DESIGNING AN EFFECTIVE COMPENSATION

PLAN IN AN ORGANIZATION

COMPENSATION

The sum total of all forms of payments or rewards provided to employees for performing tasks to achieve organizational objectives.

COMPENSATION- NATURE AND SCOPE

Maintaining equity in the distribution of wages and salaries.

Maintaining competitiveness in the wage market. Matching employee expectations Reinforcing positive employee behavior and contribution Eliminating any discrepancies in wage administration Devising a system that is the most efficient . Optimization of management and employee interests.

COMPENSATION OBJECTIVES

To reward employees’ past performance fairly. To attract and retain high performing employees To motivate employees and reinforce desirable

employee behavior To remain competitive in the labor market To align employees’ future performance with

organizational goals To communicate the employees their worth to the

organization To provide employee social status.

COMPONENTS OF COMPENSATION

FINANCIAL COMPENSATION

DIRECT INDIRECT

BASE PAY INCENTIVES MANDATORY VOLUNTARY -Wages -Individual -Provident fund -Breaks

-Salaries -Group / Team -Gratuity -Vacations

-Organizational -Health plans -Pensions

-Maternity leave -Educational

-Medical leave assistance

NON- FINANCIAL COMPENSATION

Challenging job responsibilities Recognition of merits Awards , Recognition awards , Service awards - IBM : Thanks award - IDEA : Appreciation card

DETERMINANTS OF COMPENSATION

INTERNAL

- Employer’s compensation strategy

- Worth of a job

- Employee’s relative worth

- Employer’s ability to pay

EXTERNAL

- Labor market conditions

- Area wage rates

- Cost of living

- Collective bargaining

- Government policy

COMPONENTS OF A COMPENSATION SYSTEM

Job descriptions Job analysis Job evaluation Pay structures Salary surveys

USES OF COMPENSATION

Recruit and retain qualified employees. Increase or maintain

morale/satisfaction. Reward and encourage peak

performance. Low absenteeism Motivation Reduce turnover and encourage

company loyalty. Modify (through bargaining) practices

of unions.

 TYPES OF COMPENSATION PLANS

Matrix Plans

Binary Plans

Stair Step Breakaway Pay Plans

HOW TO DESIGN A COMPENSATION PLAN???

Develop a program outline Designate an individual to oversee designing the

compensation program. Develop a compensation philosophy. Conduct a job analysis of all positions Evaluate jobs. Determine grades.

Establish grade pricing and salary range. Determine an appropriate salary structure Develop a salary administration policy. Obtain top executives' approval of the basic

salary program. Communicate the final program to employees

and managers. Monitor the program

PRINCIPLES OF A SUCCESSSFUL COMPENSATION PLAN

Well defined & uniform Simple & flexible Easy to implement Helpful in solving disputes Motivate & encourage No exploitation of workers Communicate!! Communicate!! Communicate!!

ADVANTAGES OF A FAIR COMPENSATION SYSTEM

Positive impact on efficiency & results Enhance the process of job evaluation Helps in complying with various labor acts Raise morale, efficiency & cooperation Peace in employer - employee relations Provides growth & advancement opportunities Happy & satisfied workforce Create a healthy competition

WHY DO COMPENSATION PLANS FAIL????

Perpetual redesign Poor communication Weak execution

EXAMPLE OF COMPENSATION & BENEFITS

Benefits ( Health , Risk & Retiral) Equity based plans Others-

Public holidays, leaves (illness, maternity)

educational assistance , cafeteria services,

medical room facilities , company vehicle schemes etc…

ADOBE

INDIA

QUERIES???