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chool

INTROD

UCTION

T

O

COMP

ENSATI

ON&RE

WARD

MANAGEMENT

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chool

Topicscoveredafterthe

learning:

1.

ConceptofCompensatio

n,

2.

Systemo

fCompensating,

3.

ConceptofRewardand

RewardSystem

,

4.

Economic

TheoryofWages,

5.

LimitationsofEconomic

Theories,

6.

WageandSalaryAdmin

istrationatmicrolevel,

7.

Wagecon

cepts,

8.

Roleofvariousparties

Employees,Employers,

Unions&

Government,

9.

Overview

ofLegislationsaffectingCom

pensation

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CONCEPTOFCOMPEN

SATION

Compens

ationiswh

atemploye

esreceive

inexchang

efortheir

contributio

ntothe

organization

Anemplo

yeesstandardoflivin

g,status

inthesoci

ety,

Motiva

tion,

Loyaltyand

Productivitydependu

ponthe

compensationhe/she

receives

Forthee

mployerto

employee

remunerat

ionissigni

ficantbeca

useofits

contributiontocosto

fproductio

n

7/29/2019 CRM Mod1 Student

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chool

NATUREO

FCOMPENS

ATION

Compens

ationcanb

eofferedb

yan

organizationbothdirectly(Base

Pay&

VariablePay)andInd

irectly(Be

nefits)

1.

BasePa

y-Basiccompensation

an

employee

getsusuallyasawageorsalary

2Variable

Pay-Comp

ensationlinked

directlyto

theperformance

3.

Benefits

-Indirectrewardsgiv

enasa

partoforg

anizationalmembersh

ip.

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MAINOBJE

CTIVESOF

COMPENSA

TION

1.

Internal

Equity-Ensuresthatmo

redifficult

jobsarepaidmore.

2.

ExternalParity-Aim

stocompen

satefairlyin

compariso

ntosimilarjobsinlabor

market.

3.

Individu

alEquity-EqualPayfor

equalwork.

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chool

SOMEOTH

EROBJECT

IVES

Toattracttalent

Toretain

talent

Ensuree

quity

Tomotiv

atenew&

desiredbehavior

Controlcost

Complywithlegalrules

Easeofo

peration

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chool

FACTORSI

NFLUENCIN

GEMPLOYEE

COMPENSA

TION

I.External

Factors

i.LaborM

arket

ii.

Costof

Living

iii.LaborLaws

iv.

Society

v.

Econom

y

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chool

Contd./

II.

Interna

lFactors:

i.Busine

ssStrategy

ii.

JobEvaluation&Performanc

e

Appraisal

iii.Emplo

yee

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chool

SYSTEM

O

F

C

OMPEN

SATING

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chool

PayforWo

rk&Perform

ance

PayforTim

enotWork

DisabilityIncomeCont

inuation

DeferredI

ncome

Spouse(Family)Incom

eContinuat

ion

Health,

Ac

cident&LiabilityProtection

IncomeEq

uivalentPay

mentsPer

ks

Organizati

onsDevelop

CompensationPolicy

Dimensions

7/29/2019 CRM Mod1 Student

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chool

HOWI

SCOMPENSATIONUSED?

Compensa

tionmaybe

adjustedac

cordingthe

businessn

eeds,goals,andavailab

leresources

Compensationmaybeus

edto:

recruitand

retainqualifie

demployees.

increaseormaintainmor

ale/satisfaction

.

rewardandencouragepe

akperformanc

e.

achieveinternalandexte

rnalequity.

reducetur

noverandencouragecompan

yloyalty.

modify(th

roughnegotiat

ions)practices

ofunions.

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chool

WHATAR

ETHECOM

PONENTSOFA

COMPENSATIONSYSTEM?

Thecomponentsofac

ompensationsystem

include:

JobDesc

riptions

JobAnal

ysis

JobEvaluation

PayStru

ctures

SalarySurveys

PoliciesandRegulations

7/29/2019 CRM Mod1 Student

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chool

WHATARE

DIFFERENTTYPESOF

COMPENSA

TION?

Differenttyp

esofcompe

nsationinclude:

BasePay

Commissio

ns

OvertimePay

Bonuses,P

rofitSharing,

MeritPay

StockOpti

ons

Travel/Meal/HousingA

llowance

Benefitsin

cluding:den

tal,insuranc

e,medical,

vacation,

leaves,retirem

ent,taxes...

7/29/2019 CRM Mod1 Student

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chool

COMPENSATIONPLAN

Developaprog

ramo

utline

Designateanin

dividualtoove

rsee

Developacompensationphilo

sophy

Conductajobanalysisofallp

ositions

Evaluatejobs

Determinegrad

es

Establishgrade

pricingandsa

laryrange

Determineana

ppropriatesala

rystructure

Developasalaryadministratio

npolicy

Obtaintopexecutives'approv

alofthebasic

salaryprogram

Communicatet

hefinalprogra

mt

oemployee

sandmanagers

Monitorthepro

gram

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CONCEPT

O

F

REW

ARD

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Rewardisacompositeofall

Rewardisacompos

iteofall

organiza

tionalmechanism

and

organiza

tionalmechanism

and

strategie

susedtofinallyacknowledge

strategie

susedtofinallyacknowledge

employe

esbehaviorandperformance.

employe

esbehaviorandperformance.

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chool

OBJECTI

VEOFREW

ARD

OBJECTI

VEOFREW

ARD

Tomotiva

teemployees

toperformeffectively

Tomotiva

teemployees

tojointheorg

anization

Tomotiva

teemployees

tocontinueto

work

Enhance

Loyalty

Satisfaction

7/29/2019 CRM Mod1 Student

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chool

Financial

Rewards

Financial

Rewards

++

NonFinanc

ialRewar

ds

NonFinanc

ialRewar

ds

==

TotalReward

TotalReward

7/29/2019 CRM Mod1 Student

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chool

FINANCIALREWA

RDS

FINANCIALREWA

RDS

Anumber

ofmonetary

benefitsoff

eredto

employeestoobtainshortterma

nd

longterm

commitmen

t.

Typesoff

inancialrewardsgivenare;base

pay,variablepay,share

ownership,

bonus,etc.

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NONFIN

ANCIALRE

WARDS

NONFIN

ANCIALRE

WARDS

Non-financialrewardscatermainlytofulfill

thepsycho

logicalneed

softheemp

loyees

Typesof

nonfinancia

lrewardsgivento

employees

are;recogn

ition,opport

unitiesto

developsk

ills,qualityofworklife,etc.

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chool

REWARD

SYSTEM

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chool

Levelo

fskill

RateofPay

AdoptedfromBanfieldPaulandKayRebeccaIntrodu

ctiontoHRM.

OxfordUniversityP

ressVol.4PageNo.

308

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chool

WHYREW

ARDSYST

EMS?

Attractin

g,retaining

&motivating

employees

Togetdesiredbehav

ior

Toachievestretchst

andards

Tocater

individualneeds

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chool

REWARDM

ECHANISM

S

Praise/rec

ognitionfrom

supervisor

s

Challengingworkass

ignments

Promotion

sandlateralmoves

Paid

leavetoem

ployees

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chool

GETTINGMOREOUT

OFREWARDS

Aligningr

ewardswith

objectives

Outcome-basedevalu

ationofemp

loyee

Agreeing

whatbehavi

orsandcapa

bilities

willberewarded

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chool

DesigningR

ewardSyste

m

W

homt

oRew

ard?

IndividualEmployees

Teams

Organization

Outsiders

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chool

DesigningR

ewardSyste

m

W

hattoRewa

rd?

Performance

Organization

alLevel

Unit/Depar

tmentalLevel

SpeedandE

fficiency

Loyalty

Innovation

UpholdingValues

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chool

TechnicalS

olution

Learning

GoodBeh

avior

SenseofHumor

Teaching

Publications

EventManagement

SocialConcern

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chool

C

haracteristicsofrewa

rds

Rewardsmusthavethefo

llowingcharacteristics

Value

Relevant

Purpose

Behaviorale

ffect

Recognition

7/29/2019 CRM Mod1 Student

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chool

Co

nceptofTot

alRewardSystem

TotalRewardStrategiessh

ouldinclude

DirectFinancial

IndirectFina

ncial

Identification

WorkContent

CareerOppo

rtunities

7/29/2019 CRM Mod1 Student

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chool

R

ewardsc

anfailin

theform

ofincentives

Kohn

Payisnot

amotivator

Rewardsp

unish

Rewardsrupturerelationships

Rewardsignorereason

s

Rewardsd

iscouragerisktaking

Rewardsu

ndermineinterest

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chool

EC

ONOMICTHEO

RY

OFW

AGES

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ECONOM

ICTHEORIES

1.Social

Wage

The

ories

Subsis

tence

The

ory

Wagefund

Theory

Resid

ualClaimant

Theory

MarxianTheory

2.Ju

stification

The

ories

Marginal

Productivity

Th

eory

Bargain

ing

Theory

Supplyand

Demand

Theory

Competitive

Theory

3.Behavioral

The

ories

Employees

Acc

eptance

level

Int

ernalWage

Structure

Wageand

Motivation

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LIMITAT

IONSOFECONOMICT

HEORY

WagesandPricesareeitherfullyfixedor

fullyflexible.

Assu

mptionofFu

llE

mployme

nt

Wagescouldbeinfluencedbyfactorsother

thanw

agestoo.

WageandBenefitsreflectIndustry

characteristicsand

personalch

aracteristics

.

Interferencebyg

overnment

Tech

nologyandProductivityaremajor

determ

inants

Pressureforlinkinglabourstandardswith

Intern

ationalTrade.

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chool

WA

GESAN

DSALA

RY

ADMINIS

TRATIO

N

A

T

MICRO

LEVEL

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chool

Policies

Techn

iques

Objectives

ALIGNMENT

Work

analysis

Description

EFFICIEN

CY

-Perform

ance

-Quality

-Customers

-Costs

FAIRNESS

COMPLIA

NCE

INTERNAL

STRUCTURE

COM

PETITVENESS

Market

Surv

eysPAYSTRUCT

URE

C

ONTRIBUTION

Seniority

Based

Performance/

MeritB

ased

INCENTIVE

PROGRA

MS

MANAGEMENT

Costs

CommunicationEVALUATION

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INTERNALALIGNMENT

DependentofInternalPayStructure

Levels

Differentials

Criteria

-C

ontentand

Value

-U

seValuean

dExchange

Value

-J

obandPersonBased

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chool

EXTERNALCOMPE

TITIVENES

S

Factors

ShapingExt

ernalCompe

titiveness

LabourMarket

Natureof

Demand

Natureof

Supply

ProductM

arketFactors

DegreeofCompetition

LevelofP

roductDemand

OrganisationFactors

Industry,

Strategy,

Size

Individua

lManager

EXTERNAL

COMPETITIVENESS

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chool

CONTRIBUTION

Senio

rityBased

Perfo

rmanceBasedPay

Merit

Guidelines

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chool

MANAGE

MENT

Managin

gLabourCo

st

-ControllingEmployment

-Controllingav.

CashCompensation

Communication

-Ma

nagingtheM

assage

Pay

-Ch

angeAgentinRestructuring

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chool

W

AGECONCEPT

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chool

WAGE

ANDSALARY

Wage

:Indexofproductivity

DefinitionofWage

Wage

vsSalary

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chool

ROLEOF

VARIOUS

PARTIESIN

COMPENSATION

&

REW

ARD

MANAG

EMENT

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chool

ROLEOFEMPLOYERS

Abilitytopay

Costeff

ect

Wagecosts

Unitlabourcosts

Costreduction

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chool

ROLEOFEMPLOYEES

Abilitytoliveandwork

Priceeffect

Wagele

vels

Effortputin

Wagem

aximization

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chool

ROLEOF

THEGOVE

RNMENT

Five

YearPlans&

WagePolicy

Lega

lFramework

-Paymento

fWagesAct1936

-MinimumWagesAct1948

-Paymento

fBonusAct19

65

-EqualRem

unerationAct1976

Unila

teralPayFixation

PayCommissions

WageBoards

Adju

dication

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chool

ROLEOF

UNIONS

Collectiv

eBargaining

(Levels)

Secto

ralBargainin

gatNationa

lLevel

Indus

try-cum-Re

gionwideAg

reements

DecentralizedFirm

/PlantLevel

Agreem

ents

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chool

LEGISL

ATIONS

AFFECTING

COMPEN

SATION

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chool

A

CTSAFFECTI

NGCOMPENS

ATION

PaymentofGratuityAct,197

2

TheWorkmen

sCompensatio

nAct,1923

TheContractLabor(R&A)A

ct,

Article43ofC

onstitutionOfIndia

All

actswithWageorSalary

oranycompensationbetwee

n

t

heEmployerandEmployee

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chool

THANKYOU!