Performance and Reward Management
Performance and Reward Management
Performance and Reward Management
Compensation System:
Direct Compensation:
Indirect Compensation:
1. Legal requirement
a. Provident fund
b. Gravidity
c. Pension
d. Insurance
e. Medical leave
f. Accident benefits
g. Maturity leave
2. Optional sick leave
3. Casual leave
4. Travelling allowance
5. Telephone bill
6. Canteen allowance
7. Club membership
Function/role of compensation
The following are some of the task that they lay before a compensation and
benefits manager.
1. Identify & put into service and attractive pay package which is capable
of retaining the existing talent with the entity. The compensation policy
must be capable of drawing the attention of potential employees towards
entity.
2. Analysis the compensation policies and salary packages provides by the
competitors and those in the market to guarantee that the compensation
and benefits package offered is equivalent to those in the market.
3. Compensation plays a very important role in attracting the best talent in
the organization, as well as, retaining them for a long time.
4. It helps in creating a solid human resource base in the organization
which enhances the productivity, efficiency and overall quality in the
organization.
5. A sound human resource infrastructure with employees possessing
proper set of skills for right job, is critical to the success of any
organization and
6. In order to avoid high attrition levels, compensation plays a key role in
retaining the top talent in the organization.
7. To maintain high standards of productivity and service, the organization
must motivate employees.
8. A suitable compensation, incentives and rewards program is the key
motivator in any organization today.
Significance/importance of compensation
Job evaluation
In a short, job evaluation seeks to rank all the jobs in the organization and
place them in a hierarchy that will reflect the relative worth of each. There
are four general job evaluation methods.
a. Ranking method:
Raters examine the description of each job being evaluated and arrange
the jobs in order according to their value to the company. This method
requires a committee typically composed of both management and
employee representative to arrange job in a simple rank order from
highest to lowest.
No attempts are made to break down the jobs by specific weighted
criteria. The committee members merely compare two jobs and judge
which one is more important, or more difficult to perform. Then they
compare the other job with the first two, and so on until all the jobs have
been evaluated and ranked.
The most obvious limitation to the ranking method is its sheer inability
to be managed when there are a large number of jobs. Other drawbacks
to be considered are the subjectivity of the method-there are no definite
or consistent standards by which to justify the rankings and the fact
that because jobs are only ranked in terms of order, we have no
knowledge of the distance between the ranks.
b. Classification method:
A job evaluation method by which a number of classes or grades are
defined to describe a group of jobs is known as Classification method.
The classifications are created by identifying some common denominator
skills, knowledge, responsibilities-with the desired goal being the
criterion of a number of distinct classes or grades of jobs.
Once the classifications are established, they are ranked in an overall
order of importance according to the criteria chosen, and each job is
placed in its appropriate classification. This later action is generally done
by comparing each position’s job description against the classification
description and benchmarked jobs.
The classification method shares most of the disadvantages of the
ranking approach, plus the difficulty of writing classification
descriptions, judging which jobs go where, and dealing with jobs that
appear to fail into more than one classification.
c. Factor comparison method:
Raters need not keep the entire job in mind as they evaluate; instead,
they make decisions on separate aspects, or factors, of the job factors:
1. Mental Requirements,
2. Skills,
3. Physical requirements,
4. Responsibilities, and
5. Working Conditions.
The committee first rank each of the selected benchmark jobs on the
relative degree of difficulty for each of the five factors. Then, committee
of the committee allocates the total pay rates for each jobs to each factor
based on the importance of the respective factor to the job. A job
comparison scale, reflecting rankings and money allocations, is
developed next.
d. Point method:
Raters assign numerical values to specific job components, and the sum
of these values, provides a quantitative assessment of a job’s relative
worth. The point method requires selection of job factors according the
group of the specific group of jobs being evaluated. After determining the
group of jobs to be studied, analysts conduct job analysis and write job
descriptions.
Next the analysts select and define the factors to be used in measuring
job value and which become the standards used for the evaluation of
jobs, education, experience, job knowledge, mental effort, physical effort,
responsibility, and working conditions are examples of factors typically
used.
Process of the job evaluation
Job evaluation is the systematic process for assessing the relative worth of
jobs within an organization. A comprehensive analysis of each position’s
tasks, responsibilities, knowledge, and skills requirements is used to assess
the value to the employer of the job’s content and provide an internal
ranking of the jobs.
Gaining Acceptance
Classifying Jobs
Reviewing Periodically
Wage differentials
Wage differential is a term used in labour economics to analyze the relation between
the wage rate and the unpleasantness, risk, or other undesirable attributes of a
particular job. A compensating differential, which is also called a compensating wage
differential or an equalizing difference, is defined as the additional amount of income
that a given worker must be offered in order to motivate them to accept a given
undesirable job, relative to other jobs that worker could perform. One can also speak of
the compensating differential for an especially desirable job, or one that provides special
benefits, but in this case the differential would be negative: that is, a given worker would
be willing to accept a lower wage for an especially desirable job, relative to other jobs.
The idea of compensating differentials has been used to analyze issues such as the risk
of future unemployment, the risk of injury, the risk of unsafe intercourse, the monetary
value workers place on their own lives, and in explaining geographical wage differentials.
TYPES OF WAGE DIFFERENTIALS
• Cause labour to be allocated among different occupations, industries and geographical areas in the
economy in such a manner as to maximize the national product;
• Enable full employment of the resources of the economy to be attainted; and
• Facilitate the most desirable rate of economic progress.