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COMPENSATION MANAGEMENT

COMPENSATION MANAGEMENT. Session Overview Benefits of Proper Compensation Consequences of Inadequate Compensation Concepts of Wages Components of Remuneration Theories of Remuneration Factors Influencing Remuneration Remuneration Model Challenges of Remuneration

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COMPENSATION MANAGEMENT

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  1. COMPENSATION MANAGEMENT

  2. Session Overview Benefits of Proper Compensation Consequences of Inadequate Compensation Concepts of Wages Components of Remuneration Theories of Remuneration Factors Influencing Remuneration Remuneration Model Challenges of Remuneration Skill based and Job based Pay

  3. Session Overview Incentive Payments Prerequisites of Effective Incentive System Types of Incentive System Group Incentive Plans Incentives for Indirect Workers Nature of Benefits and Services Benefits as Incentive Types of Employee Benefits and Services Principles of Fringes

  4. Session Overview Significant Benefits and Service Programs Common Benefits in Pakistan Advantages and Disadvantages of Long Term Benefits Administration of Fringe Benefits Remunerating Top Executives Components of Executive Remuneration Issues in Executive Remuneration

  5. Chapter 11 MANAGING BASIC REMUNERATION

  6. Benefits of Proper Compensation Compensation policy aims to attract talented employees and motivate them to put their efforts and commitment to work that increase job satisfaction work performance

  7. Consequences of Pay Dissatisfaction performance Desire for more pay strikes absenteeism grievances turnover Search for new job Psychological withdrawal Job dissatisfaction Pay dissatisfaction Lower attractiveness of job Poor health absenteeism Visits to the doctors Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 289

  8. Concepts of Wages Minimum Wage Fair Wage Living Wage Team based Pay Remunerating Professionals Contract Employees Expatriates and Executives

  9. Components of Remuneration Benefits include both financial and non financial • Wages and Salary • Incentives • Fringe Benefits • Perquisites • Non Monetary Benefits

  10. Components of Remuneration Remuneration Financial Non Financial Fringe benefits CPF Gratuity Medical etc. Perquisites Company car Club membership Furnished house Stock option schemes etc. Incentives Individual plans Group plans Wages and Salary Hourly wages and monthly rates salary Job content Challenging job responsibilities Supervision Growth prospects Working conditions Etc. Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 286

  11. Theories of Remuneration Feedback to employee Employee set expectations and goals Performance is rewarded Employee consider equity of reward and performance Employee sets new goals and expectations based on experience

  12. Theories of Remuneration Reinforcement Theory Behavior rewarded Positive Experience Behavior is repeated

  13. Theories of Remuneration Equity Theory • Adam’s equity theory emphasizes to have equity in pay structure of employee • If employee feel that their efforts are well rewarded they will put more efforts and will be satisfied with their job • In case of inequity feeling they will be de moralized and dissatisfied resulting into low productivity Individual equity Motivation Internal equity Perception of fairness Commitment External equity Performance Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 287

  14. Theories of Remuneration Agency Theory • In the organizations employer and employees are two main stakeholders • Employer act as principals and employees assume the role of agent • The remuneration of employee is agency cost • Principal tries to agency cost and agent expect to have more agency cost • The principal (Employer) should try to choose remunerating schemes that align its own interest with expectation of agents (employees) • Behavior oriented (merit based pay) • Outcome oriented (profit sharing, commission)

  15. Factors Influencing Remuneration

  16. Factors Influencing Remuneration Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 295

  17. Remuneration Model Job description Job evaluation Job hierarchy Pay survey Pay levels Pricing Jobs Pay grades Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 295

  18. Challenges of Remuneration Skill based pay Monetary and non monetary rewards Salary Reviews Employee participation Remuneration Pay Secrecy Below market or above market pay Comparable worth Eliticism or Egalitarianism Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 300

  19. Skill Based and Job Based Pay Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 301.

  20. Summary • Benefits of Proper Compensation • Consequences of Inadequate Compensation • Concepts of Wages • Components of Remuneration • Theories of Remuneration • Factors Influencing Remuneration • Remuneration Model • Challenges of Remuneration

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