Compensation & Benefits[1]

8/9/2019 Compensation & Benefits[1]

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COMPENSATION &COMPENSATION &BENEFITSBENEFITS

Pay SystemsCompensation

Benefits


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Pay system challengesPay system challenges

Economicand legal

factors

& Policyissues of acompany

Alignment ofompensationstrategy tobusinessstrategy

Developsystematic

paystructures


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ChangingChangingphilosophyphilosophy

y Pay for performance new mantra than

Salary entitlement of past decades

y Current performance is what counts

y Performance standards raised every year


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Major challenges todayMajor challenges today

Willingness toreduce workforce

num erOutsourcing of

workVaria le pay

system

-Recession-LeanerOrganizations

-Mechanization

-To othercountries withcheaper wages

-Outsourcing

functions like HR

-Based onperformance

-Fixed andvaria lecom inations


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Organizational Reward SystemOrganizational Reward System

Reward

System

Financial

Direct payment(salaries)

Indirect Payment

(Benefits)

Non-Financial

Protection Program

Recognition

Involvement inDecision making

Training opportunities


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Equity in PayEquity in Pay

Internal

Relative worth of individual jo s to anorganization are equal

External

Wages paid y the organization are fair in

terms ofcompetitive market rates

Individual

Fair pay to each individual relative to that ofother individuals doing similar jo s


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Are CEOs overpaid?Are CEOs overpaid?


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Pay systems based on Job AnalysisPay systems based on Job Analysis

* Important jo characteristic

* Compensa le factors

* JE to relative worth of jo s

Jo Hierarchy

Pay surveys attach pay rates to jo s

Pay structure to classify jo s y grade levels

ssignment of individual pay within a range for each jo


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Market based PayMarket based Pay

y Uses a direct market-pricing approach for allfirms jo s

y Only if all jo s are enchmark (key) jo s andmatches can e found in market

y Pay surveys are used

y Disadvantage: Neither a unique nor a difficultto imitate pay system.


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Dynamics of labor marketDynamics of labor market


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Screen of an online survey portalsScreen of an online survey portals


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Figure 7: CEOs' average pay, production workers' average pay, theS&P 500 Index, corporate profits, and the federal minimum wage,

1990-2005 (all figures adjusted for inflation)Source: Executive Excess 2006, the 13th

nnual CEO Compensation Surveyfrom the Institute for Policy Studies and United for a Fair Economy.


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CompetencyCompetency Based PayBased Pay

y Workers not paid according to the jo s

they are doing ut rather on the asis oftheir skills or on their depth of knowledge oth of which are termedcompetencies.

y Skill ased plan for lue collar workers

y Competencies white collar work


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Competency based interviewCompetency based interviewCritical Incident InterviewCritical Incident Interview


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Learning to develop competenceLearning to develop competence


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Linking Strategy & CompensationLinking Strategy & Compensation

y Understand what type of ehavior to reinforce

y Recognize that compensation system is anintegral part of planning and control

y Competency ased system have an average payhigher than market rate


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Incentive systemsIncentive systems

y To improve performance standards

y Retaining valua le employees

y Encourage long-term relationships with

clients

y Incentives can e cash or gifts


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Effe

ctiveIncentive

Programs

Simple

Specific

ttaina le

Measura le


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Gain sharingGain sharing

y Gain sharing is est descri ed as a system of managementin which an organization seeks higher levels of

performance through the involvement and participation ofits people.

y s performance improves, employees share financially inthe gain. It is a team approach; generally all the

employees at a site or operation are inc

luded.

y Found in manufacturing, health care, distri ution, andservice, as well as the pu lic sector and non-profitorganizations


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Profit SharingProfit Sharing

y Profit Sharing: An incentive based compensation programto award employees a percentage of the company's profits.

y The company contri utes a portion of its pre-tax profits toa pool that will e distri uted among eligi le employees.

y The amount distri uted to each employee may e weightedy the employee's ase salary so that employees with

higher ase salaries receive a slightly higher amount of theshared pool of profits.

y Generally this is done on an annual asis.


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Employee are partners!Employee are partners!


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ESOPESOP

y Employee Stock Ownership Plan (ESOP):An ESOP is a definedcontribution employee benefitplan that allows employees tobecome owners of stock in the company theyworkfor.

y It is an equitybased deferred compensation plan.

Severalfeatures make ESOPs unique as compared tootheremployee benefitplans, e.g., Infosys in India.

y First, onlyan ESOP is required bylaw to investprimarily in thesecurities of the sponsoring employer.

y Second, an ESOP is unique among qualified employee benefitplans in its ability to borrowmoney. As a result, "leveraged

ESOPs"maybe used as a technique of corporate finance.


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Employees as owners!Employees as owners!


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Incentives for lower level employeesIncentives for lower level employees


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Team incentives

y To promote participation and to create a feelingof identity with the team mem ers

y To improve morale of mem ers

y To increase productivity

y Highly inter-related jo s

in future


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Employee benefitsEmployee benefits

Provident

Fund

ESI:Employee

StateInsurance

llowances :conveyance,House Rent,Children fee,

Fixed

Gratuity Pension

Sickleave

Casualleaves

Earnedleaves

Maternity

Paternityleaves


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HR Outsourcing in IndiaHR Outsourcing in India

y A growing trend

y

outsourcing of peripheral ut necessary administrativetasks such as payroll, enefits, education/training,recruiting personnel, administration

y Companies have more time focusing on their core usiness

y Allows HR professionals to move away from routineadministration to a more strategic role

y http://www.coolavenues.com/m a-journal/human-resources/human-resource-outsourcing-scope-india


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SoftwareSoftware

Payroll Softwarehttp://www.greytip.com/content/folklore-payroll

HRMS

http://www. ennettss.com/ataglance.html?gclid=CIqj8q3uuqMCFdFR6wodrSDL A

Online Payroll Software

http://www.evetan.com/


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Thank you!

Documents

Compensation & Benefits[1]