Compensation Need Assessment

Group Members:Aamir MohammadSyed Wasi AbbasTalha Ahmed HobanSyed Haris HussainSumair Patel

Compensation

Compensation assessment is an integral part of the management of the organization. Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. It may achieve several purposes assisting in recruitment, job performance, and job satisfaction. It is the reward received by an employee in return for his/her contribution to the organization.

Strategic Compensation Planning

The three important aspect of strategic compensation planning are:

Linking Compensation to the Organizational

Objectives.The Pay Performance Standards. Motivating Employees through Compensation.

Motivating Employee through Compensation

Equity Theory

Central to the theory is the role of perception in the motivation and the fact that individual make compare its means that individual from the ratio of their inputs of their abilities, scales, and experience in a situation to their outcomes.(Salary, benefits) in that situation.

Relationship Between Pay Equity & Motivation

MY INPUTS /OUTPUTS

RATIO

COMPARISION PERSONS

INPUT /OUTPUT

RATIO

MY INPUTS

/OUTPUTS RATIO

COMPARISION PERSONS

INPUT /OUTPUT

RATIO

MY INPUTS /OUTPUTS

RATIO

COMPARISION PERSONS

INPUT /OUTPUT

RATIO

DOING MORE & RECEIVING LESS

DOING LESS & RECEIVING MORE

DOING SAME & RECEIVING SAME

Factors Affecting The Wage mix

INTERNAL FACTORS EXTERNAL FACTORS

WAGE MIX

•Compensation Strategy of organization •Worth of job•Employees relative worth•Employers ability to pay

•Condition of the labor market •Area wage rates•Cost of living•Collective bargaining•Legal requirements

Steps in Establishing Pay Rates

The process of establishing pay rates while ensuring external, internal and procedural consist of five steps:

Salary surveyJob evaluationPay gradesWave curves Pay rates

Components Of Compensation

Basic wages:Wages represent hourly rates of pay, and salary refers to the monthly rate of pay, irrespective of the number of hours put in by the employee

Dearness allowanceThe payment of dearness allowance facilitates employees and workers to face the price increase or inflation of prices of goods and services consumed by them. The dearness allowance which may be a fixed percentage on the basic wage.

Components Of Compensation(cont)

• Incentives

Incentives are paid in addition to wages and salaries and are also called ‘payments by results’. Incentives depend upon productivity, sales, profit, or cost reduction efforts.

• Bonus

The bonus can be paid in different ways. It can be fixed percentage on the basic wage paid annually or in proportion to the profitability

Components Of Compensation(cont)

• Non-monetary benefits

These benefits give psychological satisfaction to employees even when financial benefit is not available such as:– Competent supervision, and

– Job sharing and flexi-time.

• CommissionsCommission to Managers and employees may be based on the sales revenue or profits of the company. It is always a fixed percentage on the target achieved.

Components Of Compensation(cont)

• Piece rate wagesPiece rate wages are prevalent in the manufacturing wages. The laborers are paid wages for each of the Quantity produced by them. The gross earnings of the labor would be equivalent to number of goods produced by them.

• Fringe benefitsFringe benefits constitute indirect compensation as they are usually extended as a condition of employment and not directly related to performance of concerned employee.

Salary Compression

Salary compression which means longer term employees salary is lower than those of workers entering the firm today which is creating inflation.

Competence Based Pay

Skill base pay or knowledge base pay.Fundamental change in the attitude of

management.Greater productivity increase employee learning Improve commitment to work.

3P’s Compensation Management

Paying for positionPaying for personPaying for performance

Pricing Managerial and Professional Job

Basic payShort term incentives Long term incentivesExecutive benefits

Conclusion