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What is employee
remuneration ?
Compensation an employee receives
in return for his or her contribution to
the organization.

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Example of a salary
HEAD
Per annum(Rs.)
Per month(Rs.)
structure:
Basic

186000.00

15500.00

HRA

93000.00

7750.00

9600.00

800.00

Medical
reimbursement

15000.00

1250.00

LTA

15500.00

1291.67

Telephone
reimbursement

12000.00

1000.00

Refreshments

15000.00

1250.00

Special Allowance

89140.00

7428.33

PF(co. contribution)

22320.00

1860.00

7440.00

620.00

465000.00

38750.00

Conveyance

Gratuity
TOTAL

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Components of
remuneration

Remuneration

Financial

Hourly
&
Monthly
Rated

Wages
Salaries

Incentives
Group
individual

Non-financial

Fringe
benefits

direct

Perquisites

indirect
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Job
context

Theories of remuneration
Reinforcement and

expectancy theory
Equity theory
Agency theory

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Importance of an ideal
remuneration system
performance

strikes
Desire for
More pay

grievances
Search for
Higher paying jobs

Pay
dissatisfaction

Lower attractiveness
Of job

absenteeism
turnover
Psychological
withdrawal

Job
dissatisfaction
absenteeism

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Visit to
the doctor

Poor mental
health

Factors influencing employee

remuneration
External :

Labour market
Cost of living
Labour unions
Government

legislations
Society
Economy
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Internal
Business strategy
Job evaluation and performance appraisal
Employee
Performance
Seniority
Experience
Potential
luck

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Remuneration Influencing
Factors
Remuneration

External

Internal

Labor Market
Cost of Living
Labor Unions
Government Legislations
Society
Economy
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Business Strategy
Job Evaluation and
Performance Appraisal
The Employee

External Factors
1. Labor Market

Demand and supply

Going rate
Productivity

2. Cost of Living

Rising prices
Dearness allowance
CPI

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3. Labor Unions

Non-unionised factories
Unionised factories

4. Labor Laws

Payment of wages act 1936

Minimum wage act 1948
Payment of bonus act 1965
equal remuneration act 1976
Payment of gratuity act 1972
Companies act 1956

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5. Society

Ethical and social considerations

6. The Economy
Depressed economy
Expanding economy

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Internal Factors
1. Business strategy

Achieve rapid growth

Maintain and protect current earnings

2. Job evaluation and Performance appraisal

3. The employee

Performance
Seniority
Experience
Potential
Luck

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Remuneration plans and

business strategy
Market Position
& Maturity

Remuneration
Strategy

Blend of
Remuneration

Invest to Grow

Merging or
growth rapidly

Simulate
entrepreneurialism

High Cash / Average

Incentives/ Modest
Benefits

Manage
earnings
protect markets

Normal growth
to maturity

Reward
management
skills

Business
Strategy

Harvest earnings No real growth

reinvest
or decline
elsewhere

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Stress on cost
control

Average Cash /
Moderate Incentives/
Standard Benefits
Below Average Cash/
Small Incentives/
Standard Benefits

Devising a
remuneration plan
Job Description

Job Evaluation

Job hierarchy

Pay Survey

Pricing jobs

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Challenges to
Remuneration
Skill-based pay

Employee
participation

Salary reviews

Remuneration

Comparable
worth

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Pay secrecy

Concepts of wages
Minimum wages
Fair wages
Living wage

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DEFINITION
Payment by results
Variable rewards granted according to

variations in the achievement of specific

results.

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Advantages
Motivation
Mutual benefits
Increased alertness
Reduction of cost..
Reduced time loss.

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Disadvantages
Sacrifice Quality for Quantity
Disregarding safety regulations
Overwork
Jealousy
Difficult to change

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Types of Incentives
Earning vary in the same proportion as output
Earnings vary less proportionately than output
Earnings vary proportionately more than

output
Earnings differ at different levels of output

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Incomes varying in
proportion
to
output

Straight piece-work

Standard hour system

Time wages guaranteed

Time wages not guaranteed

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Earnings varying
proportionately less than
output
Halsey or weir premium plan

Std. Rate- 25 units per hour

Base rate- Rs1
Total WH-8hours
Case(1) @15/hour worker earn Rs8

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@35/hr produce 35*8 = 280 units

Production = 11.2Hours of work
Compensation=Rs8+50% of 3.2

=9.60

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Rowan Plan
Bonus= Time saved/time allowed*time
taken*rate per hour
Std. Time-10 hours
Wage/hour-Re1
Time taken-8hours
Saved-2 hours

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Halsey Plan

8 hours*Re1+50% of 2= Rs9
Rowan Plan

8+(2/10*8*1)=9.60

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Barth Variable Sharing System

Std. Time - 10Hrs

Rate per hour-Re1
Case(1)
Time taken= 12Hours
Earnings=Root of (12*10)
=10.95

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*1

Bedaux Scheme

Std.Time = 30 Hours
1800 Bs
Wage per hour - Re1
Time taken - 35 hours
Earnings
- Re.35

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Time Taken 25 Hours

Earnings =

Wage 25
Incentive- 5*.75= 3.75
Foreman 1.25

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Earnings varying
Proportionately more than
output
High Piece rate
High std Hour system

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Earnings differing at
different levels of output
Taylors differential piece rate system

120 percent of piece rate at or above std.

80 percent of piece rate below std.

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Maverick Differential Piece Rate system

Gantt task system
Emerson plan

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Group Incentive Plans

Gain Sharing Programs

Cost saving plan
Scanlon plan
Labor cost/svop
Rucker Plan
Labor cost/sop
Profit Sharing Plans

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Cash Plans
Deferred Plans
Combination Plans
ESOPs
Incentive for indirect workers

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Learning Objectives
Nature of employee benefits
Different kinds of fringe benefits and their

principles
Future of fringe benefits
Problems faced by an MNC in administering
benefits and services

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Meaning and
Definition
what is employee Services and Benefits??
..fringes embrace a broad range of benefits
and services that employees receive as part of
their total package.pay or direct
compensationis based on critical job factors
and performance.

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Why Benefits &

Services??
Indirect remuneration may:
Mitigate fatigue
Discourage labor unrest
Satisfy employee objectives
Aid recruitment
Reduce turnover
Minimize overtime costs

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Benefits as Incentives
Do Benefits motivate employees????

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Types of employee benefits

& services
To hold that a benefit is a fringe, three
criteria need to be fulfilled:
It should be computable in terms of money
The amount of benefit is generally not
predetermined
No contract, indicating when the sum is
payable, should exist

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Examples of fringes
1. Legally required payments
- Old age, survivors, disability and health insurance
(commonly known as social security)
- Workers compensation
- Unemployment compensation
2. Contingent and Deferred benefits
- Pension plans
- group life insurance
- military leave and pay
- maternity leave
- child care leave & sick leave etc.,
3. Payments for time not worked
- vacations & holidays
- voting pay allowances
4.Other benefits
- travel allowances & moving expenses
- uniform tool expenses

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Principles of
benefits
Benefits and services must be provided to the

employees on the basis of a genuine interest in

the protection and promotion of their wellbeing
Benefits must satisfy a real need
The benefit must be cost effective
The benefit should be as broad based as
possible
Employees should be educated to make use of
benefits
The wishes of employees are expressed by
their union representatives
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Administration of benefits
& services
what are the problems faced in indirect
remuneration ??

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.contd
These problems can be avoided if the
following steps are followed:
Establishing benefit objectives
Assessing environmental factors
Communicating benefit information
Controlling benefit costs and evaluation

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Guidelines to make benefit

programs effective
Fringe benefit program should be looked at

as a worthwhile corporate instrument in HRM

Separate programs directly beneficial to
workers from those that are directed towards
community welfare
Devise new ways to involve workers and
their representatives at all levels of planning
and implementation
It is advisable not to have a facility rather
than neglecting it in its administration
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Agenda:
What and how much are the executives paid?
Why are they paid such hefty remuneration?
What issues are involved in payment of higher

remuneration?

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COMPONENTS OF REMUNERATION
1. Salary
2. Bonus
3. Long-term

Incentives
4. Perquisites
(Perks)

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1. Salary
First component of Exec.

Remuneration.
Determined through capabilities,
what they can do rather than
what the job demands
Salaries fixation are generally
not observed.
Subjected to deduction at source
and capped by Govt. Regulation.

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2. Bonus
Usually short-term, based on

performance.
Types of bonus:
1. Annual Bonus * (FORMULA) * Share Price/ROI
2. Bases on subjective judgment of the BoD &
CEO

3.

Increase in earnings / Target attained

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3. Long-term Incentives
Stock Options companies

allows Exec. to purchase

their shares @ fixed price.
Valuable as long as price of
share keeps increasing.
NOTE
1.Exec. must use their own resource.
2.Same risk as the other share
holders.

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4. Perquisites
Major source of

income for the

executives.

e.g. PF, Gratuity, special

parking, vacation travel,
auto expense,
memberships in clubs, wellfurnished house, bills, etc.

Companies takes
care of all the
possible needs.
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Special Features
Cannot be compared with the

salaries/wages of other
employees in the Org.
Exec. Cannot demand for higher
salaries/perks.
Secrecy maintained.
Based on the performance of
the entire Organization
Based on statutory ceilings.

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RANK NAME OF EXEC.

&
EXTENT
OF PAYSALARY
BONUS

TOTAL PAY

L.T.
COMPENSATION
$

202,011,000

203,011,000

Michael D Eisner
(Walt Disney)

750,000

Stanford I Well
(Travelers)

4,291,000 48,519,000

52,810,000

Joseph R Hyde
(AutoZone)

1,103,000 31,117,000

32,220,000

Charles N
Mathewson
(Int. Game
Technology)

628,000

22,231,000

Alan C Greenberg
(Bear Steams)

11,988,00 3,927,000
0

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21,603,000`

15,915,000

Justification for paying

more
Org. positioned after great
personalities.
These categories of people are
always in short supply
Retaining high-caliber personnel
is more difficult than attracting
them.
The Third Wave
Expectation of people have gone
up.
Eliminate and minimizes
corruption
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