2. Table of Contents
2
Topics
Slide No.
Compensation
3
Goals of compensation
4
How is compensation used
5
Compensation Administration
6
Features of Compensation Administration
7
Bonus
8
Types of Bonus
9
ESOP
11
Advantages of ESOP
12
Variable Pay System
13
Advantages of Variable Pay System
14
Disadvantages of Variable Pay System
15
Establishing a Variable Pay System
16
Conclusion of Variable Pay System
18
Reference
19
3. 3
Compensation
It is the method of maintaining balance between interest of company
and attracting , developing, retaining and rewarding high quality
staff through wages and salary.
Compensation is a systematic approach to provide monetary value
to employee in exchange for their work performed.
It includes all forms of wages, salaries, incentives, commissions,
variable pay and bonus.
4. 4
Goals of Compensation
To design pay system that elicit desired behavior by employee at
work.
To motivate employee to join, stay & perform at high levels.
For the organization to remain ethical and legal in its compensation.
5. 5
How is Compensation used
Recruit and retain qualified employee.
Increase or maintain morale/satisfaction.
Reward and encourage peak performance.
Achieve internal and external equity.
Reduce turnover and encourage company loyalty.
6. 6
Compensation Administration
Compensation administration is a segment of management or human
resource management focusing on planning, organizing, and
controlling the direct and indirect payments employees receive for
the work they perform. Compensation includes direct forms such as
base, merit, and incentive pay and indirect forms such as vacation
pay, deferred payment, and health insurance.
Objectives: Efficient maintenance of a productive workforce, equitable
pay, and compliance with federal, state, and local regulations based on
what companies can afford.
7. 7
Features of
Compensation Administration
Compensation Packaging
This make the distinction between different types of compensation and to
categorize the compensation types.
Eligibility
This to identify who qualifies for compensation awards based on a series of
eligibility criteria.
Guidelines
This to determine how compensation awards are calculated or to set limits on
the calculation results.
8. 8
Bonus
Bonus pay is compensation over and above the amount of pay
specified as a base salary or hourly rate of pay.
A structure of bonus payments is frequently found in sales
organizations to reward sales performance at specified levels over
and above commission.
11. 11
Variable Pay System
Variable pay system provides some or all workforce's compensation
based on employee performance or on the performance of a team.
These programs are sometimes referred to as "pay-for-performance"
or "at-risk" pay plans.
Variable pay programs are an increasingly popular mode of
compensation in today's business world.
12. 12
Compensation Methods of
Variable Pay System
Variable pay programs include
Annual incentives
Bonus payments
Individual incentive plans
Payments for newly acquired skill and knowledge.
Objectives: The ultimate goal of variable pay plans is to share a
common emphasis on recognizing achievement
13. 13
Advantages of Variable Pay System
Variable compensation can motivate employees and promote team
building.
It also encourages people to take responsibility for the outcome of their
work.
Variable pay boosts profitability by encouraging creative problem solving.
Workers are ideally situated to generate new ideas.
These often include ways to streamline processes, improve
products/services, and increase customer satisfaction.
14. 14
Disadvantages of Variable Pay System
Incorporating bonuses into sales and marketing is simple because
success is easy to measure whereas figuring out how to calculate
what outcomes you should reward in other industries takes a lot
more thought.
If you have no clear goals or guidelines, an incentive program will
simply be money wasted.
Many companies fail to make variable pay programs meaningful to
individual employees, which in turn robs the program of much of its
power to facilitate increased productivity.
15. 15
Establishing a Variable Pay System
Proponents of variable pay programs contend that implementation of
such a system is far more likely to be successful if the following
conditions are met :
Differences in performance must mean something to the business.
Employees must see that mediocre and high-quality performances
are not rewarded equally, and that results count
Business goals must be clearly defined and adequately disseminated
to employees, and they should be arrived at with their assistance.
16. 16
Establishing a Variable Pay System
(Contd..)
Performance must be measured regularly and reliably. A clear
system of performance appraisal and feedback must be put in place,
with regularly scheduled meetings as one component.
Employers should use variable pay as a tool in reaching ambitious
business goals. The targets should be set high so that extra effort is
needed to reach them.
Businesses should make sure that their variable pay plans reward
employees for actions or skills that actually further the aims of the
company
17. 17
Conclusion of Variable Pay
Communicate how the program benefits both the employees and the
company.
Give bonuses to those who increase the company’s profitability by
creating more efficient systems – not those who cut costs at the
expense of ethics and morale.
Determine how performance will be measured and make the guiding
principles easy to understand.
Set short term, achievable goals that require employees to challenge
themselves.
