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7/29/2019 Compensation Startegry Grp 7
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COMPENSATION STARTEGIES
Smita Verma
Raghav Jaju
Mayank Sahay
Jaineet Kaur Sethi
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Importance of Compensation
Compensation is one of many human resource tools thatorganizations use to manage their employees.
Motivate and retain skilled employees and ensure talent
management.
Important for an organization to link compensation to itsoverall goals and strategies and ensure alignment with its HR
strategy.
The compensation strategy differentiates the organization on
the job market and builds the attractiveness of the companyfor the top talents.
Gaining competitive advantage is one of the major motives.
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CompensationStrategies
FringeBenefits
Incentives
Perqs
DearnessAllowance
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Fringe Benefits
Fringe or employment benefits, also known as benefits inkind, are compensations made to an employee beyondregular wages or salaries by reason of their employment.
FringeBenefits
StandardNon-
Standard
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Objectives of Fringe Benefits
Create a sense of belongingness among employees and to retain them.
Hence, fringe benefits are called Golden Hand-cuffs. Acts as a selling point to entice higher-quality employees to work for your
company over another one To reduce staff turnover
Motivate the employees by identifying and satisfying their unsatisfied
needs.
Provide qualitative work environment and work life.
Provide security and protect the health of the employees
Meet requirements of various legislations relating to fringe benefits.
Rising prices and cost of living has brought about demand for provision of
extra benefit to the employees.
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Principles of Fringe Benefits
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Examples of Fringes
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Administration of Fringe Benefits
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Guidelines to make Fringe Benefits
more Effective
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Fringe Benefits
Cash compensation
Social security and well-being
Development and education
Employee stock purchase program.
5% discount of WIPRO stocks (up to 10% of salary payments) Leave of absence programs (sabbaticals etc.)
Relocation program.
Railway half-fare season ticket.
Family Service: Support in the areas of Childcare
Homecare and Eldercare. Bonus for recommending new employees.
Special conditions for insurance
Sickness and accident income plan
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INCENTIVECOMPENSATIONSYSYTEM
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INCENTIVES SCHEME
Schemes where the workers earning vary in
same proportion as output
Schemes where earnings vary proportionately
than output
Schemes where earnings vary proportionately
more than output
Schemes where earnings differ at different
levels of output
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LIMITATIONS OF INCENTIVE
COMPENSATION SYSYTEM
They are practical only when performance can
be measured easily and objectively
They are often taken as administrative burden
They are likely to focus on only a narrow
range of behaviour,perhaps at the expense of
other behaviour
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Team & Group Incentives Reward
System
GAINSHARING
A team and group based incentive systemdesigned to share the cost savings from
productivity improvements with employees.SCANLON PLAN
A type of gainsharing plan in which the
distribution of gain is tilted much more heavilytowards employees and across the entireorganization
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PROFIT SHARING
An incentive system in which ,at the end of
year, some portion of the company profits is
paid into a profit sharing pool ,which is then
distributed among employees.
EMPLOYEE STOCK OWNERSHIP PLANS
Group level incentive system in employeesare gradually given a major stake in ownership
of cooperation
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Incentive Systems inBrakes India Foundry
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Brakes India Limited is the leadingmanufacturer of Automotive and Non-Automotive Braking Systems and Ferrous
Castings in India. Established in 1962 Brakes India Foundry has introduced
appropriate incentive systems from 1999 toencourage the employees.
One of such incentive scheme is SuggestionScheme
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Suggestion Scheme
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Suggestions are collected from individual employee withrespect to energy conservation, productivity, quality, safetyetc., and immediate reward is given to allthe receivedsuggestions to motivate the employees to give more andmore suggestions.
These suggestions are reviewed by the suggestioncommittee and evaluated in terms of cost, benefit and easeof implementation.
For implementing chosen suggestions, teams are formed
Based on cost savings, safety and productivity CashReward is also given to motivate the employees.
The best suggestions are rewarded every year with specialpayment and also a Best Suggestion rolling trophy.
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Suggestion forms
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Perq to Executive Include The
Following:
Car
Free Parking
Kidnapping and ransom protection
Counseling Service Spouse travel
Home entertainment allowance
Club membership
Season tickets to entertainment events.
Use of company credit cards
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Role of Salary and Commission
Company Salary Comission Perks HRA/PF (Rs Crore)Total
RIL 0.60 23.44 0.48 --- 24.52
Tata Steel 0.62 1.20 0.37 --- 2.20
L&T 0.60 2.42 0.15 0.81 3.98
Tata Motors 0.32 1.10 0.18 0.87 1.69
Bharti Airtel 5.17 7.50 --- --- 12.67
ICICI 0.98 0.52 0.70 0.26 2.47
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Company lease vs self rent
Employee can claim HRA exemption. The tax
exemption on HRA is computed as the
minimum of following three conditions:
i. Actual HRA on the pay slip
ii. 40-50% of the basic salary
iii. The rent amount minus 10% of the salary.
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Driving a company car
If employer provides with a car lease option,
one should consider availing of the same as it
would be a tax efficient option.
Perq value is equal to Rs 1,800 per month ifthe cubic capacity of car is up to 1,600. For
cars with higher cubit capacity, the perquisite
value is Rs 2,400 per month.
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Group mediclaim
This is a common benefit offered to employees
irrespective of their grade and the premium is
less than half of an individual mediclaim.
Most group health insurance products offer
wider coverage and they are more lenient than
individual policies.
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DEARNESS ALLOWANCE
The allowance was introduced into Indiafollowing the First World Warand was initiallyentitled the "Dear Food Allowance".
As of June 2012, dearness allowance (DA) iscalculated as a percentage ofan Indian citizen's basic salary
Allowances paid to employees in order toenable them to face the increasing dearness ofessential commodities
http://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Salaryhttp://en.wikipedia.org/wiki/Salaryhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/First_World_War7/29/2019 Compensation Startegry Grp 7
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DA includes any payment made to protectan employee against inflation and risingprices
Not restricted to specific occupationEmployees
granted DA and this continues followingreemployment with the Central or State
Government In other cases of reemployment, access to
DA is subject to the limitofemoluments last drawn
Pensioners
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Prior to 1972, there was no element of D.A. on
pensions. From 01.04.1972 there was a flat
rate of D.A. to all the pensioners.
With effect from 1.1.2006, Dearness allowance
is granted to compensate price increase above
to which the revised pay scales relate. This
will be sanctioned twice a year, payable from 1January and 1 July.
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Executive Compensation
Pick yourperks
Find yourbest buyers
Protectyour back
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In conclusion, a successful negotiation hinges onthe willingness of both the parties to hear eachother and an ability to arrive at a commondenominator in a spirit of accommodation.Hence, do not be overtly rigid and at the sametime do not give in to the employer totally.
TIP:Venture Deals by Brad Feld. This book was
written to help founders negotiate financing withinvestors.
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