By Sachin.P.

M & Ratul maiti 1

WHAT IS COMPENSATION?

In simple words,

Compensation is

Compensation is a reward, incentive, or pay for what the employee does in an organization.

Definition

It refers to the methods of maintaining balance b/w interest of company & attracting, developing Retaining and rewarding high quality staff through wages and salaries.

Goals of compensations of administration

To design pay systems

To motivate employees to join, stay & perform to max extent.

For the organization to remain ethical & legal in compensation programmers.

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Maslows Hierarchy of Needs

Selfactualization

Esteem

Social
Safety and security Physiological
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Why compensation is used?

Recruit & retain the best employees To maintain satisfaction

Reward & encourage the best performers

Modify (through Negotiations) practice of unions

Basic Components of Compensation

1. base pay,
2. wage and salary add-ons, 3. incentive payments, and 4. benefits and services

1.Base Pay

It refers to the cash that an employer pays for the work performed.
Base Pay

Wage

Salary

2.Wage and Salary add-ons

cost-of-living adjustments (COLA)

overtime holiday and other premium wages travel and apparel expenses a host of related forms of premiums and reimbursements

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3.Incentives Payments
It refer to funds employees receive for meeting targets, to seniority and merit pay

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4.Benefits and services

paid time off, health insurance, unemployment compensation deferred income such as pension and profit sharing programs, company cars, fitness club memberships, child care services, and tuition reimbursement.
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Main issues in Compensation

How much should companies pay to attract, retain & motivate employees? Should they provide benefits & if so to what extent

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Components of an compensation system Base wages

Pay structures
Travel allowance Dearness Allowance

Policies and Regulations

Employer Collective Bargaining Legislation Wage Boards Pay Commissions Minimum Wages Act Payment of Wages Act Adjudication Machinery
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Minimum wage Fair wage Living wage

Bonus Payments made under a profit sharing scheme Value of house accommodation Medical allowances

Travelling allowances
Any other sum paid to defray special expenses incurred by the worker Contribution to pension, provident fund

Internal Equity in Compensation

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Concept of Total Compensation

Rewards

Financial

NonFinancial

Indirect

Direct

Protection program

Pay for time not worked

Employee services

Base salary

Merit incentive

Bonus

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Concept of Total Compensation

Rewards

Financial

Non-Financial

Leave Policy

Overtime Policy

Hospital policy

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