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Pay delivery administration. Jayendra Rimal. Introduction. Employees develop an unique view of the relationship between pay and assigned job, pay and performance, pay as part of the total compensation package. As a result employees seek some answer to the following: When is the next pay day?

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Employees develop an unique view of the relationship between pay and assigned job, pay and performance, pay as part of the total compensation package. As a result employees seek some answer to the following:

  • When is the next pay day?
  • When is the first increase possible?
  • What are the criteria for raises?
  • What are the eligibility requirements for vacations? How long?
  • How many paid holidays? What are they?
  • What are the criterion for promotions?
  • Are cost-of-living adjustment provided?
  • How are overtime opportunities determined?
  • Is an employee’s ever reduced?
introduction contd
Introduction. Contd…
  • Skilled administrators keep a well designed compensation programme active.
  • The amount of money that an organization is able to spend is the limiting factor. A new organization may have limited funds whereas a monopolistic organization might have fairly substantial funds.
  • Personnel costs and the relationship to productivity and profitability provides opportunities for employer influence.
  • For service-sector and labor intensive companies HR costs can surpass 60% whereas for capital intensive that spend a lot on raw materials preassemble parts or plants, the HR costs may be as low as 10 to 15%. In any case they have an impact on organizational productivity.
introduction contd4
Introduction. Contd…

Employees then seek answers to a second set of questions which affects worker performance, organizational productivity and profitability. They recognize that job dictates more than supporting a standard of living but also defines social status and economic worth, some questions:

  • Is this a regular full-time job?
  • Will the job and its rewards offer income security?
  • Will the job and its rewards provides a satisfying lifestyle?
  • Does the job permit extra effort, and will the organization recognize special contribution?
  • Will the job provide opportunity for self growth and career development?
  • Do the job and its rewards compare favorably with those available in this area, profession or line of work?
the budget process
The budget process

Compensation personnel have a role in defining the budget for the upcoming period. The operating budget has the HR expenses, which is a significant part. Usually personnel costs are developed by department heads then passed on to the CFOs. The CFO will include this cost in the overall budget and pass it on to the CEO. In many cases a compensation committee with directors may perform some or all of the following activities:

  • Review and appraise performance of CEO and top management
  • Set compensation for the CEO
  • Review compensation practices of competing companies
  • Monitor executive perquisites and expenses
  • Review performance based bonus criteria
  • Review compensation of directors
  • Determine base for establishing long-term incentive awards
  • Review general policies relating to total compensation
  • Report findings to the full board
the budget process contd
The budget process, contd…

Others involved in the budget decision:

  • The CEO has the ultimate responsibility for all decisions made in the operation of the organization. The CEO, as the final decision maker, reviews, makes recommendations for necessary changes and approves the personnel budget.
  • The initial responsibility for developing the personnel budget rests with the finance department (along with the HR department in some cases).
  • Some organizations may also have a salary administration committee consisting of three to five members with the CFO as the head. This reviews the total budget and acts as a review body for existing compensation policy recommending changes.
  • Other organizations may have a job evaluation committee which consists of managerial and non-managerial personnel. This ensures internal fairness among jobs by determining the job worth
administration of pay
Administration of pay

The administration of pay includes three steps:

  • Providing merit or salary increase budget data and information
  • Adjusting the pay structure in line with pay policy, the market, the approved merit or salary increase budget for the planned year
  • Moving employees pay according to level of performance, seniority on the job and location in the pay grade.

Some of the functions that are carried out may include:

  • Forecasting personnel costs
  • Using merit increase and pay structure survey data
  • Allocating merit budget funds
  • Annual performance bonus
  • Timing of pay adjustments
other compensation administration issues
Other compensation Administration issues

Other issues in the administration of pay includes:

  • Guidelines for promotion and demotion adjustments
  • Available options for keeping employees “whole”
  • Attracting workers with knowledge and skills that are in short supply
  • Paying all employees a salary
  • Determining overtime guidelines for all employees
  • Adjusting pay for all types of employees
  • Implement compensation for temporary and regular part-time employees