Human Resource is the most vital resource for any
It is responsible for each and every decision taken, each
and every work done and each and every result.
Employees should be managed properly and motivated by
providing best remuneration and compensation as per the
The good compensation will also serve the need for
attracting and retaining the best employees.
Compensation is the remuneration received by an employee in
return for his/her contribution to the organization.
It is an organized practice that involves balancing the work-
employee relation by providing monetary and non-monetary
benefits to employees.
4. Needs For Compensation
When managed correctly, it helps the organization achieve
its objectives and obtain, maintain, and retain a productive
Compensation is a key factor in attracting and keeping the
best employees and ensuring that your organization has
the competitive edge in an increasingly competitive world.
Without adequate compensation, current employees are
likely to leave and replacements will be difficult to recruit.
The outcomes of pay dissatisfaction harm productivity and
affect the quality of work life.
5. Compensation System
Pay For Time Not
Low-Cost or Free
8. Employee Satisfaction And Motivation Issues
In Compensation Design
People have no basic or Instinctive need for money, A
commodity that is important only if it can satisfy others
Organization frequently overestimate the value workers
place on monetary reward.
For example : If money were the primary motivation for
working why would hourly employees object to over time,
given the premium rate of pay associated with it???
The EQUITY and EXPECTANCY theories can help
explain employees reaction to compensation systems
9. Equity Theory
Equity is balance between the inputs an individual brings
to a job & the outcomes he or she receives from it.
Employees inputs includes experience, education, special
skills, efforts and time worked.
Outcomes includes pay, benefits, achievement,
recognitions, and any other rewards.
Inputs and outcomes are in different units, and are hard to
compare to each other directly.
Equity theory suggest that individuals determine whether
they are being fairly treated by comparing their own
inputs/outcomes ratio to the input/outcome ratio of others.
Person Comparison Others
My Rewards(outcomes) Other’s Rewards Equity
My Contributions(inputs) Other’s Contribution
My Rewards(outcomes) Other’s Rewards Inequity
My Contributions(inputs) Other’s Contribution (under reward)
Action to restore equity from Under – reward Inequity
Person could ask for a raise in salary.
Person could reduce contributions (work less hard)
Person could try to get others to increase contribution(work harder)
Last resorts : quit or choose another comparison other.
My Rewards(outcomes) Other’s Rewards
My Contributions(inputs) Other’s Contribution
Action to restore equity from Over –Reward Equity
Person could increase contribution
Person could ask for a pay cut
Person could attempt to get other a raise
Person could attempt to get other to reduce his or her
Last restore quit the job or choose another comparison
12. Designing equitable compensation
Three element of equity can be distinguished as external,
internal and individual.
External equity refers to comparison of similar jobs in
Internal equity refers to the relationship among the jobs
within a single organization.
Individual equity refers to comparison among the individual
in the same job with the same organization
13. Internal equity
To measure the value of jobs in relation to organizational
objectives rewards are usually based on important
components to make one job worth more than other these
aspects called compensable factors.
The five most frequently used job evaluation methods
The points method and
14. Job evaluation methods..
The major purpose of job evaluation is to determine relative worth
of the jobs within an organization.
Basis for job hierarchy
Non quantitative Quantitative
Job v/s job Job ranking Factor comparison
Job v/s scale Job grading Point method
15. External equity
There is no absolute way to rate pay for a job
Setting pay rates, organization seek to integrate the
external information with what they have learnt through
internal evaluation of jobs this process is called pricing the
Wage and salary surveys
Identifying key jobs
Selecting organization to survey
Pay level policy
16. Individual equity
Wage grades are established and all the jobs within the
grade are paid identically.
Designing pay ranges
Establishing pay ranges
Above and below range employees
Setting individual pay
Skilled based pay
17. Linking pay to performance
“Employers believes that reward in general and incentives in
particular influence performance.”
Reason to link pay to performance
The major reason for the increased attention in benefits is
Role of benefits:
To attract new employees
To retain the customers
Types of benefits:
Mandatory protection programs
Types of benefits
Compensation for time not work
20. Other benefits
Child care assistance
Cash balance pension plan
Early retirement plan
21. Examples of different organizations
compensation and benefits plan
Procter & Gamble
Health care , plus on-site physician and dental care
Vacation days and holidays, and flexible work hours
Maternity and parental leave
Google Child Care Center
Fuel Efficiency Vehicle Incentive Program
Onsite dry cleaning
23. Procter & Gamble
Financial Benefits & Compensation
Health & Family-Friendly Benefits
Vacation & Personal Time-Off
24. Apollo Hospitals
Benefits include the traditional medical and dental.
401k, company-paid life insurance.
Child care subsidies
Educational assistance and
Professional development programs.
Medical Assistance Plan and Medical claim benefits.
Group Life Insurance Program and Employee Deposit
Linked Insurance (EDLI) Program.
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