Ch 10 Compensation Adminstration.pdf

SUMMARY CHAPTER 10 Compensation Administration Compensation is the total reward received by an employee in exchange for services performed for an organization. It includes both direct pay (salary and wages) and indirect pay (benefits programs) A fair compensation has positive impact on efficiency a...

SUMMARY CHAPTER 10 Compensation Administration Compensation is the total reward received by an employee in exchange for services performed for an organization. It includes both direct pay (salary and wages) and indirect pay (benefits programs) A fair compensation has positive impact on efficiency and motivates them, enhances process of job evaluation, no exploitation of workers, raise the morale, comply with labour laws, better IR, provides opportunities for growth and advancement, minimizes attrition rate, helps in talent acquisition and talent retention and ensures success and stability of the organization. There are various factors affecting compensation. External factors are labour market, labour unions, cost of living, labour laws, society and economic conditions. Internal factors are business strategy, performance appraisal and employee related factors such as performance, seniority, experience, and potential. Various components of compensation are: Wages- minimum wage as per Minimum Wages Act, fair wage and living wage. Salary represents monthly remuneration, revised annually ad depends on type of industry and other factors. Bonus is short-term incentive (annual) and is based on performance or Payment of bonus Act. Commission is normally paid to sales- people or marketing employees based on achievement of certain targets. Stock options are long-term benefits and are usually given to senior executives as an incentive to retain them. Perquisites are major source of income for executives and include club membership, furnished houses, car, petrol allowance, medical expense reimbursement, entertainment allowance, holiday homes etc. Life insurance, medical insurance, and long-term security benefits such as pension, gratuity. Supplementary pay leave, sick leave, maternity leave, paternity leave etc. P. 1 Internal In recent times there is new system of compensation concept of cost to company. It includes monthly compensation, perks, bonus, etc. but also cost incurred in maintaining, motivating, and developing the employee. So even intangible aspect is covered. Benefits of cost to company concept: employee engagement and retention is more likely to occur. Take home compensation needs to be clarified by HR. ______________________________________________________________________ P. 2 Internal