Seminar on Compensation Management

1
Seminar on Compensation Management

• Insight to HRs Perspective in Managing Pay
• S.M. Farid Zafar

2
Compensation defined

• Refers to the methods of maintaining balance
  between interests of company attracting,
  developing, retaining, and rewarding high quality
  staff through wages and salaries
• Compensation is a systematic approach to
  providing monetary value to employees in exchange
  for their work performed.
• Compensation includes all forms of wages,
  salaries, incentives, commissions, and bonuses

3
Background

• Compensation is one of the main functions of HR.
  It is closely linked with the following
• EQUITY
• MOTIVATION
• EMPLOYEE APPRAISAL

4
Goals of Compensation Administration

• To design pay systems that elicit desired
  behaviors by employee at work
• To motivate employees to join, stay and perform
  at high levels
• For the organization to remain ethical and legal
  in its compensation programs.

5
You can please some of the people some of the
time
But you cant please all of the people all of the
time.
6
How is Compensation used?

• Compensation may be used to
• Recruit and retain qualified employees.
• Increase or maintain morale/satisfaction.
• Reward and encourage peak performance.
• Achieve internal and external equity.
• Reduce turnover and encourage company loyalty.
• Modify (through negotiations) practices of
  unions.

7
Development of Compensation Plan

• Develop a program outline
• Designate an individual to oversee the
  compensation program
• Develop a compensation philosophy
• Conduct a job analysis and Evaluation program
• Determine grades
• Establish grade pricing and salary range
• Determine an appropriate salary structure
• Develop a salary administration policy
• Obtain top executives' approval of the program
• Communicate the final program to employees and
  managers
• Monitor the program

8
Components of a Compensation System

• Job Analysis
• Job descriptions
• Job evaluation
• Pay Structures
• Salary Surveys
• Policies and Regulations
• ORDINANCE of 1961.doc
• Current Minimum Rates of Wages.doc

9
The Concept of Total Compensation
10
Protection Programs- Do they work..
11
Main Issues In Compensation

• How much should companies pay to attract, retain,
  and motivate employees?
• Should they pay salaries or variable rewards?
• Should they provide benefits, and if so, to what
  extent?
• What's an appropriate discrepancy between the pay
  for high and low performers?
• Organizations have to consider for job seekers
  it's not just getting a job that matters - it's
  getting a job that can fulfill them both
  financially and personally.

12
Main Issues In Compensation Internal Equity..
13
Factors affecting levels of pay

• Intrinsic value
• Responsibility, employee owns his / her
  contribution
• Greater the responsibility, span , scope of job
  more the pay
• Dependent on the Knowledge, Skills and
  competencies
• Internal relativities
• In an organization, job values are determined by
  perceptions of the worth of one job compared with
  others
• An added certification, qualification, skill will
  make the difference

14
Factors affecting levels of payContd

• External relativities
• External value of a job market rate is
  determined by the laws of supply and demand
• Individual rates and differentials have to be
  adjusted according to changing market pressure
• Employable individual has a price which other
  organizations are willing to pay for services
• Inflation and market movement
• Organizations have been accustomed to taking into
  account inflation when adjusting their pay
  structures
• CPI Index, Growth Rate, Inflation Rate,
  increasing / decreasing trends

15
Factors affecting levels of payContd

• Business Performance / financial circumstances
• Strategic aims and plans of organization provide
  the basis for developing pay strategies
  policies
• Business performance of the organization will
  influence the amount it can pay to employees
• Trade union pressures
• Depending on bargaining power trade unions
  pressurize to increase pay at least inflation

16
Some Facts about Compensation practices

• Similar in many respects to developing plans for
  any employee.
• More emphasis on paying on ability
• Salary is taxable to an individual at a high
  individual rate.
• In a typical modern corporations top executives
  are paid with a mixture of cash and shares of the
  company.
• More complex
• Fixed or variable
• Pay for performance doesnt work

17
Future trends in Compensation

• Link to business performance, cost control, flexi
  compensation
• According to Haygroup survey worldwide
• 13 of organizations planned to bring team pay
• 30 were making changes in benefits structure
• 17 planning to introduce a broad banded pay
  structure
• 40 intended to introduce a formal performance
  management process
• Well developed career management program, well
  validated salary surveys, strong information
  management systems.
• Treating employees stakeholders, use variable
  pay, employee benefits scheme

18
Conclusion

• Principle of Compensation
• Compensation will be perceived as fair if it is
  comprised of a system of components developed to
  maintain internal and external equity.

19
Thank you