Scribd
Upload
22 views16 pages

Module 2

Compensation policy aims to attract talented employees and motivate performance. Proper compensation administration can attract talent, motivate employees, reward performance, reduce turnover, and manage budgets. Pay dissatisfaction can lead to issues like lower performance, strikes, absenteeism, turnover, and poor health. Compensation includes both financial (wages, incentives, benefits) and non-financial (job responsibilities, growth opportunities) components. Theories like reinforcement and equity theory suggest behavior and performance are influenced by how compensation is used to reward employees. Multiple internal and external factors influence compensation strategies.

Uploaded by

Sonam Gondlekar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
22 views16 pages

Module 2

Compensation policy aims to attract talented employees and motivate performance. Proper compensation administration can attract talent, motivate employees, reward performance, reduce turnover, and manage budgets. Pay dissatisfaction can lead to issues like lower performance, strikes, absenteeism, turnover, and poor health. Compensation includes both financial (wages, incentives, benefits) and non-financial (job responsibilities, growth opportunities) components. Theories like reinforcement and equity theory suggest behavior and performance are influenced by how compensation is used to reward employees. Multiple internal and external factors influence compensation strategies.

Uploaded by

Sonam Gondlekar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 16

COMPENSATION MANAGEMENT

MANAGING COMPENSATION
Benefits of Proper Compensation

Compensation policy aims to attract talented employees and motivate


them to put their efforts and commitment to work that increase job
satisfaction work performance

Benefits of Proper Compensation Administration


1 2 3 4 5
Attracts talent Motivates Rewards Reduces Manages
Employees Performance Turnover Compensation
Budget
Consequences of Pay Dissatisfaction

performance
Desire for
more pay strikes
absenteeism
grievances

turnover
Search for
new job

Psychological
withdrawal
Job
Pay Lower dissatisfaction
dissatisfaction attractiveness Poor health
of job
absenteeism

Visits to the
doctors
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 289
Concepts of Wages

1 Minimum Wage

2 Fair Wage

3 Living Wage

4 Team based Pay

5 Remunerating Professionals

6 Contract Employees

7 Expatriates and Executives


Components of Remuneration

Benefits include both financial and non financial

• Wages and Salary

• Incentives

• Fringe Benefits

• Perquisites

• Non Monetary Benefits


Components of Remuneration

Remuneration

Financial Non Financial

Wages and Incentives Fringe Perquisites Job content


Salary benefits
Individual Company Challenging
Hourly plans PF car job
wages and Group plans Gratuity Club responsibilities
monthly Medical membership Supervision
rates salary etc. Furnished Growth
house prospects
Stock option Working
schemes conditions
etc. Etc.
Theories of Remuneration
Feedback to employee

Employee set Performance is Employee consider


expectations and rewarded equity of reward and
goals performance

Employee sets new goals and expectations


based on experience
Theories of Remuneration

Reinforcement Theory

Behavior rewarded Positive Experience Behavior is repeated


Theories of Remuneration

Equity Theory
• Adam’s equity theory emphasizes to have equity in pay
structure of employee

• If employee feel that their efforts are well rewarded they


will put more efforts and will be satisfied with their job

• In case of inequity feeling they will be de moralized and


dissatisfied resulting into low productivity

Individual Motivation
equity

Internal Perception of Commitment


equity fairness

External
Performance
equity

Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 287
Theories of Remuneration

Agency Theory

• In the organizations employer and employees are two main


stakeholders

• Employer act as principals and employees assume the role of


agent

• The remuneration of employee is agency cost

• Principal tries to agency cost and agent expect to have more


agency cost

• The principal (Employer) should try to choose remunerating


schemes that align its own interest with expectation of agents
(employees)

• Behavior oriented (merit based pay)

• Outcome oriented (profit sharing, commission)


Factors Influencing Remuneration

Internal Factors External Factors

Organization Strategy Economy

Employee Society

Job Evaluation Labour Market

Performance Appraisal Cost of Living

Labor Unions

Legislation
Factors Influencing Remuneration

Business Market Remuneration Blend of


Strategy Position Strategy Remuneration
Invest to grow Merging or Encourage High cash and
grow rapidly innovation and incentives for
entrepreneurship performance.
Modest benefits
Manage earning Normal growth Reward Average
Protect Markets to maturity management skills incentives with
average cash on
unit and
individual
performance.
Standard benefits

Harvest earnings Maturity or Focus on cost Below average


invest decline control cash with few
somewhere else incentives that
too tied with cost
control efforts.
Standard benefits

Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 295
Remuneration Model

Job description

Job evaluation

Job hierarchy

Pay survey Pay levels

Pricing Jobs Pay grades

Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 295
Challenges of Remuneration

Skill based pay Monetary and non Salary Reviews


monetary rewards

Employee Remuneration Pay Secrecy


participation

Below market or Comparable worth Eliticism or


above market pay Egalitarianism

Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 300
Skill Based and Job Based Pay

Factors Skill based Job based


Pay structure Based on ability to Based on job
perform performance
Employer’s focus Employee carriers Job carries wages.
wages, Employee Employee linked to
linked to skills job
Employee focus Skill acquisition for Job promotion for
more pay better pay
Procedures required Skills assessment, Job content
Value skills assessment, Value
jobs
Advantages Flexibility, Reduced Pay based on value
workforce of job and work
performed
Disadvantages Cost controls Inflexibility

Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 301.

You might also like