mu15 compensation benefit set 2

7/30/2019 Mu15 Compensation Benefit Set 2

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NAME: NEELAM ASWAL

ROLL NUMBER: 521131210

LEARNING CENTER: 02882

SEMESTER: 4th

SUBJECT NAME: Compensation Benefits

MODULE NO. : set-2

DATE OF SUBMISSION

AT THE LEARNING

CENTRE: 10th Dec 2012

FACULTY SIGNATURE:
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Master of Business Administration- MBA Semester 4

MU0015 Compensation Benefits

(Book ID:1336)Assignment Set- 2

Q1. What are the major

issues related to

repatriation?

Ans.The term repatriation refers to bringing the employees who are on an internationalassignment back to the home country. It is very important to manage repatriationof employees in a very careful way. A poorly managed repatriation can lead to afeeling of frustration and cynicism in the employees. These feelings can be worsethan the culture shock experienced in the first weeks of the assignment.

It requires transparency in repatriation policy, sharing information on the career

progression path, degree and support from the organisation during theinternational tenure and so on. Many organisations develop and share documented

guidelines with respect to overseas assignment, so that the employees understandthe rules and regulations and also know what to expect. Expatriate managers oftenreturn to the home office with a wealth of experience and perspectives. Yet, poorrepatriation processes are blamed for underutilizing talent, losing human capital,

and discouraging skilled managers from accepting overseas assignments(Gregersen and Black, 1995). Often the impact of repatriation for the employee isfar greater than that of the original move to the host location. The move abroad is

usually exciting, involving a promotion or at the very least, an increase in peerstatus. Also, the day to day impact of life in the new culture is more keenly felt by

the spouse and children, who interact with it on a far more personal basis.Moreover, the employee will be chosen for a particular skill set, which aregenerally appreciated by the new team as an asset.

As the project comes to an end, the expatriate starts the closure process of thepost, probably handing over to a locally based team or manager. At this point,home country HR should be back in touch with the employee, to start the careerplanning for the home move. However, most companies provide no post


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compensation plan can be implemented. Usually, an outside survey firm is hired to

perform the annual survey for employees. The results of this survey is sharedthrough out the company. Thus, the top management will get to know howemployees feel about the compensation. Employee satisfaction towards

compensation is the most important discourse for any company, because it is

directly related to the performance that can be achieved by employees. The morean employee is satisfied and happy with their compensation, the better theyperform. In turn, this will influence the company performance too. Thus companiesshould strive to bring in a fair compensation plan so as to increase employee

satisfaction. Employee satisfaction with respect to compensation and rewardsdepends on the level of intrinsic and extrinsic results and how the employee viewsthose results. These results have different values for different employees.

For most of the employees, a responsible and challenging job may have neutral or

even negative value depending on their education and previous experience bywork providing intrinsic results. These employees might have a higher value for

monetary rewards, whereas for a few others, a responsible and challengingposition or the learning involved in the job may have very high positive values.

Appropriate type of compensation plans, rewards and benefits are important foremployees. Financially, the employees must be satisfied that their salaries arejustified and are according to their contribution to the company. In this respect,both employees and employer basically work towards the same goal for mutualbenefit. Non financial rewards should also be given to employees for theircontributions. For example, paid time off, recognition, employee of the monthprograms, nominations to training programs, career growth opportunities and soon.

To provide incentives, these models support the existence of reward systems thatstructure compensation so that the employees expected value increases withobserved employee productivity. Thus compensation can take many various forms,including appreciation from managers and co- workers, implicit promises of futurepromotion opportunities, feelings of self-esteem that come from superiorachievement and recognition and current and future cash rewards related toperformance.


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Q3. What are the factors to be taken into account to

ensure an optimum compensation package for

executives?

Ans.

There are a lot of factors to be taken into account to ensure an optimumcompensation package for executives. In this section, some of the importantcriteria are elaborated.

Strategy criterion

This refers to the correlation between the organisational strategy and theperformance of its executives. The difficult work is to come out with a modelwhich balances between organisational strategies and employee performance.One of the biggest expenses for an organisation could be the raising cost ofemployee compensation. On the other side, it cannot be neglected because theemployees performance is directly related to compensation. Therefore, some ofthe important steps to be taken into account are:

Creating incentives based on the product life cycle.Relating compensation to organisational strategies.Following a simple compensation strategy.Role criterion

Hierarchical positions and organisational roles have a contributing effect onexecutive compensation design. Executives act as figureheads, and hence theyshould be compensated more than others in the lower rungs. However,organisations are now experimenting with structures to respond to the changingenvironment. It may be essential at times to sacrifice the traditional hierarchicalstructure. In such cases, executive compensation may not be aligned with thefigurehead roles.

Sometimes the pay is based on functional aspects and not on the role or position.For example, pilots are not paid a high compensation package for their position,but for their functional aspects. Therefore, the roles and responsibilities of thejob is an important aspect in deciding the executive compensation.

Behaviour criterion


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The actions and the processes followed by executives while performing their jobsreveal their behaviour. This criterion is associated with the monitoringmechanism, and executives usually try and do a subjective analysis of thebusiness decisions. Hence executive compensation based on behaviour criterionis quite sensible. However, executive behaviour is difficult to measure and all the

aspects of the observed behaviour cannot be expected to meet a specificoutcome. Hence, behaviour criterion has not received much attention from thecorporate world.

SizeThere is a general opinion that the size of an organisation plays the mostinfluencing role while designing executive compensation, while on thecontrary, it is not. It is the performance of the organisation which is the mostimportant criterion which influences executive pay package.

Market

The marginal productivity theory of Roberts (1956) argues that a market forces,that is, supply and demand for executive talent determine executive pay. Thistheory considers the services of executives like any other input for running abusiness operation. The theory argues that the value of the input (executivecompensation) is determined by the intersection of supply and demand in thelabour market.

Peer compensation

The social comparison theory (OReilly et al. 1988) assumes that the

compensation of selected peers plays a role in designing executive pay. Oftenboard members of an organisation consider themselves as a referral point intheir executive pay recommendations

Q4. How is employee benefit

and labour market linked?

Ans.Labour markets function through the contact of employees and employers. Labour

economics looks at the providers of labour services (employees), the demanders oflabour services (employers), and attempts to understand the resulting model ofwages, employment, and income. In other words, from the labour market point of

view, wages necessarily depends on the prevailing supply-demand conditions of


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the labour market. Earlier, the compensation management practices of Indian

organisations focused on attracting, retaining, developing and compensationemployees, not considering the labour market conditions. However, with theincrease of economic activity and the subsequent increase in the competition

between organisations, employee retention has taken the utmost priority.

Moreover, globalisation has also contributed to the increased mobility of labour astalented and capable employees now change jobs more frequently, moving acrossthe globe. Given the conditions, the demand and supply conditions in the labour

market gain importance and organisations have to consider these factors whilesetting up the compensation policies. Designing compensation plans which keeppace with the demand and supply of labour is now becoming a corporate practice.

Q5. What are the factors that have to be

determined before preparing the salary

structure?

Ans.

The following three factors have to be determined while developing a pay structure:

The proper data for establishing the relative value of a particular job to the organisation.The proper pay range for a job with the defined value to the organisation.The value of each job position within the specified pay range.Once the above factors are determined, pay structures can be developed

through the following steps:

1.Group the jobs with those that have a similar value in the organisation.2.Measure these groups to find out the number of pay ranges needed to group thejobs on the basis of their value to the organisation.

3.Create a salary range that has a minimum point, a mid-point and a maximum


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point for amounts allotted within the range and determine the pay for each jobgrouping.

An organisations compensation philosophy and pay strategy determines theapproach that should be taken to allocate pay across job ranges. Factors to be

considered are:

Number of years of experience. Number of reporting staff members. Performance evaluation results. Hazardous working conditions. Undesirable shifts. Education and degrees. Professional certifications. Management opinions.

A successfully developed pay structure identifies career development in additionto promotion. It demonstrates and pays for the business results on which anorganisation places value. An effective pay structure is worth the time andattention. It pays to get it right.

How an organisation structures its base salary program is basically a matter of

organizational philosophy, although marketplace practices are very essential to consider in

highly competitive situations. In structuring this base pay program, several options are

available:

Organisations can use a single rate structure in which the employeesperforming similar jobs will receive the same pay rate.

Organisations can use a tenure based approach which focuses on from howlong an employee has been employed in a particular job.

Organisations can also use a combination of a tenure-based plan and amerit-based plan. For example usually employees begin their job at a fixedrate, and then progress to higher rates during their first year based on thenumber of years spent in the job, then any additional pay increase isawarded only on the basis of performance.

Organisations can use a pay system based on productivity. An


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example for this would be an employee who is paid only a salescommission.

An increasingly popular option is some form of base pay with anincentive opportunity, either based on individual, team, unit, or

company performance.

Most of the organisations combine elements of these approaches to create theirown formal program. The most common traditional pay structure involves groupingsimilar jobs into pay grades and assigning a salary range with a minimum, amidpoint, and a maximum.

Q6. Mr.Senthil is the HR Manager of First Source Pvt. Ltd. He found

that many of the employees have been doing the same work for a

long period of time. He decided to enrich some of their jobs. List

some of the strategies which can be used by Mr.Senthil to enrich

jobs in organisations?

Ans.Job enrichmentis a way to motivate employees by giving them increased

responsibility and varietyin their jobs. Many employers traditionally believed that

money was the only true motivating factor for employees and that if you wanted to

get more work out of employees, offering them more money was the only way to

do it. While that may be true for a small group of people, the majority of workers

today like to work and to be appreciated for the work they do. Job enrichment

allowing the employees to have more control in planning their work and deciding

how the work should be accomplishedis one way to tap into the natural desire

most employees have to do a good job, to be appreciated for their contributions tothe company, and to feel more a part of the company team.

Job enrichment has two separate dimensions which contribute to an employee'sbehavior at work. The first dimension, known as hygiene factors, involves thepresence or absence of job dissatisfacters, such as wages, working environment,

rules and regulations, and supervisors. When these factors are poor, work is


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dissatisfying and employees are not motivated. However, having positive hygiene

factors does not cause employees to be motivated; it simply keeps them frombeing dissatisfied. The second dimension of Herzberg's theory refers tomotivators, which are factors that satisfy higher-level needs such as recognition

for doing a good job, achievement, and the opportunity for growth and

responsibility. These motivators are what actually increase job satisfaction andperformance.

Job enrichment becomes an important strategy at this point because enriching

employees' jobs can help meet some of their motivational needs. There arebasically five areas that are believed to affect an individual employee's motivationand job performance: skill variety, task identity, task significance, autonomy, and

feedback. Job enrichment seeks to find positive ways to address each of theseareas and therefore improve employee motivation and personal satisfaction.

Skill varietyinvolves the number of different types of skills that are used to do a

job. This area isimportant because using only one skill to do the same taskrepeatedly can be quite boring, typically causing the employee's productivity todecrease after a period of time. However, using a variety of skills in a job will tendto keep the employee more interested in the job and more motivated.

One way businesses are focusing on this area is throughjob rotation, that is, movingemployees from job to job within the company, thereby allowing employees avariety of tasks in their work and helping prevent boredom. While this process can

be costly to the company because employees must be trained in several differentareas, the cost tends to be balanced by the increase in morale and productivity.

Job rotation also gives each employee the opportunity to see how the different jobsof a company fit together and gives the company more flexibility in covering taskswhen workers are absent. However, while job rotation is a good way to enrichemployees' jobs, it can also hinder performance: Having to know several differentjobs in order to rotate, can prevent employees from becoming proficient at any ofthe jobs. Therefore, the advantages and disadvantages of job rotation as anenrichment strategy have to be carefully weighed.

Task identityis a matter of realizing a visible outcome from performing a task.Being able to see theend result of the work they do is an important motivator foremployees. One way to make task identity clearer is throughjob enlargement,

which means adding more tasks and responsibilities to an existing job. Forexample, instead of building just one component part of a humidifier, a team ofemployees builds the entire product from start to finish. When using jobenlargement as an enrichment strategy, it is important that enlarging the job givesthe employee more responsibility and more variety, not just more work.

Task significance involves how important the task is to others in the company,which is important inshowing employees how the work they do fits in with that


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done in the rest of the organization. If employees can see how their work affectsothers, it will be a motivator to do the best job they can.

Many companies take new employees on a tour of the company and providetraining sessions on how each part of the company works together with the

other parts. In order to accept and handle responsibility, it is important thatemployees know how the various areas of the company work together; withoutthis knowledge, it is very difficult for them to handle decision-makingresponsibilities. Putting employees from different areas of the company intoplanning teams can also help them see the significance of the tasks they perform.

Autonomyinvolves the degree of freedom, independence, and decision-makingability the employeehas in completing assigned tasks. Most people like to be givenresponsibility; it demonstrates trust and helps motivate employees to live up tothat trust. Responsibility can also help speed up work processes by enabling theemployee to make decisions without having to wait for management approval.

Autonomy is a very important part of job enrichment because it gives the employeepower and a feeling of importance.

A type of job enrichment that restructures work to best match the employee to thejob isjobredesign. Job redesign can focus on combining existing jobs, forming workgroups, and/or allowingcloser contact between employees and individualsuppliers or customers. The idea behind job redesign is to match employees with ajob they like and are best qualified to perform.

Self-managed teams are a type of job design whereby employees are grouped intoteams and given certain guidelines to follow as well as goals to accomplishandthen left alone to accomplish those goals. Self-managed teams demonstrate thecompany's faith in the employees and give employees a feeling of power and pridein the work they accomplish.

Feedbackdescribes how much and what type of information about jobperformance is received bythe employee. It is one of the most important areasfor motivation. Without feedback, employees have no way of knowing whetherthey are doing things correctly or incorrectly. Positive feedback helps to motivateemployees by recognizing the efforts they have put into their work.

While monetary rewards for doing a good job can be a strong incentive,sometimes saying "you did a really good job on that project" can mean just asmuch. Corrective feedback is also important because it lets employees know whatareas need improvement.

There are many different types of job-enrichment activities and programs that


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companies can implement to encourage worker participation and enhancemotivation. The team atmosphere is one way to enrich jobs. Grouping employeesinto teams and allowing the team the freedom to plan, make decisions, andaccomplish their goals gives employees a feeling of importance and responsibility.

It can also help employees come up with creative ideas on ways to improve workactivities by giving them the opportunity to work closely with others. Asking forand encouraging employees to give input on company strategies and plans isanother way to enrich jobs. Often times employees have the best input because theyare the ones actually performing the activity on a daily basis. Holding companyaward ceremonies can also help to enrich jobs and motivate employees byrecognizing individual employees for their contributions to the company.

The purpose of job enrichment is to improve the quality of an employee's job andtherefore motivate the employee to accomplish more. However, in order for jobenrichment to work, the employee has to desire and accept new ways of

accomplishing tasks. Some employees lack the skills and knowledge required toperform enriched jobs, while others are quite happy doing routine jobs becausethey feel the current work situation is relatively stress -free. It is likely that thesetypes of employees would not like job-enrichment activities and would not acceptthe new way of doing things. Therefore, asking for employee input and keepingcommunication lines open is essential to the success of job-enrichment program

mu15 compensation benefit set 2

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