed, taking into account factors such as the productivity of labour, prevailing wage rates, level of national income and its distribution, the employer’s capacity to pay etc.
Living wage: This is the highest amount of wages proposed by the government, offering basic amenities of life and satisfying the social needs of worker.

8. State regulation of wages
Institutions involved in fixation of wages

9. Reasons for wage differentials
Differences in wage rates are inevitable in any industry and the reasons are fairly obvious
Reasons for wage differentials

10. Choices In Designing A Compensation System
The compensation that is followed by a firm should be in tune with its own unique character and culture and allow the firm to achieve its strategic objectives. A variety of choices confront a firm here:
Internal and external pay
Fixed vs. variable pay
Performance vs. membership

11. Managerial Compensation In India
Executive compensation is built around three factors in India
Job complexity
Employers’ ability to pay
Managerial productivity

12. Common Strategic Compensation Goals
To reward employees’ past performance
To remain competitive in the labor market
To maintain salary equity among employees
To mesh employees’ future performance with organizational goals
To control the compensation budget
To attract new employees
To reduce unnecessary turnover

13. The Bases for Compensation
Hourly Work
Work paid on an hourly basis.
Piecework
Work paid according to the number of units produced.
Salary Workers
Employees whose compensation is computed on the basis of weekly, biweekly, or monthly pay periods.

14. Factors Affecting the Wage Mix