Compensation Management

Submitted to:Dr. Nirmala Submitted by:Ankit singla

University School of Management

CONTENTS
MEANING OF COMPENSATION p TYPES OF COMPENSATION p PURPOSE OF COMPENSATION p COMPONENTS OF COMPENSATION SYSTEM p THE PAY MODEL p IMPORTANCE OF COMPENSATION
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MEANING OF COMPENSATION
Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. p Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.
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TYPES OF COMPENSATION
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DIRECT COMPENSATION INDIRECT COMPENSATION

DIRECT COMPENSATION

INDIRECT COMPENSATION

Purpose of Compensation
Contribution based Remuneration Ensure Equity

Attract talent

Effective Compensation

Administratively Efficient

Institutionalized Processes
Motivate & Retain Staff Reward Valued Behavior

Legal Compliance

Components of Compensation System

Job Analysis: A Basic H R M Tool

Tasks Responsibilities Duties
Human Resource Planning Recruitment Selection Training and Development Performance Appraisal Compensation and Benefits Safety and Health Employee and Labor Relations

Job Descriptions Job Analysis

Job Specifications

Knowledge

Skills

Abilities

Legal Considerations Job Analysis for Teams

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The Pay Model

Business Goals Business Goals

CEO CEO

Business Business Strategy Strategy

Business Strategy This defines the direction in which organization is going in relation to its environment in order to achieve its objectives. Compensation Philosophy Consists of a set of beliefs which underpin the reward/compensation strategy of the organization and govern the reward policies that determine how reward processes operate
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The Pay Model

Business Goals Business Goals

CEO CEO

Business Business Strategy Strategy

HR Head HR Head

Compensation Compensation Strategy Strategy Org.Structure Org.Structure Compensation Compensation Plan Plan Non-Financial Non-Financial Rewards Rewards

Compensation Strategy defines the intentions of the organization on reward policies, processes and practices required to ensure that it has the skilled, competent and well-motivated workforce it needs to achieve its business goals
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The Pay Model

Business Goals Business Goals

CEO CEO

Business Business Strategy Strategy

HR Head HR Head

Compensation Compensation Strategy Strategy Org.Structure Org.Structure Compensation Compensation Plan Plan Non-Financial Non-Financial Rewards Rewards

pA

strategic perspective on compensation takes the position that how employees are compensated can be a source of sustainable competitive advantage
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The Pay Model

Business Goals Business Goals

CEO CEO

Business Business Strategy Strategy

HR Head HR Head

Compensation Compensation Strategy Strategy Org.Structure Org.Structure Compensation Compensation Plan Plan Performance Performance Management Management Job Evaluation Job Evaluation Unit Inputs Unit Inputs Pay levels // Pay levels structures structures Total Total remuneration remuneration Performance Performance linked Pay linked Pay Market Surveys Market Surveys Non-Financial Non-Financial Rewards Rewards

C & B/S M C & B/S M

Employee Employee

Contribution Contribution /outputs /outputs

Internal Equity Internal Equity

Individual Pay Individual Pay

External Equity External Equity

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Importance of compensation system

It will encourage the employees to perform better and achieve the standards fixed. p Such system would help management in complying with the various labour acts. p Such system should also solve disputes between the employee union and management. p The system should follow the management principle of equal pay.
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Importance of compensation system

It should motivate and encouragement those who perform better and should provide opportunities for those who wish to excel. p Sound Compensation/Reward System brings peace in the relationship of employer and employees. p It aims at creating a healthy competition among them and encourages employees to work hard and efficiently.
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