WELCOM

E
Course
Code:HRM697
Compensation
Management

Summer
2024
 Course Teacher

• Brigadier General AKM Iqbal,

BSP, (Retd)
• Cell No: 01769003072
(WhatsApp)
• I welcome if my students call
me to clarify study aspects.
Better time to call me from
9.00 pm to 00.30 am
• Email: akmiqbal3072@gmail
 Class Representative
(CR)
CR-1
Name: xxxx
ID: 20xxxxxx
Cell No: 01xxxx
Email:
[email protected]

CR-2
Name: xxxx
ID: 20xxxxxx
Cell No: 01xxxx
Email:
[email protected]
Please Cooperate/help
them
 Grouping of
Students for Term
Paper Presentation
Each group to be formed with 4/5
students as per ID Serial
 Group leader to be nominated by
the group members. In case of
any difficulties then senior most
ID Number holder will act as
leader
* Group will be formed in 2nd Class
12onth July
2024.
Discussion on Course
Outline
 Recommended
Book

11th or more recent adition

You must have this book in 7

possession
Introduction to
Compensation

Lesson:
1
 Learning Objectives
• Understand the meaning of
Compensation
• Contrasting Perspective of
Compensation
• Factors Affecting Compensation
• General and individual factors affecting
wages
• Forms of Compensation
• Forms of Compensation (Intrinsic &
Extrinsic)
• Objectives of Compensation
• Relation of Compensation with
other HR functions 9
Why should you not
deserve
compensation !
“If you don’t value your
time, neither will others. Stop
giving away your time and
talents. Value what you know
and start charging for it.”
– Kim Garst,
Boom!Social -- Founder
How To Use and
CEO To
On
Media of Grow Your Social
Business
What is
Compensation?
# The money and the facilities
received by an employee from an
employer as a salary or wages in
return of the time, effort, merit of the
employees

# Compensation is defined as the total

amount of the monetary and non-
monetary pay provided to an
employee by an employer in return for
work performed as required
 Why does the Salary
Known as
Compensation
Your salary is called
compensation because you are
being compensated for being
somewhere you would
rather not be, doing
something you would rather
not do.

7
What is Compensation
Management?
# Compensation management is the process of
managing, analyzing, and determining the salary,
incentives, and benefits each employee receives.
# Compensation management ensures that
people
get paid a fair salary based on:

Work
performance
Position
Responsibilities
Experience
Job market
Company
budget
 Objectives of
Compensation
Management
Good compensation
management should meet
following objectives:
 Attract and recruit talent
 Motivate employees
 Maintain morale
 Adhere to government regulations
and company compensation
philosophy
 Reflect the current job-market

7
 How can the Compensation
Management Achieve its
Objectives
 Attractive salaries
 Useful benefits
 Bonuses, incentives, and
programs to improve employee
wellbeing
 Retirement savings
 Insurance

7
 Contrasting Perspective
of Compensation

Society’s Stockholders’ Views

Views

Employees’ Managers’
Views Views

2-
6
 Contrasting
Perspective of
 Society’sCompensation
View
 Pay as a measure of justice
 Male and female should get equitable pay
 Benefits as a reflection of justice in society
 Job losses (or gains) attributed to
differences in compensation
 Believe that pay increases lead to price
increases

 Stockholders View
▶ Using stock to pay employees creates a
sense of ownership
▶ Linking executive pay to company
performance supposedly increases
stockholders' returns --but not always---see
EXHIBIT 1.2
 Contrasting
Perspective of
Compensation
Hourly Compensation Costs for Manufacturing
Workers (in U.S. Dollars)

EXHIBIT 1.1 Hourly Compensation Costs for Production Workers in Manufacturing

(in U.S. Dollars)

6
Contrasting Perspective of
Compensation
The Relationship between
Shareholder Return and Change in
CEO Pay

8
 Contrasting Perspective
of Compensation

 Managers View
▶ A major expense
▶ Used to influence employee behaviors
and to improve the organization's
performance
 Employees View
 Major source of financial security
 Return in entitlement for being an
employee of the company
 Reward for a job well done
 An exchange between employer and
themselves
Forms Of
Compensation/Pay
 Relational returns (Recognition, status,
security, challenges, etc)

▶ Psychological in nature

 Total compensation
▶ Cash Compensation/transactional
 Base wages
 Difference between wage and
salary
 Merit pay/cost-of-living adjustments
 Merit increases – given in
recognition of past work behavior
 Cost-of-living adjustments –
same increases to everyone,
regardless of performance
 Forms Of
Compensation/Pay
▶ Cash Compensation/ transactional
(cont.)
 Incentives/Variablepay –increases
directly to performance
 Does not increase base wage; must
be re- earned in each pay period
 Potential size generally known
beforehand

▶ Benefits
▶Income protection
▶Work/life balance
▶Allowances
Forms Of
Compensation/Pay
▶ Total earnings opportunities:
Present value of a stream of
earnings
 Shifts comparison of today's initial
offers
to consideration of future bonuses,
merit
increases, and promotions
(related to Time value of
money)
▶ Relational returns from work
 Nonfinancial returns (recognition
and
status, employment security,
challenging work, and
learning opportunities.)
▶ Organization as a network
 Forms Of
Compensation/Pay
Intrinsic & Extrinsic
Intrinsic Compensation
Intrinsic Compensation actually fulfills employee’s
intrinsic
factors and thus motivates him.
Examples include; giving challenging task,
involving in decision making process, giving a
higher rank in hierarchy etc. all these rewards do
not required to have increased salary as well
and employee may be working at higher
management rank without an increase in the
salary and still more motivated.

.
 Forms Of
Compensation/Pay
Intrinsic & Extrinsic
Extrinsic Compensation
Extrinsic Compensation actually fulfills employees
extrinsic factors and thus do not let him start thinking
about leaving the company.
Examples include; pay rise, bonuses, paid leaves,
annual recreational plans etc.

Another fact that can be observed from the above

discussion and examples is that intrinsic rewards are
mostly qualitative in nature and cannot be quantified for
example more respect, recognition etc. Whereas
extrinsic rewards are more of a quantitative in nature
for example pay rise, bonus etc.

.
Forms Of
Compensation/Pay
Total Returns for
Work

EXHIBIT: 1.4 Total Returns for

Work
 Forms Of
Compensation/Pay
Total Returns for Work
Some Definitions
▶ Income protection
This is a monthly benefit that pays around 75% -
85% of
employees income while s/he is unable to work,
and is based on his/her earnings prior to claim

▶ Work–life balance
Work–life balance is a term commonly used to
describe
the balance that a working individual needs
between
time allocated for work and other aspects of life.
Areas
of life other than work–life can include
personal interests, family and social or leisure
status, security, challenges, and even
activities
opportunities are all returns you can provide
learning
▶ Relational returns
your
employees
These are asnon-monetary,
the part of psychological
their
compensation and
returns that employees benefits
also receive from
Compensation Objectives

13-
15
 Relation of Compensation
with other HR
functions
 Compensation and
recruitment
 Compensation and
selection
 Compensation and training
 Compensation and
motivation
 Compensation and
termination
 Summary
• Understand the meaning of
Compensation
• Contrasting Perspective of
Compensation
• Factors Affecting Compensation
• General and individual factors affecting
wages
• Forms of Compensation
• Forms of Compensation (Intrinsic &
Extrinsic)
• Objectives of Compensation
• Relation of Compensation with
other HR functions 30
 Next
Class
Lecture: 2
The Pay
Model and
Strategy:
The Totality
of Decision

Reference :
Book Chapter:
Book: Compensation
1(last
Part) & 2
Author: George T Milkovich, Jerry M Newman & CS Venkata
Ratnam
& Other sources
Thank
You