PRESENTED BY:

SOMYA BANSAL SHITAL SINGH

BHUVNESH AGGARWAL NIRAJ KUMAR
MANSI SINGH SHRADDHA GUPTA
 COMPENSATION
 Compensation refers to a wide range of financial and non-financial rewards
to employees for their services rendered to the organisation.
 It is paid in the form of wages, salaries and employee benefits such as paid
vacations, insurance, maternity leave, retirement benefits, etc.
 Compensation to workers will vary depending upon the nature of job, skills
required, risk involved, nature of working conditions, etc.
 COMPENSATION MANAGEMENT

What is Compensation Management

 Compensation management is designing and implementing total
compensation package with a systematic approach to providing value to
employees in exchange for work performance.
 Compensation is a systematic approach to providing monetary value
to employees in exchange for work performed.

 Compensation may achieve several purposes assisting in recruitment,

job performance and job satisfaction.
 OBJECTIVES
• To Recruit And Retain Qualified
Employees.
• To Increase Or Maintain Morale.
• To Determine Basic Wage And Salary.
• To Reward For Job Performance.
• It Should Not Be Excessive
• It Should Be Paid To Each Employee
On The Basis Of Their Abilities.
 IMPORTANCE
Compensation is an integral part of human resource management which
helps in motivating the employees in improving organizational
effectiveness.

Effectiveness in terms of:

 Attracting talent towards the organisation – ATTRACTING
 Motivating employees for better performance – MOTIVATION
 Employees do not leave the employer frequently – RETAINING
 COST EFFECTIVENESS
 Image Building Ensure Equity

Institution
Legal
al
Complianc
Efectiven
e
ess
Effective
Compensati Administratively
Attract Talent Efficient
on

Motivate &
Reward Valued
Retain Staf
Employee Behavior
Managem
 MANAGEMENT
HIGH
HIGH COMPENSATION
COMPENSATION -
-
HIGH
LOW COMMITMENT
COMMITMENT
Professionals
Hired Guns

LOW
LOW COMPENSATION
COMPENSATION- -
LOW HIGH
COMMITMENT COMMITMENT
Workers as Family
commodity Oriented
Organisation
 Base Compensation
Basis For Salary Wages
Comparision
Meaning A fixed pay that an A variable pay that an
individual draws for the individual draws on the
work done by him on an basis of hours spent in
annual basis. completing the certain
amount of work.
Skills Skilled personnel Semi-skilled or unskilled
Type of Cost Fixed Variable
Basis of payment Performance basis Hourly basis
Nature of Work Administrative-office Manufacturing-process
work work
Payment Cycle Monthly and Yearly Hourly, daily, weekly
and monthly.
 FACTORS AFFECTING BASE
COMPENSATION
 DEMAND FOR AND SUPPLY OF LABOUR
 CAPACITY TO PAY
 COST OF LIVING
 PRODUCTIVITY OF WORKERS
 TRADE UNIONS
 WAGE LAWS
 PREVAILING WAGE RATES
 SUPPLEMENTARY
COMPENSATION
Modern organisations use supplementary compensation over and above base compensation to retain
the employees on a long-term basis. Supplementary compensation involves fringe benefits such as
housing, medical aid, etc. Supplementary compensation has been given different titles in industry
such as ‘fringe benefits’, ‘employee benefits’, and ‘non-wage payments’. Because of the increasing
costs of fringe benefits, some people also label them ‘hidden payroll’.
The basic purpose are:
1) To attract talented human resources with the organisation.
2) To motivate the human resources.
3) To improve the quality of worklife of the employees.
4) To provide security to employees against social risks like old age.
5) To enhance the public image of the company.
6) To improve the morale of employees.
 BASE COMPENSATION
1) It denotes payments to workers in the
form of wages and salaries.
2) Wages and Salaries are paid in cash.
3) Wages and salaries are paid to
compensate employees for their
services.
4) Wages and salaries are determined by
job’s evaluation, demand and supply
of labour, organisation’s capacity to
pay, trade union’s bargaining power,
productivity, government regulations,
etc.
SUPPLEMENTARY COMPENSATION
1) It denotes fringe benefits to workers
over and above their regular wages
and salaries.
2) Fringe benefits are offered in the form
of employee services and benefits
such as housing, medical aid, crèche,
canteen, etc.
3) Fringes or non-wage payments are
made to increase the efficiency of
employees and to retain them in the
organisation on a long-term basis.
4) Supplementary compensation is
determined by the history of the
organisation, philosophy of
management, organisation’s capacity
to spend on employee benefits, need
to retain talented employees, desire to
enhance public image, etc.
 TYPES OF COMPENSATION
Compensation System

Indirect Compensation Direct Compensation

Base
Pay

Merit
Protection Salarie Pay
Wages
Programs s
Services and Incentive Pay
> Medical Perquisites
Insurance > Bonus
> Recreational Deferred
> Life Pay
Insurance
Facilities > Commission
Pay for time Not > Car > Savings
> Disability worked > Piece rate
Income > Financial Plan
> Vacations > Profit
Planning > Stock
> Pension > Holidays Sharing
> Social
> Low-Cost or Purchase
> Sick Leave Free Meals > Stock option
Security > Annuity
> Jury Duty > Shift
Differential
 ROLE OF HR MANAGER IN WAGE
AND SALARY ADMINISTRATION
The human resource manager plays an important role in developing the wage policies and
procedures. In many organisations, the task is entrusted to wage and salary committee composed of
line and staff executives from different departments. The function of wage and salary committee on
any other executive connected with wage and salary administration are as follows:
1. To approve the systems of job analysis and job evaluation
2. To check all activities of the salary administration group against the company policies.
3. To recommend to top management the wage policies for the administration of the wage
program.
4. To recommend change in wage policies and in the salary or wage level.
5. To review wage and salary schemes department-wise.
6. To recommend to the top management specific raises for executives above a specified limit.
 Job Descriptions Pay Structures
This define in writing Job Useful for standardizing
the responsibilities, Descript compensation practices.
requirements, functions, ion Most pay structures
duties and environment include several grades
conditions of job. Policies with each grade
and Job containing a minimum
Job Analysis Regulatio Analysis salary/wage and either
Process of analyzing ns
step increments or grade
jobs from which job range.
descriptions are
Component
s of
developed. it includes
Compensati
interviews and
on
observation. Salary Surveys
Salary Job Collections of salary and
Job Evaluation
Survey Evaluatio market data. May include
System of comparing
s n average salaries, inflation
jobs for determining
indicators, salary budget
appropriate
averages.
compensation levels for Pay
individual jobs or job Structur
elements. es
 PRINCIPLES OF COMPENSATION
ADMINISTRATION
• Wage policies should be carefully developed, having in mind the interests of (A) management as
the representative of the owners, (b) the employees, (c) the consumers, and (d) the community.
• Wage policies should be clearly expressed in writing to ensure uniformity and stability.
• Wage policies should carefully distinguish between jobs and employees. Jobs should be filled up
by persons possessing qualities as demanded by the jobs.
• Wage policies should always aim at establishing equal pay at equal work.
• Management should see to it that the employees know and understand the wage policies.
• Wage policies should be evaluated from time to time to make certain that they are adequate for
current needs.
• Performance ratings of employees should be done periodically to determine performance linked
pay.
 PROBLEMS IN COMPENSATION
ADMINISTRATION
In many organisations, there are serious inconsistencies in the wage scales of different
employees. These inequities may be brought out by doing job evaluation thoroughly. Job
evaluation is essential to any sound wage administration program.
The wage and salary committee must give attention to individual rates and the salary range
when:
• Increase of work makes it necessary to create a new job in the department.
• It is proposed to change the minimum or maximum rates for a job in order to maintain a
proper balance.
• It is proposed to change the rate of pay of an individual employee as a result of his
demonstrated efficiency or inefficiency.
• It is proposed to transfer an employee to the same job but in another department.
• It is proposed to transfer or promote an employee to another job in the same or other
department.
 Aarav is an employee in XYZ ltd. He is very dedicated to his work and
so completes his work always on time. He is very effective. His superior
is very happy from his job. But, soon he started noticing some changes in
him. He started coming late, not completing his work on time….Even
deadline is crossed, but his work is still pending. He seems depressed
now a days. Thus his manager decided to give him a off for a few days
and asked him to go for a vacation, the expense of which will be by the
company.
Aarav is back after a week. And he is again energetic and effective and
again dedicated. Along with that, he is now dedicated to the organisation
and is retained by it.

Here the manager used VACATION PAY.

Thankyo
u