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Components of Compensation

The document discusses various components of compensation including wages, salary, incentives, fringe benefits, perquisites, and non-monetary benefits. It provides details on fringe benefits offered by Wipro such as cash compensation, social security, education assistance, employee stock purchase, and leave programs. There is a distinction made between fringe benefits which are non-taxable for employees, and perquisites which are taxable as part of income. Non-monetary benefits like work environment, professional development and flexible schedules are also mentioned. Equity theory related to fair compensation is summarized, covering internal and external equity, and the consequences of inequitable pay such as reduced performance or withdrawal from the job.

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Lokendra Sharma
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93 views

Components of Compensation

The document discusses various components of compensation including wages, salary, incentives, fringe benefits, perquisites, and non-monetary benefits. It provides details on fringe benefits offered by Wipro such as cash compensation, social security, education assistance, employee stock purchase, and leave programs. There is a distinction made between fringe benefits which are non-taxable for employees, and perquisites which are taxable as part of income. Non-monetary benefits like work environment, professional development and flexible schedules are also mentioned. Equity theory related to fair compensation is summarized, covering internal and external equity, and the consequences of inequitable pay such as reduced performance or withdrawal from the job.

Uploaded by

Lokendra Sharma
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Components of Compensation

The pay structure of a company depends on several factors such as labour market conditions, companys paying capacity and legal provisions. Wages: In India, different acts include different items under wages though all the Acts include basic wage and dearness allowance under the term wages. Under the workmens compensation act, 1923 wages for leave period, holiday pay, overtime pay, bonus and good conduct bonus form part of wages.

Major Components
Wages & salary Incentives Fringe benefits Perquisites Non monetary benefits

REMUNERATION

FINANCIAL

NONFINANCIAL

Hourly & Monthly Rated Wages Salaries

Incentives Individual Plans Group Plans

Fringe Benefits PF Gratuity Medical Care Accident Relief Health & Group Insurance etc.

Perquisites Company Car Club Membership Paid Holidays Furnished House, etc.

Job Context Challenging job responsibilities Recognition Growth Prospects Working Conditions , etc.

DIRECT

INDIRECT

FRINGE BENEFITS IN INDIAN COMPANIESWIPRO


Cash compensation Social security and well-being Development and education Employee stock purchase program:5% discount of WIPRO stocks Leave of absence programs (sabbaticals etc.) Railway half-fare season ticket. Family Service: Support in the areas of Childcare Homecare and Eldercare. Bonus for recommending new employees. Sickness and accident income plan

Perquisites
"Perquisite" may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. Rent-Free House Car Interest-Free Loan Club Membership Paid Holidays Others
Gift-in-kind up to Rs. 5,000 in a year. Employer's contribution to staff group insurance scheme

Difference between Fringe Benefits & Perquisites


Expense done by employer on the entertainment facilities of employee counts under fringe benefits while free education facility provided to employee's children came under perquisites. The basic difference between fringe benefits & perquisite is that while fringe benefits are not clubbed with salary & the tax on the same is paid by the employer, the perquisites are clubbed under the head "income from salary" & tax accordingly to employee. Thus while fringe benefits are taxed in the hands of employer, the perquisite are taxed in the hand of employee himself.

Non Monetary Benefits


Education Work/life balance Relaxed environment Professional development Physical work environment A challenging job Responsibilities & Recognition Flex-time schedules Free or discounted food and drinks

The laws and matters relating to wages and bonus come under the purview of the Ministry of Labour & Employment. Within the Ministry, Central Industrial Relations Machinery (CIRM) enforces all the labour legislations and the rules framed thereunder. CIRM is an attached office of the Ministry and is also known as the Chief Labour Commissioner (Central) [CLC(C)] Organisation. The CIRM is headed by the Chief Labour Commissioner (Central). Also, wage cell and wage board have been set up for the purpose

Equity Theory

Internal Equity

Motivation

External Equity

PERCEPTION OF FAIRNESS

Commitment

Individual Equity

Performance

Equity Theory (Adams, 1963)


People develop beliefs about what is a fair reward for one job contribution - an exchange People compare their exchanges with their employer to exchanges with others-insiders and outsiders called referents If an employee believes his treatment is inequitable, compared to others, he or she will be motivated to do something about it -that is, seek justice.

Model of Equity Theory


Is versus Ir Os Or I = Inputs - employees contribution to employer R = Referent - comparison person S = Subject the employee who is judging fairness of the exchange

Equity Theory - Exchange Scenarios


Case 1: Equity -- pay allocation is perceived to be to be fair - motivation is sustained Case 2: Inequity -- Underpayment. Employee is motivated to seek justice. Work motivation is disrupted. Case 3: Inequity - Overpayment. Could be problem. Inefficient. In other cultures employees lose face.

Consequences of Inequity
The employee is motivated to have an equitable exchange with the employer. To reduce inequity, employee may Reduce inputs (reduce effort) Try to influence manager to increase outcomes (complain, file grievance, etc.) Try to influence co-workers inputs (criticize others outcomes or inputs) Withdraw emotionally - or physically (engage in absenteeism, tardiness, or quit)

Equity Theory Applications


Develop tools to pay people in proportion to their contributions Let employees know who their pay referents are in the pay system: identify pay competitors and internal pay comparators. Strive for consistent pay allocations Monitor internal pay structure and position in the labor market for consistency.

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