MANAGING COMPENSATION Prof. Mita Singh

SYLLABUSStrategic Compensation PlanningDetermining Compensation Wage-MixJob Evaluation SystemsCompensation StructuresGovernments regulations

Strategic Compensation PlanningStrategic Compensation Planning is the compensation of employees in ways that enhance motivation and growth, while at the same time aligning their efforts with the objectives,philosophies, and culture of the organization.Value Added Compensation

Three Aspects of Strategic Compensation PlanningLinking Compensation to Organizational Objectives

Pay-for- Performance Standard

Motivating Employees

through Compensation

Goals of a strategic compensation policy To reward employees past performanceTo remain competitive in the labor marketTo maintain salary equity among employeesTo mesh employees future performance with organizational goalsTo control the compensation budgetTo attract new employeesTo reduce unnecessary turnover

Policies to achieve the Goals The rate of pay within the organization and whether it is to be above, below or at the prevailing market rate.The ability of the pay program to gain employee acceptance while motivating employees to perform to the best of their abilities.The pay level at which employees may be recruited and the pay differential between new and more senior employees.The intervals at which pay raises are to be granted and the extent to which merit and/or seniority will influence the raises.The pay levels needed to facilitate the achievement of a sound financial position in relation to the products or services offered.

Pay-for- Performance StandardA pay for performance standard is a standard by which managers tie compensation to employee effort and performance. It refers to wide range of compensation options, including merit based pay,bonuses,salary commissions, job and Pay banding, team and group incentives, and various gain sharing programs.

Motivating Employees through CompensationPay Equity An employees perception that compensation received is equal to the value of the work performed.Expectancy theory and Pay holds that employees should exert greater work effort if they have reason to expect that it will result in a reward that is valued.Pay secrecy

Relationship between Pay Equity And MotivationInequity(feelings of being Underpaid)Equity(Feeling of being paid fairlyInequity(Feelings of being Overpaid)My Input/Output RatioMy Input/Output RatioComparisonPersonsInput/outputratioMy Input/Output RatioComparisonPersonsInput/outputratioComparisonPersonsInput/outputratioThe greater the perceived disparity between my input/output ratio and the comparison Persons input/output ratio, the greater the motivation to reduce inequity.

Pay-for-performance and Expectancy Theory High effortHigh PerformanceValuedMonetaryrewardsPaysatisfactionExpectancylinkageValuelinkage

Bases for CompensationHourly Work Work paid on an hourly basis.Piece work -work paid according to the number of units produced.Salaried employees- those whose compensation is computed on the basis of weekly, biweekly, or monthly pay periods.

Determining Compensation Wage-MixINTERNAL FACTORSCompensation strategy of organization

Worth of job

Employees relative worth

Employers ability to payEXTERNAL FACTORSConditions of the labor market

Area wage rates

Cost of living

Collective bargainingLegal requirements

WAGEMIX

Job Evaluation SystemsJob Ranking System Job Classification SystemPoint system Work ValuationJob Evaluation for Management Positions Hay profile method a job evaluation technique using three factors knowledge ,mental activity and accountability to evaluate executives.

Compensation StructuresWages and Salary SurveysWage CurvePay GradesRate RangesCompetence-Based pay

Governments regulationsPayment Of Wages Act 1936.-The regular and timely payment of wages (on or before 7th day or 10th day after last day of the wage period in respect of which the wages are payable) The Minimum Wages Act 1948 - provides for fixation and enforcement of minimum wages in respect of scheduled employments.