1.What do you mean by Compensation Management? Explain

the non-compensation dimensions.

The key elements of compensation for the executive officers are a base salary,

an annual bonus paid in cash and a long-term incentive award denominated and

usually paid in shares of Company stock. The executive officers are also eligible

for certain other benefits and perquisites that are intended to be a part of a

competitive compensation package that provides health, welfare, savings and

retirement programs comparable to those provided to employees and executives

at other companies in our industry. Some elements of compensation are related,

meaning that the value of one element affects the value of another element.

Increasing base salary increases target bonus opportunities, savings, pension

and disability benefits. Increasing bonuses also increases pension and savings

plan benefits, but long-term incentive awards are excluded from both of these

plans.

The purpose, key characteristics and target pay levels of each element of

compensation are in the following table.

  Description /

Purpose

  Characteristics   Target Pay

Pay Element Level

Base Salary   Compensate for day-

to-day performance

at the executive's

level of responsibility

based on the

executive's skills,

experience and

accomplishments.

Support attracting

and retaining

executive talent.

  Fixed, paid in cash,

short-term.

  Approximately at

or slightly above

median of peer

group.

Annual Bonus   Motivate and reward

current year results

by aligning efforts

across the Company

to achieve specific

measurable results.

  Variable with

performance, paid

in cash, short-term.

  Combined base

salary and target

bonus

approximately at

median of peer

group (or above

or below based

on performance).

Long-term

Incentives

  Motivate and reward

long-term results,

typically over three

years, by aligning

efforts to achieve

specific measurable

results and increase

the market price of

the Company's

Common Stock.

  Variable with

performance, paid

in stock, long-term.

  Combined base

salary, target

bonus and target

long-term

incentives

approximately at

median of peer

group (or above

or below based

on performance).

Employee

Benefits(1)

  Protect against

catastrophic

expenses and loss of

income (health,

disability and life

insurance plans) and

provide retirement

income (savings and

  Fixed, indirect

compensation:

health, short- and

long-term disability

plans, life

insurance, savings

and retirement

plans.

  Combined value

approximately at

the median of

general industry.

pension). Benefits are

provided to

executives on the

same basis as all

other employees.

Perquisites   Assist in attracting

and retaining

executive talent at a

practical value for the

Company.

  Fixed, indirect,

short-term.

  Approximately at

or below median

of general

industry.

Post-Termination

Compensation

  Provide the basis for

rapid transition out of

the Company that is

fair to the executive

and to the Company

by providing

temporary income

following an

executive's

  Both fixed and

variable elements,

both cash and

stock-based.

  Approximately at

median of peer

group.

involuntary

termination (other

than for cause).

2. Discuss the classification of Employee Benefits. What

are the factors that influence the choice of a benefit

program?

Economic Theories about Wages

Many theories have been advanced to explain the nature of wages. The first of

them was the subsistence theory of wages, also called the “iron law of wages,”

of which David Ricardo was one of the main exponents. The theory maintains

that wages cluster around the bare subsistence level of workers. A wage rate

much above the subsistence level causes an increase in the number of workers;

competition will then lead to a depression of wages back toward the cost of

subsistence. Wages that are below subsistence reduce the size of the working

population; in that case competition will raise wages, but only up to the

subsistence level again.

In the surplus-value theory as propounded by Karl Marx, the value produced by

the worker in excess of what is paid in wages is called surplus value. The

surplus value, exacted from the worker, constitutes the capitalist's profit. The

wage-fund theory is that wages are advanced out of a fixed fund of capital, from

which an excess withdrawal, either through legislation or through union

pressure, will ultimately reduce the amount available for other workers. Any

increase in wages would also have to be taken out of profits, and their reduction

would cause a decline in savings, which provide the capital from which the wage

fund is derived.

The marginal-productivity theory maintains that employers will only pay a wage

that is, at most, equal to the amount of extra value added to the total product by

one additional worker. The bargaining theory modifies the marginal-productivity

theory by taking into consideration other factors (e.g., laws and social and

political changes) that might affect the determination of wage levels and by

acknowledging that certain basic assumptions (equal bargaining power of

employer and employee, free competition between the two, and mobility of labor)

that characterize the marginal-productivity theory do not hold in our present

economic system.

 

11

Australians today expect more from their jobs. Alas the gap between what

employees want from their jobsand what they actually get appears to be

widening. Today significant numbers of Australians are dissatisfiedwith the

quality of their working lives. Human Resource Managers must promote

employee productivity byfinding ways to unlock the potential that exists in the

overwhelming majority of employees. One way to dothis is through better job

design - as both productivity and quality of work life are tied to job

design. Thereis however, no one best way to design a job.  The different

approaches to job design can emphasise either  e f f ic iency

or  employee  sat is fac t ion.  Because  job des ign is   in f luenced  by

numerous fac tors  such  asmanagement philosophy, government

regulations, union requirements, economic conditions and

employeenumbers  and ava i lab i l i ty   t rade  of fs   inev i tab ly  occur

3. Suppose you are a HR Manager and you are asked to

develop an effective Incentive Scheme for your organization.

What are the pre-requisites you will consider while

developing an Effective Incentive Scheme?

This  means that some jobs wi l l be  more or lessefficient or satisfying

than others. Regardless poorly designed jobs result in lower productivity,

employeeturnover, absenteeism, sabotage, resignations

and unionisation. In contrast, a well designed job promotesthe

achievement of the organisation's objectives by structuring work in a

way that integrates managementrequirements for efficiency and employee

needs for satisfaction. Effective job design thus presents a major challenge for

the HR manager. Job design is also affected by the nature of the task,

the attributes of theworker, the cost of re-design

4. Define Pay Structure. What are its objectives? Explain the major

decisions involved in designing and setting competitive pay structures

Job evaluation is the process of figuring out how much a job is worth to create a

job structure for a business. It evaluates the position, not the performance of

employees. These evaluations are extremely important to companies because

they provide the basis for pay rates. There are three major approaches to job

evaluation a company can use.

1. The Ranking Approach

o In the ranking approach, company representatives take each job and figure out

how much it is worth to the business. This of course varies depending on the

company's objectives and methods of operation. For example, technical support

might be more important to an online retailer than an on-site retailer. Using this

method requires businesspeople to ascertain how each job is connected to each

business function. If a job is connected to many functions, it usually gets a higher

ranking and pay assignment.

The Classification Approach

o The classification approach puts jobs into classes or groups. In this method, jobs

with similar requirements are kept together. For example, the positions of

treasurer and accountant would be in one class because they both require

working with economic data. The benefit of this method is that employees can

understand that their pay rate is not completely subjective and is comparable to

the pay rates received by others within the company.

The Point Approach

o With the point approach, company agents list components with which to evaluate

each job. For example, one component might be physical effort or the amount of

supervision the job requires. Each component has a specific point value

assigned. Company agents go through each job and identify which components

apply to each position. The more points a job gets, the more valuable it usually is

to a company and the higher pay rate it typically gets. This method is expensive

but is probably the most scientific.

Why There are Different Approaches

o Companies use different approaches to job evaluation and creating job structures

largely because every company is different and has its own needs. For example,

in a large company, the simplicity of the ranking method might be problematic,

because there are dozens of individual positions. A small company, by contrast,

could find the ranking method is suitable because there are not that many

positions to define.

Multiple Approaches

o Often, companies complete more than one evaluation using different

approaches. The advantage of doing this is that it gives a company a better

sense of whether the job structure it has created is accurate; it removes

subjectivity. There thus is not really a "best" approach, because all approaches

can be used in conjunction with each other.

5. Explain the process of designing a successful Reward

Strategy? Components of Cost to Company (CTC) Salary

Basic

Dearness Allowance (DA)

Incentives or bonuses

Conveyance allowance

House Rent Allowance (HRA)

Medical allowance

Leave Travel Allowance or Concession (LTA / LTC)

Vehicle Allowance

Telephone / Mobile Phone Allowance

Special Allowance

Let’s understand this using a simple example. Say your basic is Rs. 15,000 per

month, DA is Rs. 10,000 per month, you get conveyance allowance of Rs. 800

per month, and you get HRA of Rs. 4,500 per month. So, your package so far

is Rs. 3,63,600 per year.

6. Write a short note on the following:

a)Wage Policy Plan in India

b)Voluntary Retirement Scheme(VRS)

Variable pay is employee compensation that changes as compared to salary

which is paid in equal proportions throughout the year. Variable pay is used

generally to recognize and reward employee contribution toward company

productivity, profitability, team work, safety, quality, or some other metric deemed

important.

The employee who is awarded variable compensation has gone above and

beyond his or her job description to contribute to organization success. Variable

pay is awarded in a variety of formats including profit sharing, bonuses, holiday

bonus, deferred compensation, cash, and goods and services such as a

company-paid trip or a Thanksgiving turkey.