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Compensation : It refers to a wide range of financial and nonfinancial rewards to employees for their services rendered to the organisation.
Compensation
Base Compensation : It involves the basic compensation an employee gets usually as a wage or salary. Supplementary Compensation: It involves benefits offered through several employee services and benefit which is linked directly to performance accomplishments and as a part of organisational membership.
Base Compensation
It denotes payments to workers in the form of wages and salaries Wages and Salaries are paid in cash Wages and Salaries are paid to compensate employees for their services Wages and Salaries are determined by job evaluation, demand and supply of labour, Org. capacity to pay etc.
Supplementary Compensation
It is over and above wages and salaries
Fringe benefits are offered in terms of employee services and benefits like housing, medical etc. Fringe benefits are made to increase the efficiency of the employees and to retain them. Supplementary compensation is determined by the history of the organisation, capacity of the org. to spend on employees, desire to enhance public image etc.
Types of wages
Minimum wage Fair wage Living wage
Terminology
Wages Salary Wage Rate Wage Scale Nominal Wages Real wages Fringe Benefits Take Home Pay
Incentive wages relate earnings to productivity and may use premiums, bonuses or a variety of rates to compensate for superior performance. Also known as payment by result.
a) Halsey Plan
This plan was originated by F.A.Halsey, an American engineer. The main features of this plan are_ 1) Standard time is fixed for each job or operation. 2) A minimum time wage is guaranteed to every worker. 3) If the job is completed in less then standard time, a worker is paid a bonus of 50% of time saved.
Merits
This plan is very easy to understand & the amount of wages can be calculated easily. It guarantees minimum wage & thus security to the employees. The benefit from time saved is shared equally between the employer & the workman. It encourages workers to be efficient because such efficiency is rewarded in cash. Saving in time reduces both labour cost & overhead expense.
Demerits
Fixation of standard time for various job is not easy. The worker dont secure full benefit of their efficiency but only to the extent of 50%. Workers may do the work in hurry & the quality of production may suffer.
b) Rowan Plan
This plan was introduced by D.Rowan in 1901. Here, also the bonus is paid on the basis of time saved. But unlike a fixed percentage in the case of Halsey plan, it takes into account a proportion as follow: Time saved/ Time allowed or Standard time
Merits
It assures minimum wages to every worker. The efficient workers get bonus at diminishing rate if they save more than 50% of the standard time.
Demerits
The ordinary worker may find the bonus calculation a bit difficult. It discourages very efficient workers.
Merits
It gives guarantee to minimum wages to all the workers. There is an incentive for efficient workers in the form of extra payment & the rate of bonus is related to efficiency in a rational manner
Demerits
The bonus below 100% efficiency is not attractive. It is not liked by below average workers as they dont get any incentives.
Merits
Minimum wages are guaranteed to the workers. Since 1/4th of the wages for time saved goes to the foreman, so he is motivated to get higher productivity from the workers.
Demerits
Calculation under this plan are complicated hence workers are not able to understand. The workers dont like that foreman should their bonus.
system
This plan was suggested by F.W.Taylor. In this plan Taylor did not provide minimum guarantee wages payment each workers. The lower rate is given to those who are average or less efficient and give production below the standard workload fixed and vice-versa.
Advantages
1)
2)
3)
Taylor plan makes distinction between efficient workers inefficient workers. It forces workers to be efficient because there is no guarantee to minimum wages payment of workers. This system of wage payment is popular among efficient workers as they draw more wages under it.
Disadvantages
1)
2)
There is no guarantee of minimum wages payment to workers. It treat worker not as a human being but as a machine.
Fringe Benefits
Extra benefits provided to employees in addition to the normal compensation paid in the form of wage and salary .(extended as a condition of employment but not directly related to performance)
Main features
Supplementary forms of compensation. Paid to all employees unlike incentives. Usually extended as a condition of employment. May be statutory or voluntary.