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1、COMPENSATION MANAGEMENT,JOB EVALUATION,DA,1,AGENDA,Define Compensation.Elements of Compensation System.CONCEPTS OF WAGE AND DIFFERENT KINDS OF WAGES.Objectives of Compensation System.How Compensation System is used?METHOD OF CALCULATING BASIC PAY AND ITS USE IN DESIGNING SALARY STRUCTURE.What are th
2、e components of Compensation System?Different types of Compensation System.Compensation Plans.Financial and Non Financial Incentive Schemes,2,BASIC TERMS USED IN HR,A critical component of both compensation and selection systems,job descriptions define in writing the responsibilities,requirements,fu
3、nctions,duties,location,environment,conditions,and other aspects of jobs.Descriptions may be developed for jobs individually or for entire job families.,JOB DESCRIPTION,The process of analysing jobs from which job descriptions are developed.Job analysis techniques include the use of interviews,quest
4、ionnaires,and observation.,JOB ANALYSIS,A system for comparing jobs for the purpose of determining appropriate compensation levels for individual jobs or job elements.There are four main techniques:Ranking Classification Factor Comparison Point Method,JOB EVALUATION,JOB EVALUATION METHODS,DEFINITION
5、,A set of compensable factors are identified as determining the worth of jobs.Typically the compensable factors include the major categories ofSkill Responsibilities Effort Working Conditions,FACTORE CAN BE FURTHER DEFINED,SKILLLExperience Education Ability RESPONSIBILITIESFiscal Supervisory,CONT.,E
6、FFORTMental Physical WORKING CONDITIONLocation Hazards Extremes in Environment,POINT METHOD,AdvantagesHighly stable over timePerceived as valid by users and employeesLikely to be reliable among committee that assesses the jobsProvides good data to prepare a response to an appeal,DisadvantagesTime,mo
7、ney,and effort required to set upRelies heavily on key(benchmark)jobs,so if key jobs and correct pay rates dont exist,the point method may not be valid,FACTOR DEGREES AND POINT SYSTEMS,WHAT IS A DEGREE LEVEL?,It is a scale that reflects differing quantity or quality of the factorIt is used to differ
8、entiate jobs on the factorIt is a definition that is clear and unambiguousIt contains explicit language that spells out the behaviors,skills,or performance expectations for that factor at different levels of the factor,HOW DO YOU ASSIGN POINT VALUES TO THE ENTIRE SYSTEM?,The maximum number of points
9、 assigned is a fairly arbitrary judgment(500-3000 is common)The number must be large enough to allow sufficient differentiation among the jobs to be evaluated.If there is a very wide spread between the current wages of the highest paid job and the lowest paid job,the maximum number of points will ne
10、ed to be higherIf you choose more than one pay system,the number of points or the actual factors themselves do not have to be the same in each one.SUGGESTION FOR YOUR PROJECT:Have no fewer than 1000 points and no more than 2000.,POINT VALUES TO FACTORS ALONG A SCALE,Point values for Degrees TotalFac
11、tor1234 Skill4590135180 450 Physical effort 255075100 250 Mental effort3570105150 360 Responsibility255075100 250 Working conditions20406080 200Maximum total points of all factors depending on their importance to job=1510,RESPONSIBILITY,Each employee is responsible for conserving the companys equipm
12、ent and material.Level-1Employee reports malfunctioning of equipment or defective materials to the immediate superior.Level-2Employee maintain the appearance of equipment or order of material and has responsibility for the security of such equipment or materialLevel-3Employee perform preventive main
13、tenance and minor repairs on equipment or corrects minor defects in materialLevel-4Employee perform major maintenance or overhauls of equipment or responsible for deciding type,quality and quantity of material to be used.,Job Evaluation-Concept,17,This potential to blend internal forces and external
14、 market forces is both a strength and a opportunity to job evaluation system.,Job Evaluation-Objectives,18,Job evaluation is used to determine the relative value of each job in relation to all jobs within the organization.Immediate objective:to obtain internal and external consistency in wages and s
15、alaries.Ultimate objective:employee and employer satisfaction with wages and salaries paid.,HISTORY:-1865-Karl Marx wrote in Das Kapital that the value of goods and services is based on the amount of labor that goes into them1885-Frederick Winslow Taylor stated that the content of labor in labor det
16、ermines the price of labor1935-Edward Hay developed the Hay point factor system1963-The Equal Pay Act prohibited discrimination on the basis of sexfor equal work on jobs,the performance of which requires equal skill,effort,and responsibility and which are performed under similar working conditions.T
17、he EPA formalized non-market based pay plans,1,Thus,Ranking each job relative to all other jobs,usually based on some overall factor.Steps in job ranking:Obtain job information.Select and group jobs.Select compensable factors.Rank jobs.Combine ratings.,Common Methods of Job Evaluations,Ranking metho
18、d:the grade consists of all jobs that fall within two or three ranks.,Importance of job evolution,1 To involve the people occupying the positions under evaluation.This is especially so if you thinkyour organizations job descriptions are poorly written or out of date.The people in positions and their
19、 immediate supervisors have the best idea of what the job is really about.,2 Job evaluation is most effective as a participative exercise andthis in itself can improve employment relations.It is therefore recommended that job evaluation is introduced or revised jointly by allowing management and emp
20、loyee representatives to discuss relevant issues initially in a non-negotiating forum,3T o ensure integration of internal fairness and external competitiveness.,Up to date,accurate job descriptions are absolutely essential and should bereviewed for accuracy with the current incumbent before evaluati
21、on.More complex job evaluation techniques require more information andoften the primary source of this is job descriptions,so the more complex the jobevaluation scheme,the more detailed the job description needs to be.Keep accurate records of decisions taken,to ensure openness,andtransparency.Build
22、confidence in the process and outcomes by briefing peopleMany organizations choose to engage consultants to manage parts or the entireprocess.These consultants often have access to the expensive butcomprehensive data bases containing detailed information about remunerationlevels in different sectors
23、.job evaluation methods are not to be confused with performance management or appraisal,where the primary concern is with how well a job is performed.,Aspects of job evolution,The 4 major factors on which this method are measured/based are:Company sizeStrategic levelImpact Complexity and Problem Sol
24、ving,Managerial Jobs:Characteristics,24,CommunicationTeamwork/motivationLiaison/networkingService deliveryDecision makingPlanning&organisingInitiative&problem solvingAnalytical&research skillsSensory&physical demandsWork environmentPastoral careTeam developmentTeaching&learningKnowledge&experience,J
25、ob evaluation processThe major objectivity of job evaluation process is to establish satisfactory wage and salary differentials,so job analysis should precede the actual programme of evaluation.,Objective of job evaluation,Job description,Job analysis,Job evaluation,Job specification,Wage survey,Emp
26、loyee classification,Job Evaluation Methods,26,Job Ranking MethodExamines job description and arrange jobs according to value to company e.g.highest to lowest.Job Classification MethodClasses or grades are defined to describe a group of jobs e.g.government organisations.Point MethodBreaking down job
27、s on identifiable criteria and the degree to which these criteria exist on the job.,Job Evaluation Methods,1/5/2008,27,Manager:Key Evaluation Factors,28,Decision making and problem solvingResponsibilityAccountabilitySkills,Hays Method 3 Factors,29,Hays Method-Process,30,Depth&Rangeof Know-HowPlannin
28、g&OrganisingCommunicating&Influencing,Freedomto ActNature of ImpactArea ofImpact(Magnitude),ThinkingEnvironmentThinkingChallenge,KNOW-HOW,PROBLEMSOLVING,ACCOUNTABILITY,+,+,=,Job Size,Compensation Plan of Executives,31,Broad banding paying executives at preset levels based on their level of competenc
29、y.Golden parachute a financial protection plan for top executives in case they are severed from the organisation.,Implications,32,Purpose of evaluation should be clearly definedAdoption of appropriate techniqueAllocation of sufficient resources,Criticism,33,Systematic rather than scientificReliable
30、but validity is determined by ascertaining the impact upon employee satisfaction.Conflict on value of the job.,Useful for standardizing compensation practices.Most pay structures include several grades with each grade containing a minimum salary/wage and either step increments or grade range.Pay for
31、 each job is pre-determined through collective bargaining.,PAY STRUCTURE,Contd,Sources of Compensation.Compensation Methods.Compensation Structure.Administration Of compensationFinancial and Non Financial IncentivesWages ActN.H.P.C.ConclusionReferences,35,What is Compensation System?,Compensation is
32、 a systematic approach.Compensation is a tool.Compensation System is flexible.,36,ELEMENTS OF A COMPENSATION SYSTEM,Objectives of compensation system,Acquire qualified personnelRetain present employeesEnsure equityReward desired behaviorControl costsComply with legal regulationsFacilitate understand
33、ingFurther administration efficiency,38,How Compensation System is used,Compensation is used to:Recruit and retain qualified employees.Increase or maintain morale/satisfaction.Reward and encourage peak performance.Achieve internal and external equity.Reduce turnover and encourage company loyalty.Mod
34、ify(through negotiations)practices of unions.,39,Components of compensation system,Job Descriptions:-define in writing the responsibilities,requirements,functions,duties,location,environment,conditions,and other aspects of jobs 1.Job Analysis:-The process of analyzing jobs from which job description
35、s are developed.2.Job evaluation:-for comparing jobs for the purpose of determining appropriate compensation levels for individual jobs or job elements,Continue,Pay Structures:-based on several grades pay structure is determined through collective bargaining(unions)Salary Surveys:-May include averag
36、e salaries,inflation indicators,cost of living indicators,salary budget averages.,Different types of compensation system,Base Pay Commissions Overtime Pay Bonuses,Profit Sharing,Merit Pay Stock Options Travel/Meal/Housing Allowance Benefits including:dental,insurance,medical,vacation,leaves,retireme
37、nt,taxes.,Compensation Plans,Develop a program outline.Designate an individual to oversee designing the compensation program.Develop a compensation philosophy.Conduct a job analysis of all positions.Evaluate jobs.Determine grades.Establish grade pricing and salary range.,43,Continue.,Determine an ap
38、propriate salary structure.Develop a salary administration policy.Obtain top executives approval of the basic salary program.Communicate the final program to employees and managers.Monitor the program.,44,Sources of Compensation Data,LabourEmployer InformationEmployer AssociationProfessional Associa
39、tion,45,Compensation Methods,There are basically two compensation system viz.Basis Time Rate and Piece Rate.Its is meant for making payment,which should adequate compensate the worker for his efforts.,46,Compensation System,47,Time Rate System,48,Piece Rate System,49,Compensation Structure,Compensat
40、ion System Consists of the following:Salary,Basic Salary or Consolidated Salary:Grade wise flat Allowance:Reimbursements of expenses:Annual payments:Benefits:Employee stock option schemes:“Total cost to the Company”concept:Retiral benefits:Performance Bonus:,50,Compensation Administration,The major
41、functions of an administration consist of the following:Approval and/or recommendation of management on job evaluation methods and findings.Review and recommendation of basic wage and salary structure.Co-ordination and review of relative departmental rates to ensure conformity.Review of budget estim
42、ates for wage and salary adjustments and increases.,51,Principles of Administration of Compensation,There should be a definite plan to ensure that differences in pay for jobs are based upon variations in job requirements.Prompt and correct payments of the dues of the employees.The plan should carefu
43、lly distinguish between jobs and employees.Equal pay for equal work.,52,Continue,The wage and salary structure should be flexible.The employees and the trade union,if there is one,should be informed about the procedures used to establish wage rates.The wage should be sufficient to ensure for the wor
44、ker and his family reasonable standard of living.,53,Financial and Non Financial Incentives,An incentive scheme can offer employees extra pay according to individual or group performance targets.Examples include:profit-related and share option schemes bonuses commission,54,Continue.,Non-financial Ex
45、ample include:vouchers extra holidays gifts company cars,55,Advantages and Disadvantages,56,Reasons For Introducing An Incentive Scheme,1.Increase in earnings for employees?2.Increase in output?3.Improvement in quality?4.Better mobility of labour?5.More efficient methods of working?6.Improvement in
46、safety?7.Higher housekeeping standards?8.Reduction in absenteeism?9.Reduction in labour turnover?10.Reduction in overtime working?,57,What Type Of Work Needs An Incentive Scheme?,Does the work necessitate skilled,semi-skilled or unskilled labour?Can individual skill be fully applied when manipulatin
47、g machines etc.or is the employees quantity and quality of output regulated to a large extent by factors outside his/her control?Does the level of output remain steady throughout the year or is it subject to seasonal variations?,58,Continue.,Is production organized on a process,flow line,batch or jo
48、bbing basis?Have your current production methods been recently reviewed for maximum efficiency?Is any new machinery or plant,to be introduced in the near future,likely to upset the standard upon which an incentive scheme might be based?,59,ACTS GOVERNING WAGE ADMINISTRATION IN INDIA,The Wages Act de
49、termines the legal regulation of the remuneration of persons who work under an employment contract,the grant of guarantees and payment of compensation relating to remuneration.,PAYMENT OF WAGES ACT(1936),The Payment of Wages Act,1936 is a central legislation which applies to the persons employed in
50、the factories and to persons employed in industrial or other establishments specified in sub-clauses(a)to(g)of clause)of section 2 of this Act This Act does not apply on workers whose wages payable in respect of a wage period average Rs.1600/-a month or more.,SALIENT FEATURES:-,This Act has been ena
