COMPENSATION AND

REWARD MANAGEMENT
 Session Objectives
• To Understand the Factors
Influencing Pay and Wage Plans
• To Analyze the elements of a
Compensation Package
• To understand the process of
Compensation Structure
Factors Influencing Pay

Market
Organisation
Forces
Policy

Work Individual
Value Performance
 Three Pay Policies

Pay Policy Attract Retain Motivate Control

Costs

Lead + + ? ?

Match = = ? =

Lag - ? ? +
 The Elements of Total
Compensation

Total
Compensation

Base Pay Indirect

Compensation/
Compensation Incentives Benefits
 Remuneration & Rewards

Financial Non-Financial

DIRECT INDIRECT JOB ENVIRONMENT

(cash) (benefits) • Interesting • Good policies
• Insurance work and practices
• Salaries • Holidays • Challenge • Competent
• Incentives • Medical and • Responsibility supervision
• Bonuses health • Recognition • Congenial
• Child care • Advancement co-workers
• Employee • Safe and
assistance healthy work
environment
• Fair treatment

Components of Employee Remuneration

The Compensation Structure
Job Evaluation

Wage and Salary

Issues Involved Surveys
in Setting
Compensation
Pay Grades
Structures

Rate Ranges
 Step 1 Job Evaluation
The systematic process of
determining the relative worth of jobs
in order to establish which jobs should
be paid more than others within an
organization.
 Establishing a Salary Structure

• Step 2. Salary Surveys

– Salary surveys compare an organisation’s salaries
to those offered in other organisations.

• Does the organisation want to compare

itself with:
– Organisations in the same or related industries?
– Organisations in the same geographic area?
– ‘Best practice’ companies?
– Domestic companies?
– Multinationals?
 Establishing a Salary Structure

Step 3
• Group jobs into Pay Grades or Job
Classes
• Groups of jobs within a particular
class that are paid the same rate or
rate range
– jobs of equal difficulty and similar
level of skills
 Class Exercise
• Think about a few jobs which require
similar level of skills . These jobs can
be from different sectors but require
similar level of skills
• Identify the Job Designation and
Skills
• Group the jobs with similar level of
skills together
 Hierarchy of Clerical Jobs, JE Points and
Pay Grades for a Hypothetical Office

JOB Pt. Grd.

Customer Service Rep. 300 5
Executive Secretary/Admin. Asst. 298
Senior Secretary 290
Secretary 230 4
Senior General Clerk 225
Credit and Collection 220
Accounting Clerk 175 3
General Clerk 170
Legal Secretary/Assistant 165
Senior Word Processing Operator 160
 Establishing a Salary Structure

Step 4. Price Each Pay Grade

— Wage Curve
– Shows the pay rates currently paid for jobs
in each pay grade, relative to the points or
rankings assigned to each job or grade by
the job evaluation.
 Wage Curve

6
monthly
salary 5
(Rs.000)
4
PAY 3
Line of Best Fit :
2 using Market-Survey data
or current organization
1
data

JE Points 40 80 120 160 200 240 280

Jobs AB CDEF GHIJ320 KLM 0P QRS TUV
Grades 1 2 3 4 5 6 7
 Establishing a Salary Structure: Step 5
• Formulate a Rate Structure
Single Rate Structure vs Rate Range
GR JOBS SALARY (Rs.)
Single Rate I AB 5000
Structure II CDEF 7000
III GHIJ 9000

GR JOBS SALARY (Rs.)

Overlapping I AB 3000–250–4500–500-9000
Rate Range II CDEF 6000–400–8400–750-14400

III GHIJ 10000–600–13600–900-20800

 Exercise 1
• On Joining ABC Steel Ramanujan has
a starting basic of Rs 6000 in 2015 .
He is placed in the salary band as
below :
6000–400–8400–750-14400
He gets 2 increments every year . In
which year he will cross the basic of
Rs 14400 . Illustrate with relevant
calculation
 Exercise 2
• On Joining HMC Bank Sreelata has a
starting basic of Rs 11500 in 2016 .
She is placed in the salary band as
below :
• 10000–600–18600–1200-40800
She gets 2 increments every year till
2018 . She received a 10% hike on her
BASIC Pay post her increment in
2018 . From 2019 she gets 4
increments . In which year she will
cross the basic of Rs 40,800 . Illustrate
with relevant calculation
 Red & Green Circle Jobs
39.50
37.00
34.50
32.00
Rates (Rs. 000)

29.50
27.00
24.50
22.00
22.00
19.50
17.00
14.50
12.00
9.50 I II III IV V VI
0 50 100 150 200 250 300
 BASIC WAGE PLANS
• TIME WAGE PLAN
• PIECE WAGE PLAN
• SKILL BASED PAY
• BROADBANDING
 VARIABLE PAY

Tying pay to some

measure of individual,
group, or
organizational
performance.
 Types of Incentive Plans
INDIVIDUAL GROUP ENTERPRISE
Piecework Team Plan Profit sharing
Standard hour Gainsharing Stock options
Bonuses
Merit pay
Sales incentives
 Conditions Under Which
Individual-Based Plans Are Most
Likely to Succeed
• When the contributions of individual
employees can be accurately isolated.
• When the job demands autonomy.
• When cooperation is less critical to
successful performance or when
competition is to be encouraged.
 Conditions Under Which
Team-Based Plans Are Most Likely
to Succeed
• When work tasks are so intertwined that it
is difficult to single out who did what.
• When the firm’s structure and systems
facilitate the implementation of
team-based incentives.
• When the objective is to foster teamwork
in self-managed work groups.
Pay for Performance: The Challenges
• The “Do Only What You Get Paid For”
Syndrome
• Negative Effects on the Spirit of
Cooperation
• Difficulties in Measuring Performance
• Job Dissatisfaction and Stress
• Potential Reduction of Intrinsic
Drives
Meeting the Challenges of Pay for
Performance Systems
• Link Pay and Performance
Appropriately
• Use Pay for Performance as Part of a
Broader HRM System
• Build Employee Trust
• Use Multiple Layers of Rewards
• Increase Employee Involvement
• Use Motivation and Nonfinancial
Incentives
FRINGE BENEFITS
 FEATURES OF FRINGE BENEFITS
• An employee enjoys them in addition to the
salary he/she receives.
• They are not given for specific jobs performed
but to make jobs more attractive.
• They are not linked to productivity so do not
reward performance in any way, criteria used is
other than performance.
• They have an indirect impact on workers’
efficiency. If impact is direct, it is not a fringe
benefit.
 Types of Fringe Benefits
• Pay for time not worked
• Employee security
• Safety and health
• Welfare and recreation
• Old age and retirement
Self and Employee Contribution
in PF and EPS
 Example :Salary Slip1
• Examples
Salary Slip2
• Thank You