WELCOME
Course Code:HRM697
Compensation
Management
Spring
2025
Course Teacher
• Brigadier General AKM Iqbal,
BSP, (Retd)
• Cell No: 01769003072
(WhatsApp)
• I welcome students’ phone call
to clarify study aspects. Better
time to call me from 9.00 pm to
11.00 pm
• Email: akmiqbal3072@gmail
[email protected]
Class Representative
(CR)
CR-1
Name: XXX
ID: 202xxxxxx
Cell No: 01xxxx
Email: [email protected]
CR-2
Name: xxxx
ID: 20xxxxxx
Cell No: 01xxxx
Email: [email protected]
Grouping of Students for
Term Paper Presentation
Each group to be formed with 4/5
students
Volunteers will be nominated as
Group Leader
Group will be formed in 3rd Class
on 14th March 2025
Discussion on Course O
utline
Recommended Book
14th Eddition
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
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 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) attribute to differences in
compensation
Believe that pay increases lead to price increases
Stockholders View
Using stock to pay employees creates a sense of
ownership that will improve performance
Linking executive pay to company performance
supposedly increases stockholders' returns --but not
always---see EXHIBIT 1.2
4-
11
Contrasting Perspective of
Compensation
The Relationship between Shareholder
Return and Change in CEO Pay
Contrasting Perspective of
Compensation
Managers View
A major expense
Used to influence employee behaviors and
to improve the organization's performance
Customers View
Companies whose business strategy
depends on low product cost to compete
for customer, they may also focus for
keeping the compensation low
6-
11
Contrasting Perspective of
Compensation
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
4-
11
Forms Of
Compensation/Pay
Total Returns for Work
EXHIBIT: 1.5 Total Returns for Work
15
Forms Of Compensation/Pay
Total compensation
Cash Compensation
Base wages - Base wage is the cash
compensation that an employer pays for the
work performed. Base wage tends to reflect
the value of the work or skills and generally
ignores differences attributable to individual
employees.
Merit increases– given in recognition of past
work behavior
Cost-of-Living Adjustments (COLA) –same
increases to everyone, regardless of
performance
14-19
Forms Of Compensation/Pay
Cash Compensation (cont.)
Incentives/Variable pay – increases directly to
performance. Does not increase base wage; must be
re-earned in each pay period
Long-Term Incentives - Incentives may be short- or
long-term. Long-term incentives are intended to focus
employee efforts on multiyear results. Typically they are
in the form of stock ownership or options to buy stock at
a fixed price
14-19
Forms Of Compensation/Pay
Benefits
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 activities
Allowances - Allowances often grow out of whatever is
in short supply. In Vietnam and China, housing and
transportation allowances are frequently part of the pay
package. Some Japanese companies still continue to offer a
“rice allowance” based on the number of an employee’s
dependents. Almost all foreign companies in China discover
that housing, transportation, and other allowances are
expected.
14-19
Forms Of Compensation/Pay
Total Earnings Opportunities - 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 of returns - Created by
different forms of pay, including total compensation
and relational returns
14-19
Forms Of
Compensation/Pay
Relational returns - Relational returns of compensation
refer to the non-monetary rewards that employees receive
from their work. Relational returns are intangible and
include the psychological and social benefits of
employment.
Recognition and Status - Praise and acknowledgment
from managers, peers, or the organization for good
performance
Career Development / Learning Opportunity –
Opportunities for training and development
Career advancement possibilities, such as promotions
or opportunities to take on new responsibilities
Job Security –
Assurance of continued employment
Stability within the organization
14-19
Forms Of
Compensation/Pay
Relational returns –
Challenging work - It is the style of top
management to make everyone to take initiative
and be innovative. When we grant a kind of
freedom of thinking to people, they will certainly
work better. Challenging work helps one to get
out of boredom
14-19
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 27
Next Class
Lecture: 2
The Pay Model
and
Strategy: The Totality of
Decision
Book Chapter: 1(last Part) & 2
Reference :
Book: Compensation
Author: Barry Gerhart
Thank You
