Compensation : Compensation ‘ Compensation’ in other terms also called as ‘Employee Remuneration’. Remuneration is the compensation; an employee receives in return for his or her contribution to the organization. Remuneration occupies an important place in the life of an employee. His or her standard of living, status in the society, motivation, loyalty, and productivity depend upon the remuneration he or she receives. For the employer too, employee remuneration is significant because of its contribution to the cost of production. Aims of Employee Compensation : Aims of Employee Compensation Attract capable employees to the organization.
Motivate them toward superior performance.
Retainment of their services over an extended period of time. Aims of Employee Compensation : Aims of Employee Compensation 1. Attract capable employees to the organization:-
Every organization looks for retaining capable employee with the organization. Infact, retaining an employee is the most difficult function of HR Department. So for retaining an efficient employee with the organization, he has to be provided with better compensation. That compensation that he is going to be provided should include better salary perks, increments, promotions etc. So, a better compensation package is going to attract the efficient employee who is very useful to an organization.
2. Motivate them toward superior performance:-
For any employee, money is the main motivator. If every employee of an organization is provided with better compensation, every body will be motivated to exhibit superior performance. The better the pay, the better the performance. The compensation that is going to be provided to the employees should include better salary, perks, increments, bonus etc. Even though the remaining components like promotion are going to motivate the employees, but the basic motivator is better compensation.
3. Retainment of their services over an extended period of time: -
Retainment of the services of an employee with an organization is the most difficult job of HR. So, the retainment of the employee’s service over a long period of time is possible only by providing them with better compensation. Factors affecting compensation policy : Factors affecting compensation policy Supply and demand
Cost of living
Labor unions Components of Compensation : Components of Compensation Components of Compensation Conti. : Components of Compensation Conti. Direct- Wages, Salaries, Commissions, Bonuses
Indirect- Insurance plans, Social Assistance, Educational Assistance, Paid Absences
The Job- Interesting Duties, Challenge, Responsibility, opportunity for recognition, feeling of advancement, achievement opportunity
The Environment- Sound policies, Competent supervision, Congenial coworkers, Appropriate status symbol, Comfortable working conditions, flexi-time, Job sharing, Cafeteria compensation Factors Involved in Determining Salary : Factors Involved in Determining Salary Kinds and Levels of Required Skills.
The single most important factor influencing an individual’s rate of pay is the kind of work performed. Some professions require a high level of education which made the job a highly paid job.
Supply and Demand of Labor.
Any job is worth what the marketplace will bear. Individuals with certain skills may be in varying degrees of demand. Sometimes the demands vary across specific locations. At other times, they are national in scope. Those who have the particular knowledge, skills, and credentials that are in high demand—a current example is information technology professionals—can request and will usually receive premium wages.
Levels of employment/unemployment do not affect all regions of the nation equally. Certain areas where the cost of living is high have historically paid higher wages. Factors Involved in Determining Salary : Factors Involved in Determining Salary Profitability of the Organization
Employees working for a highly profitable business have a greater chance of receiving higher wages than those working for a less profitable enterprise.
Employee Tenure and Performance.
Traditionally, an employee’s pay increases with years of service. A widely held view is that, through experience, employees become more effective problem solvers and are more dependable. However, as the global economy increasingly demands ongoing business change and higher levels of productivity, employers have looked at how pay and reward systems can improve an organization’s performance. For many employers, the goal now is to integrate the organization’s compensation and reward philosophy with its strategic initiatives regarding customers, profitability, and the development of a strong, competitive work force focused on the success of the organization. Factors Involved in Determining Salary : Factors Involved in Determining Salary Employment Stability
We all want the security of knowing that we will have our job as long as we want it. The idea of not having a regular job to pay debts and day-to-day living costs is distressing. Employees who feel that a job is secure are often willing to accept less than they would be paid in a potentially unstable environment.
Some employers are committed to a philosophy of paying their employees above industry or area standards in order to attract and retain the very best pool of skilled workers available. Others pay at the 50th percentile; still others pay as little as they can. Size of the Organization. Large organizations can often pay at a higher wage rate than smaller ones. WAGES : WAGES Minimum Wages
These are the wages that ensure more than just adequate sustenance, these ensure certain medical & other essential requirements of individuals catered to ensure:-
1. 3 extra compensation unit to a family of a simple earning member.
2. 2700 calorie of food intake per member per day.
3. 18 yards of cloth per member and for an unit of four members i.e. 18 x 4 = 72 yards cloth per annum.
4. To ensure land, shelter equivalent of what is provided by industrial housing scheme.
5. Amenities catered to by wages 20% of minimum wage. WAGES : WAGES LIVING WAGES
Ensure more than adequate sustenance to the extent that certain greater needs like social needs, sanitations, health aspects, and protections from misfortunes.
These are fixed on the basis of: -
1. Productivity of Labour
2. Prevailing level of wages
3. Industry Policy to wages & income distribution in the country.
4. Contribution of industry to the economy
The upper limit is fixed on the basis of the above factors and ensures minimum wages. Wage Policy : Wage Policy Wage policy deals with remuneration of work rendered by employees in any organization. Wages are that compensation given to employees done for work in return. Wages are given to the worker (blue color) who are the shop floor employees and salaries are given to executive cadre (white color) according to Public Policy, a good wage policy should look into the following:
1. An equitable distribution of return between capital & labour.
2. To establish justified wage differentials
3. Equal pay for equal work
4. To base wages on need basis Slide 13: FOR MORE USEFUL EDUCATIONAL PRESENTATIONS AND TECHNOLOGICAL DOCUMENTATIONS LIKE THESE