This document discusses compensation and pay plans. It defines compensation as all forms of pay employees receive in exchange for their work, including both direct financial payments like salaries and incentives, as well as indirect payments like insurance and benefits. It outlines different components of compensation, such as performance appraisal, equity in pay, and methods for establishing pay rates. The document also discusses competency-based pay programs and their pros and cons, as well as other pay plans like broadbanding and strategic pay plans.
This document discusses compensation and pay plans. It defines compensation as all forms of pay employees receive in exchange for their work, including both direct financial payments like salaries and incentives, as well as indirect payments like insurance and benefits. It outlines different components of compensation, such as performance appraisal, equity in pay, and methods for establishing pay rates. The document also discusses competency-based pay programs and their pros and cons, as well as other pay plans like broadbanding and strategic pay plans.
This document discusses compensation and pay plans. It defines compensation as all forms of pay employees receive in exchange for their work, including both direct financial payments like salaries and incentives, as well as indirect payments like insurance and benefits. It outlines different components of compensation, such as performance appraisal, equity in pay, and methods for establishing pay rates. The document also discusses competency-based pay programs and their pros and cons, as well as other pay plans like broadbanding and strategic pay plans.
This document discusses compensation and pay plans. It defines compensation as all forms of pay employees receive in exchange for their work, including both direct financial payments like salaries and incentives, as well as indirect payments like insurance and benefits. It outlines different components of compensation, such as performance appraisal, equity in pay, and methods for establishing pay rates. The document also discusses competency-based pay programs and their pros and cons, as well as other pay plans like broadbanding and strategic pay plans.
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Welcome to the session on
Compensation 2
Compensation Definition All form of pay or rewards going to employees and arising from their employment. Compensation is what employee receive in exchange for their contribution to the organization. Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. 3
Performance Appraisal Definition (cont’d) Employee exchange their physical and mental efforts for compensation, but compensation means more than wage and salaries. It includes pay, incentives and benefits. 4
Components of compensation
Two main components of
compensation Two main components of compensation
Direct financial Direct financial payments: payments: Indirect Financial payments:
Salaries, incentives, Salaries, incentives, Insurance, paid leave, wages, commissions wages, commissions provident fund, pension etc. bonuses etc. bonuses etc. 5
Compensation policy Issues
Pay for performance Probationary pay
Pay for seniority Paid and unpaid leaves
The pay cycle Paid holidays
Salary increases and Salary compression
promotions Geographic costs of Overtime and shift pay living differences 6
Equity in Pay External equity One company’s pay rate is compared to the job’s pay rate of other company. Internal equity How fair the pay rates when compared to the other jobs of the same company. 7
Equity in Pay Individual equity Fairness of individual’s pay rates compared to his or her co worker’s rate of pay in the same org. and same kind of job. Procedural equity Perceived fairness in the process and procedures used to make decision regarding the allocation of pay. 8
Establishing Pay Rates
Salary Survey
Job Evaluation
Group similar Jobs into Grade
Price each Pay Grade
Fine Tune Pay Rate
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Performance Appraisal VS Performance Management
Competencies Demonstrable characteristics of a person, including knowledge, skills, and behaviors, that enable performance.
Competency-based pay Where the company pays for the employee’s range, depth, and types of skills and knowledge, rather than for the job title he or she holds. 10
Components of Competency Based pay programs
1. A system that defines specific skills, and a
process for tying the person’s pay to his or her skill 2. A training system that lets employees seek and acquire skills 3. A formal competency testing system 4. A work design that lets employees move among jobs to permit work assignment flexibility. 11
Competency Based Pay
Pros and Cons
Pros 1. Higher quality 2. Lower absenteeism and fewer accidents Cons 1. Pay program implementation problems 2. Cost implications of paying for unused knowledge, skills and behaviors 3. Complexity of program 4. Uncertainty that the program improves productivity 12
Other pay plan
Pros and Cons
Broadbanding
Consolidating salary grades and ranges into just
a few wide levels or “bands,” each of which contains a relatively wide range of jobs and salary levels. 13
Other pay plan
Strategic Pay Plan
Strategic compensation Using the compensation plan to support the company’s strategic aims.
Focuses employees’ attention on the values of
winning, execution, and speed, and on being better, faster, and more competitive. 14
