COMPENSATION MANAGEMENT

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1 COMPENSATION MANAGEMENT DIPAK KUMAR BHATTACHARYYA Director Camellia School of Business Management Kolkata OXPORD UNIVERSITY PRESS

2 Preface Chapter 1: Introduction to Compensation Management Introduction Objectives of Compensation Principles of Compensation Formulation Theories of Wage Determination Types of Wages Wage Boards Wage Policy 7<9 1.8 Significance of Employee Compensation Ethical Issues Compensation Decisions Determinants of Compensation Decisions VIE theory and Compensation Compensation Benchmarking JO 1.14 Broad Band Pay Plan Types of Executive Compensation Compensation Trends in India Employee Reward System in India Aims of Employee Rewards in India Compensation Plan 37 Case Study 42 Chapter 2: Employee Compensation and the Labour Market Introduction Macroeconomics of Labour Markets Unemployment and its Impact on Labour Market Neoclassical Microeconomics of Labour Markets 55 v

3 2.5 Internal Labour Market as an Institution Neoclassical Microeconomic Model-Supply Neoclassical Microeconomic Model Demand Implications of Economic Models of Labour Markets on Employee Compensation 61 ^ 2.9 Criticisms of Labour Economics Labour Market Changes and Trade Unions 62 Case Study 68 Chapter 3: Economic Theories and Compensation Management Introduction Economic Theories Economic Theories and Employee Compensation Trade-offs and Employee Compensation Valuation of Employee Compensation Pricing of Employee Stock Options 78 "3.7 Labour Markets and Employee Benefits Equity in Employment Benefits Econometric Application in Compensation Decisions Productivity-linked Employee Benefits 84 Case Study 99 Chapter 4: Compensation Management and Job Design Introduction Job Design Strategies and Techniques ofjob Design Components of Job Design Job Analysis Job Description Job Evaluation Job Assessment Alternate Methods of Job Assessment Work Measurement Ergonomics Ergonomics and Work Study Ergonomics and Management Competency-based Approach 154 Case Study 159

4 Chapter 5: Performance-related Compensation Introduction Compensation Management and PMS Selection of Performance Objectives Selection of Performance Indicators Developing Performance Standards Developing a Performance Metric Effective Performance Modelling Effective PMS PMS and Organizational Strategy Various Dimensions of Performance PMS and Behavioural Observation Scales Compensation Broad Banding using PMS Results Compensation Design through Skill-based Programmes Competency-based Pay 208 ^ Case Study 212 t Chapter 6: Team-based Compensation Introduction Team-based Compensation Effective Design of Team-based Compensation 222 Case Study 225 Chapter 7: Executive Compensation Introduction Components of Executive Compensation Calibration of Executive Compensation to Performance Transparency of Executive Compensation Executive Compensation Theories Executive Compensation Design Relationship Between Fixed and Variable Pay Performance Measurement in Executive Incentive Programmes Executive Compensation and Organizational Strategy Different Criteria of Executive Compensation Recent Studies on Executive Compensation 250 Case Study 255

5 Chapter 8: Employee Benefits Introduction Non-monetary Benefits Tax Obligations on Employee Benefits Types of Employee Benefits Statutory Employee Benefits in India Deferred Compensation Plans Alternatives to Employee Benefits 270 Case Study 273 Chapter 9: Employee Motivation and Compensation Introduction Objectives of Motivation Theories of Motivation Motivation and Morale Motivational Research and Compensation Design 299 Case Study 302 Chapter 10: Sales Compensation Plan Introduction Understanding the Sales Function Sales Compensation Issues Sales Compensation Plan Sales Compensation Design and Administration Sales Incentives and Motivation Contribution-based Sales Compensation 377 Case Study 319 Chapter 11: Legal and Taxation Issues on Employee Compensation Introduction Tax Implications of Compensation Compensation and the Income Tax Act Perquisites Cost to Company Pay at Risk Legal Interpretation of Wage Fixation Wage Fixation through Collective Bargaining Collective Bargaining in India 339 Case Study 344

6 Chapter 12: Strategic Compensation Management Introduction Strategy Compensation Design and Strategy Aligning Strategies to Transform People Strategic Planning Strategic Compensation Design Strategic Compensation Policies 364 Case Study 367 Chapter 13: Quantitative Tools and Innovation in Compensation Introduction Theoretical Discussions on Compensation Variable Compensation Retirement Plans Payroll Management Quantitative Analysis Employee Benefits Incentive Determination Group Incentive Payment Practices in Organizations Overtime Wages Merit Matrices Economic Value Added (EVA) 477 Case Study 422 Chapter 14: International Compensation Management Introduction International Compensation Cultural Issues Concept of Variation Components of International Compensation Issues Related to Repatriation International Compensation Design Approaches to International Compensation 433 Case Study 437 Index 441

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