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Compensation and Rewards

This document discusses compensation and rewards. It outlines that compensation includes direct financial compensation like salaries and bonuses, as well as indirect compensation like benefits. It also discusses non-financial compensation factors like variety of work and good working conditions. The objectives of compensation management are to help the organization succeed while ensuring internal and external equity among employees. Compensation also aims to acquire qualified employees, retain current staff, reward desired behaviors, and control costs. Factors like an employee's job, performance, skills and the labor market determine direct financial compensation.

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526 views

Compensation and Rewards

This document discusses compensation and rewards. It outlines that compensation includes direct financial compensation like salaries and bonuses, as well as indirect compensation like benefits. It also discusses non-financial compensation factors like variety of work and good working conditions. The objectives of compensation management are to help the organization succeed while ensuring internal and external equity among employees. Compensation also aims to acquire qualified employees, retain current staff, reward desired behaviors, and control costs. Factors like an employee's job, performance, skills and the labor market determine direct financial compensation.

Uploaded by

varshmurhe
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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Compensation and Rewards

Compensation
Is what employees receive in

exchange for their contribution to the organization. When managed correctly, it helps the organization achieve its objectives and obtain, maintain, and retain a productive workforce.

Compensation (Contd)
Without adequate

compensation, current employees are likely to leave and replacements will be difficult to recruit. The outcomes of pay dissatisfaction harm productivity and affect the quality of work

Forms of compensation
Direct Financial Compensation

pay received in forms of wages, salaries, bonuses and commissions. Indirect Financial Compensation(benefits) - All financial rewards not included in direct compensation. For examples workers compensation, Family & medical leave, Disability Protection,

Forms Of Compensation (Contd)


Nonfinancial Compensation

- Satisfaction person receives from psychological & or physical environment in which person works. For examples, skills variety, experiences, good working conditions, flextime

Objectives in compensation management

To help the organization achieve strategic

success while ensuring internal and external equity. Internal equity- ensures that more demanding positions or better qualified people within the organization are paid more. External equity - assures that jobs are fairly compensated in comparison with similar jobs in other firms.

Objectives in compensation management (Contd)


Acquire qualified personnel
Retain current employees Ensure equity Reward desired behaviour Control costs Facilitate understanding

Acquire qualified personnel


Compensation needs to be high enough to attract

applicants. Pay levels must respond to the supply and demand of workers in the labour market since employers compete for workers. Premium wages are sometimes needed to attract applicants already working for others.

Retain current employees


Employees may quit when compensation levels

are not competitive, resulting in higher turnover.

Ensure equity

Compensation management strives(berjuang) for

internal and external equity. Internal equity requires that pay be related to the relative worth of a job so that similar jobs get similar pay. External equity means paying workers what comparable workers are paid by other firms in the labor market.

Reward desired behaviour


Pay should reinforce desired behaviours and act

as an incentive for those behaviours to occur in the future. Effective compensation plans reward performance, loyalty, experience, responsibility, and other behaviours.

Control costs
A rational compensation system helps the

organization obtain and retain workers at a reasonable cost. Without effective compensation management, workers could be overpaid or underpaid. Comply with legal regulations. A wage and salary system considers the legal challenges imposed by the government and ensures the employer's compliance.

Facilitate understanding
The compensation management system should

be easily understood by human resource specialists, operating managers, and employees.

Compensation policies
Pay leaders- pay higher wages & salaries

Pay based on market rate- pay what most

employers pay for same job Pay followers- pay below market rate because poor financial condition or believe do not require highly capable employees

Ability to pay
Organizations assessment of ability to pay is

important factor in determining pay levels.

Employee will be paid based on labor market conditions:


It includes:

Compensation surveys- what are other firms

paying?, geographic area of survey Cost of living- when prices rise over a period of time Labor Unions- mandatory collective bargaining management & unions as wages, hours & other terms and conditions of employment, cost of living (COLA) allowance has been disappearing

Employee will be pay based on labor market conditions (Contd):


The economy- cost of living often rises as

economy expands. Compensation legislation- states in wages council Act 1947, government has generally resisted any suggestions for a minimum wage applicable throughout industry and region.

Job as determinant of direct financial Compensation

Job itself continues to be factor.

Organizations pay for value they attach to certain

duties, responsibilities, and other job related factors as working conditions. E.g, professional positions different level of salary

Employee as determinant of direct Financial Compensation

Employees may demands for their salaries based on:


Performance
Competencies Skills Experiences Seniority

Performance related Pay


Performance related pay (PRP) encompasses several companywide schemes, like; employee participation and share ownership schemes etc. and general linkage with the compensation which the employees get. PRP schemes are designed and administered based on a view of what the businesses needs are, hence for effective results, it needs to be aligned closely to business strategy.

Selection of performance objectives


Identification of the performance objectives both for the individual employees and also for the organization as a whole requires organization to: Focus on a result, not an activity Be consistent Be specific Be measurable Be related to time Be attainable

We ensure this by setting SMART objectives, as it gives opportunity to scientifically measure the performance targets, trace the possible loopholes in setting the targets and effectively map the future strategies, aligning people with the organization.

Developing performance standards


For effective compensation design, developing performance standards is important. Simply benchmarking performance standards with competing organizations may not always be the right approach. Exceeding expectations in setting performance standards and thereby making employees to overstretch is a common organizational syndrome, particularly for new start-ups, who decide to rise disproportionately. HR managers also align performance standards with the job descriptions, mission, goals and objectives. Again performance standards required to be specific to various levels.

Guidelines for Developing Performance Standards


Organizations must keep in mind the following guidelines while writing performance standards: Performance standards should be related to the employee's assigned work and job requirements (check the job descriptions). Reporting systems should be adequate to measure and therefore should have more quantitative data. . Quantifiable measures may not apply to all functions. Describe in clear and specific terms the characteristics of performance quality that are verifiable and that would meet or exceed expectations. Accomplishment of organizational objectives should be included where appropriate, such as cost-control, improved efficiency, productivity, project completion, process redesign, or customer service.

Thank you

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