1. COMPENSATION MANAGEMENT

2. Session Overview Benefits of Proper Compensation
Consequences of Inadequate Compensation
Concepts of Wages
Components of Remuneration
Theories of Remuneration
Factors Influencing Remuneration
Remuneration Model
Challenges of Remuneration
Skill based and Job based Pay

3. Session Overview Incentive Payments
Prerequisites of Effective Incentive System
Types of Incentive System
Group Incentive Plans
Incentives for Indirect Workers
Nature of Benefits and Services
Benefits as Incentive
Types of Employee Benefits and Services
Principles of Fringes

4. Session Overview Significant Benefits and Service Programs
Common Benefits in Pakistan
Advantages and Disadvantages of Long Term Benefits
Administration of Fringe Benefits
Remunerating Top Executives
Components of Executive Remuneration
Issues in Executive Remuneration

5. MANAGING BASIC REMUNERATION
Chapter 11
MANAGING BASIC REMUNERATION

6. Benefits of Proper Compensation
Compensation policy aims to attract talented employees and motivate them to put their efforts and commitment to work that increase job satisfaction work performance
Benefits of Proper Compensation Administration 1 2 3 4 5
Attracts talent
Motivates Employees
Rewards Performance
Reduces Turnover
Manages Compensation Budget

7. Consequences of Pay Dissatisfaction
performance
Desire for more pay
strikes
absenteeism
grievances
turnover
Search for new job
Psychological withdrawal
Job dissatisfaction
Pay dissatisfaction
Lower attractiveness of job
Poor health
absenteeism
Visits to the doctors
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 289

8. Concepts of Wages Minimum Wage Fair Wage Living Wage Team based Pay
Remunerating Professionals
Contract Employees
Expatriates and Executives

9. Components of Remuneration
Benefits include both financial and non financial
Wages and Salary
Incentives
Fringe Benefits
Perquisites
Non Monetary Benefits

10. Components of Remuneration
Financial
Non Financial
Wages and Salary
Hourly wages and monthly rates salary
Incentives
Individual plans
Group plans
Fringe benefits
CPF
Gratuity
Medical etc.
Perquisites
Company car
Club membership
Furnished house
Stock option schemes etc.
Job content
Challenging job responsibilities
Supervision
Growth prospects
Working conditions
Etc.
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 286

11. Theories of Remuneration
Feedback to employee
Employee set expectations and goals
Performance is rewarded
Employee consider equity of reward and performance
Employee sets new goals and expectations based on experience

12. Theories of Remuneration
Reinforcement Theory
Behavior rewarded
Positive Experience
Behavior is repeated

13. Theories of Remuneration
Equity Theory
Adam’s equity theory emphasizes to have equity in pay structure of employee
If employee feel that their efforts are well rewarded they will put more efforts and will be satisfied with their job
In case of inequity feeling they will be de moralized and dissatisfied resulting into low productivity
Individual
equity
Motivation
Internal equity
Perception of
fairness
Commitment
External
equity
Performance
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 287

14. Theories of Remuneration
Agency Theory
In the organizations employer and employees are two main stakeholders
Employer act as principals and employees assume the role of agent
The remuneration of employee is agency cost
Principal tries to agency cost and agent expect to have more agency cost
The principal (Employer) should try to choose remunerating schemes that align its own interest with expectation of agents (employees)
Behavior oriented (merit based pay)
Outcome oriented (profit sharing, commission)

15. Factors Influencing Remuneration
Internal Factors
External Factors
Organization Strategy
Economy
Employee
Society
Job Evaluation
Labour Market
Performance Appraisal
Cost of Living
Labor Unions
Legislation

16. Factors Influencing Remuneration
Business Strategy
Market Position
Remuneration Strategy
Blend of Remuneration
Invest to grow
Merging or grow rapidly
Encourage innovation and entrepreneurship
High cash and incentives for performance. Modest benefits
Manage earning
Protect Markets
Normal growth to maturity
Reward management skills
Average incentives with average cash on unit and individual performance. Standard benefits
Harvest earnings invest somewhere else
Maturity or decline
Focus on cost control
Below average cash with few incentives that too tied with cost control efforts. Standard benefits
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 295

17. Remuneration Model Job description Job evaluation Job hierarchy
Pay survey
Pay levels
Pricing Jobs
Pay grades
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 295

18. Challenges of Remuneration
Skill based pay
Monetary and non monetary rewards
Salary Reviews
Employee participation
Remuneration
Pay Secrecy
Below market or above market pay
Comparable worth
Eliticism or Egalitarianism
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 300

19. Skill Based and Job Based Pay
Factors
Skill based
Job based
Pay structure
Based on ability to perform
Based on job performance
Employer’s focus
Employee carriers wages, Employee linked to skills
Job carries wages. Employee linked to job
Employee focus
Skill acquisition for more pay
Job promotion for better pay
Procedures required
Skills assessment, Value skills
Job content assessment, Value jobs
Advantages
Flexibility, Reduced workforce
Pay based on value of job and work performed
Disadvantages
Cost controls
Inflexibility
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 301.

20. Summary Benefits of Proper Compensation
Consequences of Inadequate Compensation
Concepts of Wages
Components of Remuneration
Theories of Remuneration
Factors Influencing Remuneration
Remuneration Model
Challenges of Remuneration