COMPENSATION AND REWARD MANAGEMENT

Remuneration & Rewards Financial Non-Financial

DIRECT (cash) Salaries Incentives Bonuses

INDIRECT (benefits) Insurance Holidays Medical and health Child care Employee assistance

JOB Interesting work Challenge Responsibility Recognition Advancement

ENVIRONMENT Good policies and practices Competent supervision Congenial co-workers Safe and healthy work environment Fair treatment

Components of Employee Remuneration

The Elements of Total Compensation

Total Compensation Base Compensation Pay Incentives
Indirect Compensation/ Benefits

DA (DEARNESS ALLOWANCE)
Paid to employees as a cushion against inflation DA is linked to the AICPI
computed by the Labour Bureau, Shimla (Base 1960 = 100 points)

Ways in which it is linked:

Time factor Point factor

Factors Influencing Pay

Market Forces
Organisation Policy

Work Value

Individual Performance

Three Pay Policies

Pay Policy Lead Match Lag Attract + = Retain + = ? Motivate ? ? ? Control Costs ? = +

Govt. regulation of Compensation in India

Minimum Wages Act, 1948 Payment of Wages Act, 1936 Adjudication of Wage Disputes Wage boards Pay Commissions Payment of Bonus Act, 1965

The Compensation Structure

Job Evaluation

Issues Involved in Setting Compensation Structures

Wage and Salary Surveys Pay Grades

Rate Ranges

Step 1

Job Evaluation

The systematic process of determining the relative worth of jobs in order to establish which jobs should be paid more than others within an organization.

Establishing a Salary Structure

Step 2. Salary Surveys
Salary surveys compare an organisations salaries to those offered in other organisations.

Does the organisation want to compare

itself with:

Organisations in the same or related industries? Organisations in the same geographic area? Best practice companies? Domestic companies? Multinationals?

Establishing a Salary Structure

Step 3
Group jobs into Pay Grades or Job Classes Groups of jobs within a particular class that are paid the same rate or rate range jobs of equal difficulty

Hierarchy of Clerical Jobs, JE Points and Pay Grades for a Hypothetical Office
JOB Customer Service Rep. Executive Secretary/Admin. Asst. Senior Secretary Secretary Senior General Clerk Credit and Collection Accounting Clerk General Clerk Legal Secretary/Assistant Senior Word Processing Operator Pt. 300 298 290 230 225 220 175 170 165 160 Grd. 5
4 3

Establishing a Salary Structure

Step 4. Price Each Pay Grade Wage Curve
Shows the pay rates currently paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation.

Wage Curve
8 7

monthly salary 5 (Rs.000)

PAY

4 3 2 1

Line of Best Fit : using Market-Survey data or current organization data

40 AB 1 80 160 200 240 280 320 120 CDEF GHIJ KLM 0P QRS TUV 2 3 4 5 6 7

JE Points
Jobs Grades

Establishing a Salary Structure: Step 5

Formulate a Rate Structure
Single Rate Structure vs Rate Range

Single Rate Structure

GR I II III
GR
I

JOBS AB CDEF GHIJ

SALARY (Rs.) 5000 7000 9000

SALARY (Rs.)

Overlapping Rate Range

JOBS
AB

30002504500500-9000

II
III

CDEF
GHIJ

60004008400750-14400
1000060013600900-20800

Pay Structure
39.50 37.00 34.50 Wage Curve (or line) Maximum Rate

Rates (Rs. 000)

32.00 29.50 27.00

24.50
22.00 22.00 19.50

17.00
14.50 12.00 9.50 0

Minimum Rate

I
50

II
100

III
150

IV
200

V
250

VI
300

Red & Green Circle Jobs

39.50 37.00 34.50 32.00 Rates (Rs. 000) 29.50 27.00 24.50 22.00 22.00 19.50

17.00
14.50 12.00 9.50 0

I
50

II
100

III
150

IV
200

V
250

VI
300

What Is Competency-based Pay?

Competency-based pay
Where the company pays for the employees range, depth, and types of skills and knowledge, rather than for the job title he or she holds.

Competencies
Demonstrable characteristics of a person, including knowledge, skills, and behaviors, that enable performance.

Competency-Based Pay in Practice

Main components of skill/competency/ knowledgebased pay programs:
A system that defines specific skills, and a process for tying the persons pay to his or her skill

A training system that lets employees seek and acquire skills

A formal competency testing system

A work design that lets employees move among jobs to permit work assignment flexibility.

 Pros

Competency-Based Pay: Pros and Cons

Higher quality Lower absenteeism and fewer accidents

Cons
Pay program implementation problems Cost implications of paying for unused knowledge, skills and behaviors Complexity of program Uncertainty that the program improves productivity

Other Compensation Trends

Broadbanding
Consolidating salary grades and ranges into just a few wide levels or bands, each of which contains a relatively wide range of jobs and salary levels.
Wide bands provide for more flexibility in assigning workers to different job grades. Lack of permanence in job responsibilities can be unsettling to new employees.

Broadbanding
39.50 37.00 34.50 Rates (Rs. 000) 32.00 29.50 27.00 Maximum Rate Previous Maximum Rate Wage Curve (or line)

24.50
22.00 22.00 19.50 Minimum Rate Previous Minimum Rate

17.00
14.50 12.00 9.50 0

I
50

II
100

III
150

IV
200

V
250

VI
300