Unit 5 : COMPENSATION MANAGEMENT - ASSIGNMENT

Unit 5 : COMPENSATION MANAGEMENT
Is more concerned with people(employees) and the value they create in the organization.
• Employee compensation refers to all forms of pay or rewards going to employees arising from their
employment.
• Compensation is composed of money received in the performance of work, plus the many kinds of benefits
& services that organizations provide to their employees.
Components(or Types) of Compensation
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Process of Compensation
• Job Analysis: consists of job description & job specification. A job is evaluated to determine its value
relative to all other jobs in the organization.
• Valuing Jobs: The actual amount of money to be paid is determined through wage and salary surveys.
• How much other firms are paying?
• What are the items included in social security?
• What is the level of pay offered by other firms for similar jobs?
• Pay Structure & Policies: It is determining
• Whether to pay amounts equal, above or below the industry level?
• Whether there should be single rates? Or, whether pay ranges should be provided for merit?
• Which jobs are placed in each of the pay grades?
• The actual money value to be assigned to various pay grades.
• Differential between pay plans,.
• Whether to use package system for specific work?
• How to control salary & wages costs? etc.
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• Individual Pay: The employee are to be informed of details of pay programme. Transparency vs.
secrecy(secrecy may create dissatisfaction & negative attitude).
• Implementation of wages & salaries: High ranking officers are recruited for pay system. The HR
department & executives review & control the implementation process.
Methods of Compensation
• Base plus cost of living allowance(BCOLA): Every organization has their base salary for all types of jobs.
On/ above of that employees are provided COLA. COLA is an adjustment to base salary for
goods/services/ changes in the market.
• Bonus/Cash Incentives: Employee is given some portion of profit once/twice a year.
•
$ %
9,000
Premium Zone
150
8,250
Qualified
135
7,500 Zone 125
6,750
Learning Zone
115
6,000 100
Make-up of a Salary range
• Caferetia Approach: Employee get compensation as a package. The employee picks benefits & services as
per needs within the limit of pay package. For e.g. if pay package is Rs. 5,00,000 per year, the pay, services
& benefits cannot exceed that limit.
• Broad banding method: It creates vertical pay rate range. Nepal govt. pay plan consists of 10 main grades
(Classless 3+ Non-officers 3+ Officers 4=10) each with its pay range. For employees whose job falls in one
of the grades, the pay range for that grade decides his/her minimum & maximum salary.
• Structure/ Components of Compensation
• 1. Wages & Salary: Wages is the remuneration paid periodically(hourly/daily) to an employee or worker,
production & maintenance(i.e. blue-collar workers). Salary refers to weekly/monthly rates paid to
clerical, administrative & professional employees(i.e. white-collar workers)
• 2. Incentives: refer to all the plans that provide extra pay for extra performance in addition to regular salary/
wages.
• 3. Benefits: usually known as ‘fringe benefits’ because they are offered to the employee as free of cost.
Benefits can be:
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Pay for time not worked(holidays, leaves, paid vacation(Talabi bida, Dashain, Tihar, etc).
Protection programs(insurance, pension or gratuity(Updan), etc.)
Executive benefits(fuel, telephone, security guard, newspaper, etc.)
• 4. Services & Perquisites: In addition to above compensations, organizations also provide other
services(amenities/perks) that employees find desirable. For. e.g.
-Free or subsidized housing, fooding, work clothing, transportation facilities.
-Purchasing services(company-operated stores, staff discount on company products)
Recreation & social programs(sports, social club, parties, picnic, reading room, etc)
Educational(Ph.D), medical(Self & family members), outplacement service, etc.
Employee Benefits/ Incentives Pay Plans (IPP)
• Performance & pay should be direct & clear.
• From the days of Scientific Management & F. W. Taylor, business organizations have emphasized the use
of incentives on an individual rather than group basis.
• Straight piecework plan: In this plan, the worker is paid fixed wage for each unit produced. There is direct
relationship between outputs and earnings.
• Piece Wage= Number of units produced X Rate per unit
• Differential piece rate: Two rates are used. One rate is given for standard output. Another higher rate is
given for output above the standard, so as to encourage the employee to exceed the normal standard.
• Sales incentive plans: are for salespersons as a commission/ benefits on sale/target. Outdoor salespersons
are paid a salary plus commission.
Managerial incentive plans: are for managers in the form of cash bonus for good performance of the
department, branch or whole organization.
Employees Benefits & Services
• Indirect & non-cash compensation paid to an employee by the organization is called benefits.
• Some benefits are mandatory(made compulsory) by law(social security, unemployment compensation,
etc.).
• Others differ from organization to organization(such as health insurance, life insurance, paid vacation,
pension, gratuity, etc.)
• Employee benefits ensure economic security of members & help them to stay long.
• The term ‘Perks’ can be used for benefits.
• Common perks are take home vehicles, hotel stays, leisure activities on work time (watching live
football/cricket, free stationery/newspaper, allowance for lunch, clubcard, etc).
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Types of Benefits/Services
• Economic/Financial benefits: intended to provide financial support to employees & their families, in time
of sickness, old age, accidents, unemployment.
• Recreation/Social services: provide employees with opportunities for fruitful use of leisure time.
• Professional services: higher education, self development, etc.
Government Regulations for Compensation in Nepal
• Govt. legislation has following provisions to deal with pay structure, benefits & services.
• -Labor Act 2048 & Labor Regulation
• Civil Service Act 2049 (B.S.)
• Bonus Act
• Company Act 1996
• Constitution of Nepal, 2072
• Equal Pay/no discrimination: for both gender.
• Minimum wages: To be fixed with consultation with employers & trade union. The employers must pay
minimum wages for hourly, daily & monthly work.
• Minimum basic salary= Rs. 9,700 (effective from Falgun 2072)
• Daily wages= Rs. 395
• Provident Fund: applicable to permanent staffs. The maximum limit is 10% of basic salary from both.
• Bonus: Bonus is mandatory for both public & private Ltd. 10% of net profit as the limit for bonus payment.
• Overtime payment: regular work-hour per week is 48 hours (8 hoursX6 days a week). In Nepal, it is 150%
(1.5 times) the regular hour rate.
• Other Provisions:
• -Dashain bonus equal to basic salary of one month.
• Gratuity(a/c to provisions applicable)
• Payment for preservation of home/sick leave, etc.
• Leave (Casual, sick, annual, force)
Social Welfare, Incentive Provisions & Retirement Benefits in Nepal
• Social security is a device provided by society(or organization) against insecurities arising from natural,
social & economic causes(sickness, maternity, invalidity, old age, death).
• Social welfare/ security includes the creation of family responsibility of the organization.
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• When a person retires from the work/age bar. (58years age/30 years work)
• Voluntary retirement (after the age of 50)
• When person considered as suffering from invalidity.
• Survivor’s pension
• Disablement benefits
• Widower’s entitlement to survivors pension.
• Accident while working/ travelling/ during job title.
• Occupational disease.
• Medical benefits.
• Employer not to dismiss or punish employee during period of temporary disablement.
Issue of Compensation in Nepal
• Issue of minimum wages: Due to slow industrial & economic growth, there is always excess of labour
supply over demand. Therefore, the bargaining power of workers is very low. Minimum in South Asia.
• Issue of comparable worth: Should women who are performing jobs equal to men’s be paid the same as
men? Govt. & semi-govt. organizations are trying to establish equity in compensation. But most of the
private organizations pay unequally.
• Issue of Pay secrecy: Govt. organizations, public enterprises, etc. disclose full information about wages &
salaries. Transparency provides employee satisfaction.
• Private firms prefer pay secrecy. This is done to avoid pay comparisons among employees.
• Issue of Inflation: some organizations offer allowance for inflation(mahangi bhatta) in salary programs. If
not included it becomes difficult to motivate employees & recruit new under the circumstances.
• Issue of cost-of-living differentials: different country, city/ locality have different standards of COL index.
For.e.g. a family of three members can live in Terai region(Janakpur) with Rs. 20,000 per month. But the
same family may require 30,000 in Kathmandu.
• Give the transferred employee a nonrecurring payment(usually a lump sum amount is given i.e., Rs.
1,20,000 per year in the above case)
• Issue of Pay review: Pay review must be reviewed & changed from time to time. But how frequent & when
becomes a relevant issue. Pay reviews may be made on predetermined dates, for e.g. in every three
years(e.g. applicable from Shrawan 1st).
• Issue of employee participation: when employees are not involved in designing a pay plan, they show high
resistance in accepting it. Therefore, the pay committee must involve employee representative, for further
acceptance & motivation….
• End of Unit:5 Compensation Management
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Unit 6: Safety & Health at Work
 Safety refers to the absence of accidents/ protection of workers from the danger of accidents.
 The importance of occupational/industrial safety has increased because of industrialization, in which
human beings are subject to mechanical, chemical, electrical & radiation hazards.
 Many organizations deny to follow the minimum legal requirements designed by govt. or law.
 Top management should set its procedures to define, document & implement a formal health & safety
policy for the organization.
Legal Requirements for Safety & Health
 International Labor Organization(ILO)’s Model Code of Safety Regulation:
 A Tripartie Technical Conference organized by ILO in 1948 formulated a Model Code for the guidance of
govt. & industry. Rule 82 of this Code deals with guarding machinery:
 -Provide positive protection
 -prevent all access to danger zone
 -not interfere unnecessarily with production
 -operate automatically or minimum effort
 -provide machine oiling, inspection, adjustment, & repair
 Withstand long use with minimum maintenance
 Have safety & fire resistant wear & other precautions, etc..
Accidents
 Accidents are usually the result of a combination of factors like:
 Unsafe conditions(work related causes)
 Unsafe acts
 Other causes
 Each one of which may differ from situation to situation.
How to Reduce Accidents
 Proper Training: Human factor is responsible for 80-90 % of accidents. This indicates that safety
procedures should be given more emphasis on the human aspect of accidents with a view to eliminate
human errors. The safety measures adopted by psychologists include training workers to promote safety
habit, developing attitude of co-operation to use safety devices, reducing fatigue & selecting employees.
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 Safety Propaganda Work: Posters, slogans, magazines, etc. are used in conducting safety publicity. Safety
committees should be formed to encourage habits.
 Safety Programme: A sound accident control programme(based on experience of the past) is outlined
below(policy guidelines):
 -Control of unsafe acts
 -Elimination/control of hazardous conditions
 -Safety-minded supervision
 -Maintain accident records
 -Selection of less accident prone(safe machines, tools, equipments,)
 -Use of automated machines/robots, etc. in 3D jobs(danger, dirty and difficult jobs)
Occupational Health & Safety (OHS)
 Why much focus in health?
 Because unhealthy employees have greater absenteeism, turnover, medical claims, low productivity, and
results for organizations….
 It is necessary to examine employee health from different angles:
 Physical health,(Communicable diseases)
 Mental health,
 Alcoholic & drug abuse
 Violence in workplace,
 Sexual Harassment, etc….
Occupational Diseases
 Lung Cancer (Causes: Coke oven emissions, smoke from cement industry)
Respiratory problem(plastic packaging), Black lung disease(coal dust, cotton dust), Itching, skin
disease(cement industry), Hearing problem(Loud noise), Backache(Table work), eyepain(Computer work),
Anxiety, stress,(work pressure, crowd).
Sexual Harrassment at Work
Anything of a sexual nature that creates a condition of employment, promotion, or offensive language/
communication, unwelcome physical contact, etc.
 Harassed employees feel angry for being treated as an sex object. They have no respect for those doers,
find uncomfortable in the company.
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 Sexual harassment causes problem for employers. For e.g. employee turnover, absenteeism, low morale,
lack of effective team, psychological problems, etc.
How to deal with Sexual Harrassment
 An employer should establish written sexual harassment policy by which employees can bring complains to
management.
 Employers need to establish a means of identifying unreported incidents within the company.
 Establish a committee composed of both men and women to investigate such claims.
 The victim can take legal action(police/court) against such doers without delay.
Drug-related Problems
 Over use of any kind of drug which produces negative consequences at work.
 Drug abuse is evident among young employees as compared to middle employees.
 A drug-abused person is:
 Is late 3 times as compared to other employees.
 Uses 3 times the normal level of sick benefits.
 Is involved in accident 3.6 times as compared to normal employees.
 Is one-third less productive than fellow workers
Alcohol-related Problems
 Alcohol related problems are very common in our society.
 It adversely affect quantity & quality of work, is costlier, and requires medical treatment.
 About 16% of full-time employees have serious drinking problem.
 Annual death due to alcohol is about 1 million.
 Fully half of all auto deaths involve alcohol.
Reducing Drug & Alcohol abused Employees
 In house counseling by the HR department, the company doctor, or immediate supervisor.
 By using disciplinary systems like short term dismissal, fine,
 Consulting psychiatrist, treatment centre.
 Finally terminating the victim…
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Emerging Concepts and Issues in OHS(Occupational Health & Safety)
Workplace Violence: More than 1,00,000 employees are murdered(forced to suicide) every year. No organization is
problem-free today. The issues for companies are how to prevent on-the-job violence?
International Health Issues: Most countries have laws & regulatory agencies that protect workers from hazardous
work environment. Organizations preparing to send executives on overseas assignments should have on checklist: an
updated health certificate, a general first aid kit, emergency plans. What about cost & tension involved in doing so?
International Safety Issues: Safety for the employees has become an issue while travelling & after arrival. A lot
of turcher, kidnapping, gherao, throwing shoes, etc. have been faced by high profile officials abroad. The issue is
how much precautions to be taken? How much money to invest in safety measures?
Healthy Environment: Another emerging issue is how to maintain a healthy work environment which: provides
enough fresh air, avoid harmful building materials, such as asbestor, toxins, provide smoke-free environment, reduce
stress, achieve work-life balance.
End of Unit: 6
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