Learning Objectives. Understand the different types of compensation. Understand what is strategic compensation planning

Transcription

1 Ibrahim Sameer

2 Learning Objectives Define compensation Understand the different types of compensation Understand what is strategic compensation planning Understand the factors affecting wage rate Understand the components of compensation Administration

3 Compensation Definition Compensation are the methods and practices of maintaining balance between interests of operating the company within the fiscal budget and attracting, developing, retaining and rewarding high quality staff through wages and salaries which are competitive with the prevailing rates for similar employment in the labor market.

4 Components of Compensation Job Description: Based on the worthiness of the job tasks and duties the compensation level is set. Job Analysis: Based on the analysis incentives and benefits are awarded to employees. Job Evaluation: A system for comparing jobs for the purpose of determining appropriate compensation levels for individuals jobs or job elements. Pay Structure: Used for standardizing compensation practice. Salary Survey: Collection of salary & market data.

5 Objectives of Compensation To reward employees past performance fairly, in line with effort, skills and competencies. To attract & retain competitive high performing employees. To motivate the high performing employees and reinforce desirable employees behaviour. To remain competitive in the labour market. To align employee s future performance with organizational goals. To communicate the employees their worth to the organization. To provide employee social status.

6 Factors affecting wage rate Demand and supply of labour Ability to pay Prevailing wage rates Bargaining capacity Cost of living Productivity of labour Job requirement Government policy

7 Approaches of Rewarding people Financial reward It consist of the rate for the job (base pay), pay related to performance or contribution and benefits such as pension scheme. Financial reward should be transparent system where employees know how it works and how affect them. Non financial reward Intrinsic rewards are related to responsibility achievement and the work itself may have a long term and deeper impact on motivation. Reward system should therefore include a mix of extrinsic and intrinsic rewards.

8 Types of Financial Compensation Direct Compensation Base pay The direct financial compensation an individual receive based on the time worked. The two base for calculating base pay is: 1. Hourly wage. 2. Salary Variable pay Is employee compensation that changes as compared to salary which is paid in equal proportion through the year. Variable pay is awarded to employees in the form of: Profit sharing, bonuses, holiday bonus and cash etc.

9 Types of Financial Compensation (cont ) Indirect Compensation Indirect compensation refers to non monetary benefits offered and provided to employee in lieu of the services provided by them to the organization. They include leave policy, overtime policy, car policy, insurance, retirement benefits etc. Mandatory benefits Include such as provident fund, insurance (Aasand health insurance in Maldives), unemployment benefits retirement benefits. Voluntary benefits Include such as annual leave with paid ticket, recreational programmed, educational assistance for the employee and his dependent, subsidized holiday packaged.

10 Types of Non Financial Compensation Are most effective as motivators when the award is combined with a meaningful employee recognition programmed. Non - financial reward are part of motivational rewards to employee in the form of: 1. Job enrichment 2. Job enlargement 3. Empowerment 4. Award and recognition 5. Promotional opportunities

11 Q & A