Compensation: HR Guide To The Internet:: Outline and Definitions
Compensation: HR Guide To The Internet:: Outline and Definitions
methods and practices of maintaining balance between interests of operating the company
within the fiscal budget and attracting, developing, retaining, and rewarding high quality staff
through wages and salaries which are competitive with the prevailing rates for similar
employment in the labor market
Introduction. Compensation is probably the least understood process accompanying flow cytometric
analyses. Perhaps this is because it is often described with the linear algebra elements needed for its
computation, and many of us have forgotten what linear algebra is, much less how to do it. However,
proper compensation is absolutely crucial for some aspects of flow cytometry, one of which is antigen
density measurements. Unfortunately, because compensation is often misunderstood, and because
there is so much incorrect mythology about it floating around, many laboratories do not set
compensation properly.
Chapter Highlights
Morale and job satisfaction are affected by compensation. Often there is a balance
(equity) that must be reached between the monetary value the employer is willing to pay
and the sentiments of worth felt be the employee. In an attempt to save money,
employers may opt to freeze salaries or salary levels at the expence of satisfaction and
morale. Conversely, an employer wishing to reduce employee turnover may seek to
increase salaries and salary levels.
Base Pay
Commissions
Overtime Pay
Bonuses, Profit Sharing, Merit Pay
Stock Options
Travel/Meal/Housing Allowance
Benefits including: dental, insurance, medical, vacation, leaves, retirement,
taxes...
FLSA
Compensation Plans
Evaluate jobs.
Rank the jobs within each senior vice president's and manager's department, and
then rank jobs between and among departments.
Verify ranking by comparing it to industry market data concerning the ranking,
and adjust if necessary.
Prepare a matrix organizational review.
On the basis of required tasks and forecasted business plans, develop a matrix
of jobs crossing lines and departments.
Compare the matrix with data from both the company structure and the
industrywide market.
Prepare flow charts of all ranks for each department for ease of interpretation
and assessment.
Present data and charts to the compensation committee for review and
adjustment.
Determine grades.
Establish the number of levels - senior, junior, intermediate, and beginner - for
each job family and assign a grade to each level.
Determine the number of pay grades, or monetary range of a position at a
particular level, within each department.
Develop and present cost impact studies that project the expense of bringing the
present staff up to the proposed levels.
Present data to the compensation committee for review, adjustment, and
approval.
Present data to the executive operating committee (senior managers and
officers) for review and approval.
Develop a plan for communicating the new program to employees, using slide
shows or movies, literature, handouts, etc.
CASE STUDY SERIES: Designing a Pay Structure: A Case Study and Integrated Exercises
Compensation is a critical area of HR that can greatly affect employee behavior. To be effective,
compensation must be perceived by employees as fair, competitive in the market, accurately
based, motivating and easy to understand.
IT, ITES Sectors Lead The Pack In Salary Increments This Year
Although firms are expected to add more staff, most of the talent especially in the middle to
senior management roles will remain in their current organizations, reveals Kelly Services'
Employment Outlook and Salary Guide 2010-11.
Attrition woes spark salary increases; focus on pay for performance to intensify
Employees in India can expect an overall average salary increase of 11.6% in 2010, according to
a recent Mercer India Monitor survey.
TEMPORARY STAFFING INDUSTRY TO GROW BY 18% OVER THE NEXT ONE YEAR
Now that salary increments are back, a 7.5% to 15% raise for temporary staff is seen to be well
in order to retain well-skilled people: TeamLease.
IMPORTANCE OF COMPENSATION
Compensation and Reward system plays vital role in a business organization. Since, among four
Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is
impossible to imagine a business process without Men. Every factor contributes to the process of
production/business. It expects return from the business process such as rent is the return
expected by the landlord, capitalist expects interest and organizer i.e. entrepreneur expects
profits. Similarly the labour expects wages from the process.
Labour plays vital role in bringing about the process of production/business in motion. The other
factors being human, has expectations, emotions, ambitions and egos.
Labour therefore expects to have fair share in the business/production process. Therefore a fair
compensation system is a must for every business organization. The fair compensation system
will help in the following:
o An ideal compensation system will have positive impact on the efficiency and results
produced by employees. It will encourage the employees to perform better and achieve
the standards fixed.
o It will enhance the process of job evaluation. It will also help in setting up an ideal job
evaluation and the set standards would be more realistic and achievable.
o Such a system should be well defined and uniform. It will be apply to all the levels of the
organization as a general system.
o The system should be simple and flexible so that every employee would be able
to compute his own compensation receivable.
o It will raise the morale, efficiency and cooperation among the workers. It, being just and
fair would provide satisfaction to the workers.
o Such system would help management in complying with the various labor acts.
o Such system should also solve disputes between the employee union and management.
o It should motivate and encouragement those who perform better and should provide
opportunities for those who wish to excel.
o It aims at creating a healthy competition among them and encourages employees to work
hard and efficiently.
o The system provides growth and advancement opportunities to the deserving employees.
o The perfect compensation system provides platform for happy and satisfied workforce.
This minimizes the labour turnover. The organization enjoys the stability.
o The organization is able to retain the best talent by providing them adequate
compensation thereby stopping them from switching over to another job.
o The business organization can think of expansion and growth if it has the support of
skillful, talented and happy workforce.
o The sound compensation system is hallmark of organization’s success and prosperity.
The success and stability of organization is measured with pay-package it provides to its
employees.
By NNazir
Human Resource Management (HRM) has never been as significant as it is today. Companies
want to attract, retain and motivate brains to meet objectives. Today Humans are regarded as one
of every company’s assets so they need to be efficiently and effectively managed. One of the
tools companies use to attract, retain and motivate its people is Compensation Management. In
this hub, I shall define compensation and benefits along with their advantages for a company and
its workers.
Suppose, you own a boutique. Lets call it myWear - or you can give it any name of your liking.
You have hired three salespersons and a receptionist. The salespeople are responsible to look
after the sales affairs. The receptionist's duties are to handle the cash and manage the account
books. I shall refer to this illustration throughout the hub.
COMPENSATION:
Would the three salespersons and the receptionist work for free? No. They would, like us all,
expect something in return. You must have heard a common phrase: Give and Take. You always
have to give things to people in return to what you take from them. Compensation refers to this
exchange, but in monetary terms. Compensation is the employer's feedback for an employee's
work. It simply is the monetary value you would give to your four employees in return of their
services.
Gary Dessler in his book Human Resource Management defines compensation in these words
"Employee compensation refers to all forms of pay going to employees and arising from their
employment." The phrase 'all forms of pay' in the definition does not include non-financial
benefits, but all the direct and indirect financial compensations. I shall, Inshallah, explain the two
terms in my next hub 'Parts of Salary'.
Advantages of Compensation.
BENEFITS:
Employees today are not willing to work only for the cash alone, they expect 'extra'. This extra is
known as employee benefits. Also known as fringe benefits, Employee benefits are non-financial
form of compensation offered in addition to cash salary to enrich workers’ lives.
What benefits would you offer to your employees at myWear? Off course, you would offer
different benefits to the salespersons and the receptionist. Problem will arise when you begin to
decide what benefit to give to whom and on which basis? Employee benefits are not
performance-based, they are membership-based. Workers receive benefits regardless of their
performances. Employee benefits as a whole have no direct affect on employee performance,
however, inadequate benefits do contribute to low satisfaction level and increase absenteeism
and turnover in employees (DeCenzo and Robbins; 2007). So you would have to carefully design
your benefit package. Your package may include a cell phone to each worker, taking them to a
training workshop or seminar, giving them a day or two off every month and so on. While
deciding on the benefits package, do consider the associated costs.
1. Job satisfaction: Your employees would be happy with their jobs and would love to work for
you if they get fair rewards in exchange of their services.
2. Motivation: We all have different kinds of needs. Some of us want money so they work for
the company which gives them higher pay. Some value achievement more than money, they
would associate themselves with firms which offer greater chances of promotion, learning and
development. A compensation plan that hits workers’ needs is more likely to motivate them to
act in the desired way.
3. Low Absenteeism: Why would anyone want to skip the day and watch not-so-favorite TV
program at home, if they enjoy the office environment and are happy with their salaries and get
what they need and want?
4. Low Turnover: Would your employees want to work for any other boutique if you offer them
fair rewards. Rewards which they thought they deserved?
TYPES OF COMPENSATION
There are two different types of compensation management: direct and indirect. Compensation is
the combination of monetary and other benefits provided to an employee in return for their time
and skill. The field of compensation management provides management with the ideal
combination of the different remuneration types. The purpose of this type of program is to retain
and motivate good employees.
Direct compensation is typically comprised of salary payments and health benefits. The creation
of salary ranges and pay scales for different positions within the company are the central
responsibility of compensation management staff. The evaluation of the employee and employer
portions of benefit costs is an important part of a compensation package.
Effective compensation plans are routinely compared with other firms in the same industry or
against published benchmarks. Although some jobs are unique within a specific firm, the vast
majority of positions can be compared to similar jobs in other firms or industries. Direct
compensation that is in line with industry standards provides employees with the assurance of
fair compensation. This process helps the employer avoid the costly loss of trained staff to a
competitor.
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Indirect compensation focuses on the personal motivations of each person to work. Although
salary is important, people are most productive in jobs where they share the company’s values
and priorities. Common types of indirect compensation include free staff development courses,
subsidized day care, opportunity for promotion or transfer within the company, public
recognition, ability to effect change in the workplace and service to others.
Performance Management
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Strategic Compensation Management
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Sales Compensation
Compensation Damages
Workman Compensation
Employee Management
Regular evaluation of the total compensation program and continual modifications is necessary
to meet the changing needs of employees. Many firms invest time and resources to ensure that all
employees are aware of the total compensation package that is available. This encourages
employees to provide valuable feedback on the types of compensation programs that are most
important to them.
Human resources departments are responsible for the creation and management of the
compensation program. A compensation management professional usually has a degree in
human resources and skills with data management, statistics, and report creation. Creative
compensation packages must be in keeping with the company’s vision and identify to be
effective.
1.Direct compensation
Direct compensation refers to monetary benefits offered and provided to employees in return of
the services they provide to the organization. The monetary benefits include basic salary, house
rent allowance, conveyance, leave travel allowance, medical reimbursements, special
allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.
Basic Salary
Salary is the amount received by the employee in lieu of the work done by him/her for a certain
period say a day, a week, a month, etc. It is the money an employee receives from his/her
employer by rendering his/her services.
House Rent Allowance
Organizations either provide accommodations to its employees who are from different
state or country or they provide house rent allowances to its employees. This is done to
provide them social security and motivate them to work.
Conveyance
Organizations provide for cab facilities to their employees. Few organizations also
provide vehicles and petrol allowances to their employees to motivate them.
These allowances are provided to retain the best talent in the organization. The
employees are given allowances to visit any place they wish with their families. The
allowances are scaled as per the position of employee in the organization.
Medical Reimbursement
Organizations also look after the health conditions of their employees. The employees are
provided with medi-claims for them and their family members. These medi-claims
include health-insurances and treatment bills reimbursements.
Bonus
Bonus is paid to the employees during festive seasons to motivate them and provide them
the social security. The bonus amount usually amounts to one month’s salary of the
employee.
Special Allowance
2. indirect comp.
Indirect Compensation
Overtime Policy
Employees should be provided with the adequate allowances and facilities during their overtime, if they
happened to do so, such as transport facilities, overtime pay, etc.
Hospitalization
The employees should be provided allowances to get their regular check-ups, say at an interval of one
year. Even their dependents should be eligible for the medi-claims that provide them emotional and
social security.
Insurance
Organizations also provide for accidental insurance and life insurance for employees. This gives them the
emotional security and they feel themselves valued in the organization.
Leave Travel
The employees are provided with leaves and travel allowances to go for holiday with their families.
Some organizations arrange for a tour for the employees of the organization. This is usually done to
make the employees stress free.
Retirement Benefits
Organizations provide for pension plans and other benefits for their employees which benefits them
after they retire from the organization at the prescribed age.
Holiday Homes
Organizations provide for holiday homes and guest house for their employees at different locations.
These holiday homes are usually located in hill station and other most wanted holiday spots. The
organizations make sure that the employees do not face any kind of difficulties during their stay in the
guest house.
Flexible Timings
Organizations provide for flexible timings to the employees who cannot come to work during normal
shifts due to their personal problems and valid reasons.
Medical practice The aggregate of benefits–eg, payment of health and malpractice insurance permiums,
pension contribution, books and journal subscriptions, paid CME, paid vacation, car leasing, etc, given to
an employee in addition to a base salary or wages. Cf Direct compensation.
Differential pay
Merit pay
Differences
Direct compensation is an employee's base wage. It can be an annual salary, hourly wage or any
performance-based pay that an employee receives, such as profit-sharing bonuses.
Indirect Compensation is far more varied, including everything from legally required public
protection programs such as Social Security to health insurance, retirement programs, paid leave,
child care or housing.
>Direct- Say if you were of an ethnic minority and you went for a job and you were told
when you arrived that the job was taken. You then arrange for a "white" friend to go for
the same job and they are told it is still available. Or if you were at a job interview and you
state that you have 4 children and the interviewer makes a remark about you having to
have a lot of time off work.
-->Indirect- If you went for a job that states anyone who applies must have at least 10 years
experience in the position which would put a young person at a disadvantage. Or if there
were disabled facilities but they had to be accessed from the rear of the building next to the
rubbish bins etc and everyone else goes in thru the front door. They're still providing the
facilities and still saying anyone can use them but they're putting those people at a
disadvantage or humiliation.