Compensation by Rajat Jhingan

8/4/2019 Compensation by Rajat Jhingan

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Session#8 HRM PGDM2 PT (2007-2010 BATCH)

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Compensation: AnCompensation: An

OverviewOverview

Compensation: AnCompensation: An

OverviewOverview


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CompensationCompensation

Deals with every type of reward individuals

receive in exchange for performing

organizational tasks

Major cost of doing business

Chief reason why most individuals seek

employment

An exchange relationship


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Financial CompensationFinancial Compensation

Direct FinancialCompensation

Consists of the pay anemployee receives in theform of:

wagessalaries

bonuses

commissions

Indirect FinancialCompensation

Consists of all financialrewards not included indirect financialcompensation i.e.,benefits:

pensions

insurance

paid time off


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Objective of CompensationObjective of Compensation

To create a system of rewards that is

equitable to the employer and employee alike

The desired outcome is an employee who is:Attracted to the work

Motivated to do a good job for the employer


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A Compensationsystem shouldbe:

Adequate*

Equitable*

Balanced

Cost-effective

Secure

Incentive-

providing*

Acceptable to theemployee


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Labor Market Economy

Government Unions

External Influences on CompensationExternal Influences on Compensation


7/22Session#8 HRM PGDM2 PT (2007-2010 BATCH)

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Compensation and an International LaborCompensation and an International LaborForceForce

Issues that affect the compensation strategies of

organizations competing in a global market:

Global wage differentials verging on the extreme

Moving Indian employees to foreign locations

Employing local (foreign) managers and workers

Moving foreign workers to the India for training or

work assignments



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Comparable Worth

Attempts to prove that employers

systematically discriminate by paying womenless than their work is intrinsically worth,

versus what they pay men who work in

comparable (equally valuable) positions and

to remedy this situation.



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Internal Influences on CompensationInternal Influences on Compensation

OrganizationSize

OrganizationAge

LabourBudget

Who MakesCompensationDecisions



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Pay and MotivationPay and Motivation

Motivation set of attitudes and values that

predisposes a person to act in a specific,

goal-directed manner:

the direction of behavior (working to reach a goal)

the strength of behavior (how hard or strongly the

individual will work)



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Pay and Employees SatisfactionPay and Employees Satisfaction

Pay Satisfaction refers to an employees

liking for or dislike of the employers

compensation package (including pay and

benefits)

Lawlers Model the distinction between the

amount employees receive and the amount theythink others are receiving is the immediate cause

of pay satisfaction or dissatisfaction



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Pay dissatisfaction is a function of sixPay dissatisfaction is a function of siximportant judgments:important judgments:

1. A discrepancy between whatemployees want and what they receive

2. A discrepancy between a comparison

outcome and what they get3. Past expectations of receiving more

rewards

4. Low expectations for the future5. A feeling of deserving or being entitledto more than they are getting

6. A feeling that they are not personallyresponsible for poor results



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Pay and Employees ProductivityPay and Employees Productivity

Studies indicate that if pay is tied to

performance, the employee produces a

higher quality and quantity of work

The key to making compensation systems

more effective is to be sure that they are

directly connected to expected behaviors



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Compensation DecisionsCompensation Decisions (1 of 3)(1 of 3)

Pay-Level DecisionExamines pay relative to employees working on

similar jobs in other organizations

Objective is to keep the organization competitivein the labour market

Pay surveyis the major tool used in this decision


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Pay-Structure DecisionExamines pay relative to employees working on

different jobs within the organization

Involves setting a value on each job within theorganization relative to all other jobs

Job evaluation is the approach used


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Individual Pay Determination

Examines pay relative to employees working on

the same job within the organization


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Pay-Level StrategiesPay-Level Strategies

High-Pay Strategy

Low-Pay Strategy

Comparable-Pay

Strategy


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Factors Affecting the Choice of Pay StrategyFactors Affecting the Choice of Pay Strategy

The motivation and attitudes held by

management

The ethical and moral attitude of management

The degree to which an organization can

attract and retain personnel

The organizations ability to pay


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Pay SurveysPay Surveys

Techniques and instruments used to collect

data about compensation paid to employees in:a geographic area

an industry

an occupational group

Obtaining valid, reliable information about pay

is critical to creating a compensation systemthat supports corporate goals


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GovernmentSources

Professional and

TradeOrganizations

Surveys Conductedby OtherOrganizations

Surveys byJournals

Sources of Pay SurveysSources of Pay Surveys


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SummarySummary (1 of 2)(1 of 2)

The objective of the compensation function is

to create a system of rewards that is equitable

to the employer and employee alike

Compensation should be adequate, equitable,cost-effective, secure, incentive-providing, and

acceptable to the employee

The pay-structure decision involves comparingjobs within the organization to determine their

relative worth


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SummarySummary (2 of 2)(2 of 2)

Determining the worth of a job is difficult

because it involves measurement and

subjective decisions

Using systematic job evaluation procedures is

one way to determine net worth

Documents

Compensation by Rajat Jhingan