Compensation And Benefits

CompensationAnd Benefits

IntroductionHuman Resource is the most vital resource for any organization.It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards.The good compensation will also serve the need for attracting and retaining the best employees.

2CompensationCompensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees.

Needs For CompensationWhen managed correctly, it helps the organization achieve its objectives and obtain, maintain, and retain a productive workforce.Compensation is a key factor in attracting and keeping the best employees and ensuring that your organization has the competitive edge in an increasingly competitive world.Without adequate compensation, current employees are likely to leave and replacements will be difficult to recruit. The outcomes of pay dissatisfaction harm productivity and affect the quality of work life.

Compensation SystemIndirectProtection ProgramsMedical InsuranceLife InsuranceDisability IncomePensionSocial securityDirectBase PaySalaryWageMerit Pay

Cont..IndirectPay For Time Not WorkedVacationsHolidaysSick LeaveJury Duty

DirectIncentive PayBonusCommissionPiece RateProfit SharingStock OptionShift DifferentialCont..IndirectServices And PerquisitesRecreationalFacilitiesCarFinancial PlanningLow-Cost or Free MealsDirectDeferred PaySavings PlanStock PurchaseAnnuityEmployee Satisfaction And Motivation Issues In Compensation DesignPeople have no basic or Instinctive need for money, A commodity that is important only if it can satisfy others needs.Organization frequently overestimate the value workers place on monetary reward.For example : If money were the primary motivation for working why would hourly employees object to over time, given the premium rate of pay associated with it???The EQUITY and EXPECTANCY theories can help explain employees reaction to compensation systems Equity TheoryEquity is balance between the inputs an individual brings to a job & the outcomes he or she receives from it.Employees inputs includes experience, education, special skills, efforts and time worked.Outcomes includes pay, benefits, achievement, recognitions, and any other rewards.Inputs and outcomes are in different units, and are hard to compare to each other directly.Equity theory suggest that individuals determine whether they are being fairly treated by comparing their own inputs/outcomes ratio to the input/outcome ratio of others.ContPerson Comparison OthersMy Rewards(outcomes) Others Rewards EquityMy Contributions(inputs) Others Contribution

My Rewards(outcomes) Others Rewards InequityMy Contributions(inputs) Others Contribution (under reward)

Action to restore equity from Under reward InequityPerson could ask for a raise in salary.Person could reduce contributions (work less hard)Person could try to get others to increase contribution(work harder)Last resorts : quit or choose another comparison other.

Cont..My Rewards(outcomes) Others RewardsMy Contributions(inputs) Others Contribution Inequity(over reward) Action to restore equity from Over Reward EquityPerson could increase contributionPerson could ask for a pay cutPerson could attempt to get other a raise Person could attempt to get other to reduce his or her contributionLast restore quit the job or choose another comparison

Designing equitable compensation systemThree element of equity can be distinguished as external, internal and individual.External equity refers to comparison of similar jobs in different organizations. Internal equity refers to the relationship among the jobs within a single organization.Individual equity refers to comparison among the individual in the same job with the same organizationInternal equity To measure the value of jobs in relation to organizational objectives rewards are usually based on important components to make one job worth more than other these aspects called compensable factors. The five most frequently used job evaluation methods are: Job ranking Job grading The points method and Factor comparison

Job evaluation methods..The major purpose of job evaluation is to determine relative worth of the jobs within an organization.Basis for job hierarchy

Non quantitative Quantitative

Job v/s job Job ranking Factor comparison

Job v/s scale Job grading Point method

External equityThere is no absolute way to rate pay for a jobSetting pay rates, organization seek to integrate the external information with what they have learnt through internal evaluation of jobs this process is called pricing the wage structure.Wage and salary surveys Identifying key jobsSelecting organization to survey Collecting dataPay level policy

Individual equityWage grades are established and all the jobs within the grade are paid identically.Designing pay rangesEstablishing pay rangesBroad brandingAbove and below range employeesSetting individual paySeniorityMerit paySkilled based pay

Linking pay to performance Employers believes that reward in general and incentives in particular influence performance.Reason to link pay to performanceMotivationExpectancyInstrumentalityValenceRetentionProductivityCost savingsOrganizational objectives

Benefits The major reason for the increased attention in benefits is costs.Role of benefits:To attract new employeesTo retain the customersTypes of benefits:Mandatory protection programsSocial securityUnemployment compensationWorkers compensation

Cont..Types of benefitsCompensation for time not workHolidays VacationsSick leavePersonal daysOther leave

Other benefitsChild care assistanceWellness programEducational assistanceInsurance benefitsWorkers Retirement benefitsSocial securityPension planCash balance pension planEarly retirement plan

Examples of different organizations compensation and benefits planGoogleProcter & GambleApollo Wipro

Google Health care , plus on-site physician and dental careVacation days and holidays, and flexible work hoursMaternity and parental leaveAdoption assistanceGoogle Child Care CenterFuel Efficiency Vehicle Incentive ProgramEmployee discountsOnsite dry cleaning

Procter & GambleFinancial Benefits & CompensationHealth & Family-Friendly BenefitsVacation & Personal Time-OffEmployee Engagement.Community Involvement

Apollo HospitalsBenefits include the traditional medical and dental.401k, company-paid life insurance.Child care subsidiesFlex timeEducational assistance and Professional development programs.WiproFlexible Benefits.Medical Assistance Plan and Medical claim benefits.Group Life Insurance Program and Employee Deposit Linked Insurance (EDLI) Program.Wipro Cares MitrKids @ Wipro (fun way of learning)Fit for Life.Eco Eye.