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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