Professional Documents
Culture Documents
WHAT IS COMPENSATION???
JUST
THINK
FOR A
MINUTE!!!
!!!
• A LABORER GETS RS. 200.00 FOR SWEATING FOR 9 HOURS AND
THE ENGINEER GETS FEW LAKHS!!!!!!!!!!
• WORKER GETS PAID FOR WORKING WHILE THE MANAGER
GETS PAID FOR??????
SITTING!!!
CASE STUDY
A friend of ours writes that she is in one of the touring companies of the musical
Cats. In the company are two performers called “swings” who sit backstage during
each performance. Each swing must learn five different lead roles in the show.
During the performance, the swing sits next to a rack with five different costumes
and makeup for each of the five roles. Our friend, who has a lead in the show, once
hurt her shoulder during a dance number, She signaled to someone offstage, and by
the time she finished her number, the swing was dressed, in makeup, and out on
stage for the next scene. Our friend is paid $ 2000 per week for playing one of these
cats in the show, she is expected to do a certain number of performances and a
certain number of rehearsels per week.
SHE GETS PAID FOR HER JOB??
The swing gets paid $ 2900 per week, whether she performs 20 shows that week or
none.
She is paid for knowing the five roles, whether she plays them or not.
Think of other professionals you know Electricians, payroll supervisors, etc etc,
COMPENSATION
MANAGEMENT
REVEALS ALL
THESE SECRETS
TO US
AND ALSO
HOW WE CAN
USE IT TO OUR
BENEFIT!!!!!
Compensation refers to all forms of financial returns and tangible services and
benefits employees receive as part of an employment relationship.
Compensation represents both the intrinsic and extrinsic rewards employees receive
for performing their jobs. INTRINSIC C reflects employees’ psychological mindsets
that result from performing their jobs. EXTRINSIC C includes monetary and non-
monetary rewards.
TYPES OF COMPENSATION
SHORT TERM INCENTIVES
CASH
COMPENSATIO BASE MERIT\COST OF LIVING
N
INCOME ALLOWANCES
PROTECTION
BENEFITS
WORK LIFE FOCUS
These are a few pay programs and a single employer uses more than one of these.
CASH COMPENSATION :
1. BASE WAGE: is the cash compensation that an employer pays for the work
performed.
2. It reflects the value of the work or skills and generally ignores differences
attributable to individual employees
Why does bill gates still show up for work every morning???
Why does Microsof millionaires continue to write codes???
• INTRINSIC compensation represents employees’
critical psychological states that result from
performing their jobs.
• According to JOB CHARACTERSTICS THEORY
these critical psychological states, employee
experiences enhanced psychological states when their
jobs rate high on five core job dimensions.
i. Skill variety: is the degree to which the job requires
the person to peform different tasks and involves
different skills, abilities and talents.
ii. TASK IDENTITY: is the degree to which a job
enables a person to complete an entire job from
start to finish.
iii. TASK SIGNIFICANCE is the degree to which the
job has an impact on the lives or work of other
people.(Cancer research scientist)
iv. AUTONOMY: is the amount of freedom,
independence, and discretion the employee enjoys in
determining how to perform the job(Farmers).
v. FEEDBACK: is the degree to which the job or
employer provides the employee with clear and
direct information about job outcomes and
performance.
Problem of turnover if IT
employees!!!! Over time,
base salaries and bonuses
have risen dramatically
to promote the
recruitment the very best.
But turnover has not
slowed down!!!
EXAMPLES include new technologies,
learning and training opportunities and
challenging technical environments.
Recent study by
People, a HR
consulting firm
suggests that
enhanced intrinsic
compensation may
help reduce excessive
turnover
What do you mean by Strategic Analysis? Describe the factors that influence
company’s compensation practices.
Compensation strategy deals about what type of pay model the company should
follow which should be in alignment with its Ozal strategy.
Wh
A STRATEGIC PERSPECTIVE FOCUSES ON THOSE COMPENSATION
CHOICES THA HELP THE OZ GAIN AND SUSTAIN COMPETITIVE
ADVNATAGE
5D
The competitive advantage of Starbacks is apparent with the first sip of its specialty
drink, mocha Valencia. What started out as a Seattle seller of coffee beans has,
through strategic decisions, grown to a familiar chain of coffeehouses stretching
around the globe?
K ey St
• The first step includes an understanding of the industry in which the Oz
operates and how it plans to compete. Know what factors are important today
(Changing customers needs, labor market etc. What will be important in
future? What is your business strategy? How do you compete to win?
• A pay system reflects the values that guide an employer’s behaviors and
underline its treatment of its employees. The pay system mirrors the
company’s image and reputation. Microsoft gives it mission and values
statement as “To enable people and businesses throughout the world to realize
their full potential”
• The simple fact that employees differ is too easily overlooked in formulating a
compensation strategy. Ex Older, highly paid workers may wish to defer taxes
by putting their pay into retirement t funds, while younger employees may
have high cash needs to buy house, support a family, or finance an education.
• Step 3 is to implement the strategy through the design and execution of the
compensation system. How the compensation system translates strategy into
practice and into people’s bank accounts.
3 T
STRATEGY
ALIGN EXTERNALLY WITH
ECONOMIES
ALIGN INTERNALLY WITH
HR SYUSTEMS.
HOW IS OUR STRATEGY
DIFFERENT FROM
OTHERS!!! MICROSOFT
USES STOCK AWARDS
MORE THAN BASIC PAY,
DIFFICULT TO COPY!!!
So
ACCORDING to examination of eight years of data from 180 U.S. companies, “ITS