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7/30/2019 Compensation mngt
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Compensation Structure
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Salary Structure
Salaries in line with market rates
Provide internal equity in grading and
maintain competitive rates
Consider employee advancement
opportunities and motivational aspects
Graded salary structures
Salary progression curves
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Graded Salary Structures
Defines minimum and maximum range
Features
All jobs are allocated into a salary gradewithin the structure
Each salary grade should consist of salary
range or grade
Increase in the cost of living or in the marketrate are taken care
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The salary grade should be wide enough
The differential should be maintained between
the mid points of each salary grades
There can be overlap between salary grades
Progression within a grade depends on the
performance of an individual
The no. of salary grades will depend upon theno. of distinct levels of job in the hierarchy
Graded Salary Structures:
Feature
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Example: Pay Grade
Managerial and professional: 3500-300-
6500
Technical/supervisory: 3000-250-5500
Administrative and Clerical: 1800-1500-
3000-200-5800
Manual : 1800-100-2300-150-3050
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Make-up of a salary Grade
The learning zone
The qualified zone
The premium zone
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Salary Progression Curves
The salary ranges are divided into defines
zones
There should be incremental systems
merit/experience
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Incremental Systems
Rigid incremental systems
Flexible incremental systems
Semi-flexible incremental systems
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Pay Structure in Practice
Managerial and professional
Technical/supervisory
Administrative and Clerical Manual
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Basic Pay:
The degree of skill
The strain of work
The experience involved The training required
The responsibilities undertaken
The mental and physical requirements
The disagreeableness of the task
The hazard attendant on the work
The fatigue involved
Pay Structure in Practice
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Basic Pay: the basis of differentials
Interpersonal differentials
Inter-occupational differentials
Inter-area differentials
Inter-firm differentials
Pay Structure in Practice
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Dearness Allowance (DA)
allowance paid to enable employees to face
the increasing dearness of essential
commodities.
Also called as COLA
Pay Structure in Practice
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Allowances Attendance
Books
Car
Cash
Computer Conveyance
Driver
Dust
Education
Family-planning
Graduate Leave travel
Medical
Night duty
Pay Structure in Practice
Allowances Tiffin
Strain
Special
Shift
Paternity Uniform
Telephone
Heat
Lunch
Pension
PF Relocation
servent
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Overtime Payment
Virtually all hourly (nonexempt) employees
must receive overtime compensation for
working: More than 40 hours per week
More than 8 hours per day
Salaried employees do not receive overtime pay.
Pay Structure in Practice
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Designing Pay Ranges and
Bands
Ranges
Salary Rs
Pay Structure
Grades
Pay Policy Line
Minimum
Minimum
Minimum
Minimum
Maximum
Maximum
Maximum
Maximum
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Bands
Designing Pay Ranges and
Bands
Associates
Professionals
Lead Professionals
Senior Professionals
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Variable Compensation
Variable pay is countercyclical
Employee goals and organizational goals
Motivated Employees Bonus/Incentive Plans
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Incentive Plans
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Individual Incentive Plans
Straight Piecework
An incentive plan under which employees receive a
certain rate for each unit produced.
Differential Piece Rate production exceeds the standard amount of output
Ex. Standard o/p = 10; rate per piece = re.1
Case 1: Out put 8; Earnings = 10X1 = 10
Case 2:Output 12hrs; Earnings = 10X1= 10DPR Earnings = 12X1= 12
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Individual Incentive Plans
(contd)
Standard Hour Plan
An incentive plan that sets pay rates
based on the completion of a job in a
predetermined standard time.
Bonus: Halsey System
Total Earnings =time taken * hourly
rate + bonus ( bonus 50%of timesaved).
Rowan System
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Merit Pay Program (Merit Raise)
Links an increase in base pay to how
successfully an employee achieved some
objective performance standard.
Done on individual performance standards
Individual Incentive Plans
(contd)
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Lump-Sum Merit Program Program under which employees receive a
year-end merit payment, which is not added
to base pay.
Advantages:
Provides a clear link between pay and
performance.
Individual Incentive Plans
(contd)
I di id l I i Pl
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Awards
Often used to recognize productivity gains,
special contributions or achievements, and
service to the organization.
Non-cash Incentive Awards
Are most effective as motivators when the
award is combined with a meaningful
employee recognition program.
Individual Incentive Plans
(contd)
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Group & team Incentive Plans
Team Incentive Plans
Compensation plans where all team
members receive an incentive bonus
payment when production or servicestandards are met or exceeded.
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Group Incentive Plans (contd)
Gain sharing Plans
Programs under which both employees and
the organization share the financial gains
according to a predetermined formula thatreflects improved productivity and profitability.
5-6% of the employee base salary
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Improshare (Improved productivitythrough sharing)
Based on overall productivity of the work
team.
Seen as a measure of the total ,finished
products.
Both production and non production
employees are given an incentive.
The employee and company each receive
a gain of 50% of improvement.
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Enterprise Incentive Plans
Profit Sharing Any procedure by which an employer pays, or
makes available to all regular employees, in addition
to their base pay, current or deferred sums based
upon the profits of the enterprise.
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Types of profit sharing plans:
Current distr ibut ion plans (cash plans):profitsharing paid as a bonus in the form of cash or
shares of the companys stock
Deferred payou t plans:profit sharing paid as abonus into a trust fund to be distributed to
employees at some time in the future (such as
when the employee retires, becomes disabled, or
dies)
E t i I ti Pl
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Enterprise Incentive Plans
(contd)
Stock Options
Granting employees the right to purchase a
specific number of shares of the companys
stock at a guaranteed price (the option price)during a designated time period.
The value of an option is subject to stock
market conditions at the time that option is
exercised.
E t i I ti Pl
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Enterprise Incentive Plans
(contd)
Employee Stock Ownership Plans (ESOPs)
Stock plans in which an organization contributes
shares of its stock to an established trust for the
purpose of stock purchases by its employees.
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Payroll Management
Gross pay
Deductions
Net pay
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Company LOGO
Company Name
Payslip for the Month August-2012
Total Working Days Days Present Paid Leave LWP Total days Payable
31 31.0 0.0 0.0 31.0
Employee Code: 123 PF No.: UP/32082/288 Bank A/c: 0200104000114691
Employee Name: ABC Designation: Deptt.:
Net payable: 53970.0 In Words: FIFTY THREE THOUSAND NINE HUNDRED SEVENTY ONLY
Earnings
Regula
r
Arrea
r
TotalTotal
Earnings
Basic19500.
00.0
19500.
0
D.A.19500.
00.0
19500.
0
H.R.A. 5850.0 0.0 5850.0
CITY ALL 300.0 0.0 300.0
S.F.ALL. 2500.0 0.0 2500.0B & P ALL. 2500.0 0.0 2500.0
CONVE ALL. 5000.0 0.0 5000.0
ACADEMIC GRADE
PAY7500.0 0.0 7500.0
Total: 62650.0
Deductions
Regular Arrear Total Total Deductions
P.F 4680.0 0.0 4680.0
INCOME TAX 4000.0 0.0 4000.0
Total: 8680.0