Compensation & Reward Management HR 712 Module - 1 Foundation of Compensation Management

ABS
COMPENSATION & REWARD

MANAGEMENT
HR 712
Module – 1
Foundation of Compensation Management
1
ABS
Learning Objectives
• To Understand meaning of Compensation.
• To understand the objectives of compensation
• To analyse principles of a good compensation Plan.
• To apply the pay models in designing compensation Plans

Compensation & ABS
Reward Management
Is fundamentally about People- for their efforts, skills and contribution .

“Our Assets walk out of the door each evening, we have to make sure that they
come back the next morning”- Narayan A Murthy- Infosys
“Take our 20 best people and virtually overnight we become a mediocre

company.”- Bill Gates- Microsoft
“Take my assets, leave my people, and in five years I will have it all back.”
-Alfred Sloan, General Motors

• 1
ABS
We all have drive acquire –

Why do Millions of people flock money, things, status, prestige,
to work every day power………..
What do Employees Value
ABS
Compensation is-
Something that Employees Values the most.

How and how much they are paid-affects
their attitude, performance, job choice
and standard of living
ABS
Compensation Management
Gary Dessler :“Employee compensation refers to all forms of pay going to employees and
arising from their employment
Wendell French:
” Compensation is a comprehensive term which includes wages, salaries and all other
allowance and benefits.”
Compensation Management is essentially the application of systematic approach to the

problem of ensuring that the employees are paid in a logical, equitable & fair manner.
ABS
Perspectives
Employers Employees
 money  showing up regularly, on time

 benefits  carrying out tasks dependably
 non-financial rewards  cooperating with others
 training  making useful suggestions
 career development
 coaching/mentoring
ABS
What to pay for
Work
Outcomes Person
ABS
3 P’s Approach to Compensation Management
Paying for position
Paying for person
Paying for performance

ABS
Criteria for Effective Compensation
Adequate
Equitable
Balanced
Cost Effective
Secure
Acceptable to the Employee

ABS
Defining Compensation
Based on value of the job, personal contribution and performance.
Compensation refers to all forms of financial returns and tangible

services and benefits employees receive as part of an employment
relationship.
Includes- Direct Financial Compensation
Indirect Financial Compensation
Non Financial Compensation
ABS
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ABS
Definitions & Concepts
• Wage: Indian Labour Organisation defines the term Wage as the “the remuneration paid by the
employer for the services of hourly, daily, weekly & fortnightly employees.
• Salary: The term salary is defined as the remuneration paid to the clerical & managerial
personnel employed on monthly or annual basis.
• Earnings: Earnings are the total amount of remuneration received by an employee during a
given period. These include salary, dearness allowance, House rent allowance, city
compensatory allowance, other allowances, over time payments, etc.
ABS
Objectives of Compensation
To acquire qualified competent personnel
To improve productivity
To retain the Present Employees
To secure Internal & External Equity
To improve Union Management Relationship
To control costs
To improve public image of the organization
To Ensure Desired Behaviour

ABS
Pay Model
POLICIES TECHNIQUES OBJECTIVES
Internal Work Description Evaluation/ Internal EFFICIENCY

Alignment Analysis Certification Structure
Performance
Quality
Customer and
Competitiveness Market
Policy line
Pay Stockholder
Definition Surveys
Structures Cost
FAIRNESS
Seniority Incentives Merit Pay for
Contributions Guidelines
Based Performance
COMPLIANCE
Management Cost Communication Change Evaluation ETHICS

Factors Effecting Compensation ABS
Demand and
Supply
Management’s Organization’s
Philosophy Ability to Pay
Prevailing
Job Market Rate
Requirements or “Going
Wage Rate”
Trade Union’s
Bargaining Cost of Living
Power
ABS
PAY MODEL
Business Goals Compensation activities
serve Business objectives
Business Strategy
Organisational Compensation Strategy

Structures
Compensation Plan Periodically re-evaluated
and developed
Market Survey
Job Evaluation
Performance Unit Inputs
Management
Pay Levels
Contribution
outputs
Total Remuneration
Performance Manager along with team
linked Pay carries out compensation
Individual pay activities
INTERNAL EXTERNAL
ABS
Learning Outcomes
• To be able to define Compensation.
• To be able to explain the objectives of compensation
• To be able to analyze principles of a good compensation Plan.
• To apply the pay models in designing compensation Plans

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ABS

COMPENSATION & REWARD

• To Understand meaning of Compensation.

• To understand the objectives of compensation

• To analyse principles of a good compensation Plan.

• To apply the pay models in designing compensation Plans

Is fundamentally about People- for their efforts, skills and contribution .

“Take our 20 best people and virtually overnight we become a mediocre

We all have drive acquire –

Something that Employees Values the most.

Compensation Management is essentially the application of systematic approach to the

 money  showing up regularly, on time

Paying for position

Paying for person

Paying for performance

Acceptable to the Employee

Based on value of the job, personal contribution and performance.

Compensation refers to all forms of financial returns and tangible

To acquire qualified competent personnel

To retain the Present Employees

To secure Internal & External Equity

To improve Union Management Relationship

To improve public image of the organization

To Ensure Desired Behaviour

Internal Work Description Evaluation/ Internal EFFICIENCY

Management Cost Communication Change Evaluation ETHICS

Organisational Compensation Strategy

• To be able to define Compensation.

• To be able to explain the objectives of compensation

• To be able to analyze principles of a good compensation Plan.

• To apply the pay models in designing compensation Plans

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