Scribd
Upload
33 views

Compensation

Compensation management involves determining fair pay and benefits for employees in exchange for their work. It considers factors like productivity, costs of living, market rates, and government policies. Compensation includes direct pay like salaries and bonuses as well as indirect benefits like insurance and retirement plans. Companies determine compensation based on job roles, performance, qualifications, location, and legal standards to attract and retain talent while motivating productivity. Effective compensation management benefits both organizations through improved performance and employees through fair rewards and satisfaction.

Uploaded by

rishu jain
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
33 views

Compensation

Compensation management involves determining fair pay and benefits for employees in exchange for their work. It considers factors like productivity, costs of living, market rates, and government policies. Compensation includes direct pay like salaries and bonuses as well as indirect benefits like insurance and retirement plans. Companies determine compensation based on job roles, performance, qualifications, location, and legal standards to attract and retain talent while motivating productivity. Effective compensation management benefits both organizations through improved performance and employees through fair rewards and satisfaction.

Uploaded by

rishu jain
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 16

Compensation Management

By: Dr. Rishu Jain


What is compensation management?

• It is managing and determining an employer’s compensation to the employees in


return for their work.
• Compensation management involves managing, analysing, and determining the
salary, benefits, and incentives paid to the employees. Compensation management
plays a crucial role in attracting and retaining top talent. It includes monetary as
well as non-monetary benefits. It also increases employee productivity and
reduces employee turnover.
• Additionally, it ensures that every employee gets paid a fair wage based on
industry standards, work experience, company budget, etc.
Key factors affecting compensation management:

• Here’s a list of key factors that affect compensation management. We


have discussed each factor in detail in the next section.
• Productivity of workers
• Ability to pay
• Government policies
• Labour unions
• Cost of living
• Demand and supply of labour
• Industry standards
• Productivity of workers– Productivity-based compensation helps
derive the best results. The higher the productivity of employees, the
more should be the compensation.
• Ability to pay– If your company has high profitability, you can pay
better compensation and retain your employees and vice versa.
• Government Policies– Government also has certain policies to
protect employee interests. The employer has to pay the employees as
per governmental regulations and provide benefits such as PF, medical
insurance, gratuity, and pension.
• Labour Unions– They also play an essential role in ensuring
employees get a fair wage. They fight with the employers for the
employee’s rights and wage revision.
• Cost of Living– Cost of living also influences compensation to a large extent. An
employee based in a city with a high cost of living needs a higher salary and vice
versa.

• Demand and Supply of Labour– It is one of the most important factors that
affect the compensation of employees. If the demand is more than the supply, the
compensation will be higher.

• Industry Standards– No employee would like to join a company whose


compensation is below the industry standards. Therefore you need to analyse the
standard market rates of different roles and pay your employees accordingly.
Different types of compensation

• The types of compensation are broadly classified into direct


compensation and indirect compensation.
Direct Compensation
• It is the monetary benefits provided by the employer to the employees.
• Hourly pay– Hourly pay is the salary paid for each hour of work that the employee does.
• Salary– Salary is the fixed monthly amount that the employer pays to the employee in cash.
• Commission– A monetary reward that is paid based on the performance of an individual. It is
generally provided in the case of sales jobs as a fixed percentage.
• Bonus– A bonus is a monetary incentive paid to employees for their good performance. It is paid over and
above the employee’s basic salary.
Different types of compensation
• Indirect Compensation
Indirect compensation refers to non-monetary benefits like paid
holidays, insurance, and retirement benefits.
• Insurance– Employers generally provide employees with medical insurance to
ensure good health of their employees. If you are an early-stage startup facing
difficulties getting employee insurance, check out . It provides group insurance
packages to teams.
• Paid holidays– Paid holidays are provided to help employees maintain a work-
life balance.
• ESOPs– Sometimes, companies also provide their employees with their shares at
a discounted price, offering them an additional opportunity to earn.
• Retirement Benefits– Retirement benefits include gratuity, pension, general
provident fund, leave encashment, etc.
• Leave travel allowance– LTA or leave travel allowance is the non-monetary
benefit provided by the employer to the employee where the employer covers the
employee’s travel expenses.
• Relocation expenses– Relocation expenses are the benefits the employer provides
in case the job requires relocation to a different city.
How is compensation management determined?

In India, compensation determination involves a combination of factors, including


market practices, legal regulations, industry standards, and individual performance:

• Job role and responsibilities


• Industry and market trends
• Geographical location
• Company size and financial health
• Experience and expertise
• Education and qualifications
• Performance and contributions
• Legal and regulatory factors (mentioned in the above sections)
• Gender equality and non-discrimination
• Collective bargaining and industry standards
• Benefits and perks
• Inflation and economic conditions
Benefits of Compensation Management
(For Organizations)
Attracts and retains top talent
Motivates performance and productivity
Increases employee satisfaction and engagement
Aligns with business objectives
Drives better organizational performance
Encourages talent development
Retains key employees
Enhances cost efficiency
Mitigates compliance and legal risks
Builds a positive employer brand
Benefits of Compensation Management
(For Employees):
• Ensures fairness in rewards
• Motivates through performance-based pay
• Provides recognition for achievements
• Supports financial security
• Boosts job satisfaction
• Increases retention rates
• Promotes professional growth
• Ensures equity in compensation
• Improves work-life balance
• Fosters long-term commitment
THANK YOU

You might also like