Compensation Management HRM PDF

Compensation Management Dr. Ayesha Khatun Assistant Professor Symbiosis Law School Symbiosis International University  Content Compensation Compensation management Why to study compensation management Basis of devising compensation  Co...

Compensation Management Dr. Ayesha Khatun Assistant Professor Symbiosis Law School Symbiosis International University  Content Compensation Compensation management Why to study compensation management Basis of devising compensation  Compensation Compensation refers to monetary as well as non-monetary reward provided to an employee in exchange for his services. In the workplace, compensation is what is earned by employees. It includes salary or wages in addition to commission and any incentives or perks that come with the given employee's position.  Compensation Management Compensation Management refers to the establishment and implementation of sound policies, programs and practices of employee compensation. It is essentially the application of a systematic and scientific approach for compensating the employees for their work in a fair, equitable and logical manner.  Why compensation mgt. Core function of HRM Helps in analyzing current pay practices and determine if they are competitive for various industries and geographic location. They can also help determine if your employees’ salaries are in compliance with current employment or state laws.  Objectives of compensation management Acquire qualified personnel. Retain current employees. Ensure equity. Reward desired behavior. Control costs.  ……… Comply with legal regulations. Facilitate understanding of work component. Further administrative efficiency. Motivating Personnel. Consistency in Compensation.  Activity Devise an innovative compensation plan for a salaried lawyer and a law professor.  Employee Compensation All forms of pay going to employees and arising from their employment ❖ Direct Financial payments Wages Salaries Incentives Commissions Bonuses ❖ Indirect Financial payments Employer paid insurance Vacations ❖ Non-Financial Recognition Appreciation Components of Compensation  Quiz Compensation includes _____ benefits. Monetary Non-monetary both ‘a’ and ‘b’ None of the above  Components of Remuneration Wages and salary – hourly/daily/monthly pay Incentives- payments by results individual or group based upon productivity, cost reduction and sales profit Fringe Benefits- provident fund , gratuity , medical care, canteen , uniform, accident relief Perquisites- company car, club membership, paid holiday , furnished house Non monetary -working conditions, flexi timing etc.  Quiz _______ are also called ‘payments by results’. allowances claims incentives fringe benefits  Quiz The following is paid only at the time of employees exit after serving more than five years Perquisites Claims Gratuity Allowances  Theories of Remuneration Reinforcement and Expectancy Theories Agency Theory Equity Theory Human Resource Management, p. 330 Source: Jeffery A. Mello, Strategic Dimensions of Equity  Theories of Remuneration Reinforcement and Expectancy theory- Given by Vrooms Link between Work and reward – attractive rewards from the job Employees feel the zeal when they are certain about achieving positive outcome in the job for superior performance.  The Agency theory- Employer as the principal and the managers as the agents. Creating ownership interests among the managers. Through unique compensation scheme (e.g., stock option). Adam’s Equity Theory  The Equity Theory The Equity Theory- Given by John Adams, a behavior psychologists. Ensuring a fair balance between an employees contribution to the jobs and rewards received. Input greater than output; outcome- low employee satisfaction and motivation Output greater than input; outcome - High employee satisfaction and motivation  Equity Types External Equity Comparison: outside organization Internal Equity Comparison: inside organization, among jobs Employee Equity Comparison: individuals doing same job for same organization  Quiz ‘A behavior which has rewarding experience is likely to be repeated’ is postulated by Reinforcement and expectancy theory Equity theory Agency theory None of the above  Quiz A fair day work for fair day pay’ denotes a sense of _______ felt by employees. Responsibility Equity Happiness Respect  Activity Identify the most suitable compensation theory for 21st century organization and substantiate your answer with suitable explanation.