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Compensation Management

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Introduction

Human resource is one of the most vital resource

of an organization.

It is responsible for each and every decision

taken, each and every work done and each andevery result .

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Employees should be managed properly and

motivated .

By providing best remuneration andcompensation as per the industry standards.

The lucrative compensation will also serve theneed for attracting and retaining the best

employees .

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Compensation is the remuneration received byan employee in return for his/her contribution tothe organization.

It is an organized practice that involvesbalancing the work-employee relation byproviding monetary and non-monetary benefitsto employees.

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Compensation is an integral part of humanresource management which helps inmotivating the employees and improving

organizational effectiveness

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Components of acompensation system are asfollows:

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Types of Compensation

Direct Compensation

Indirect Compensation

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DIRECT COMPENSATION

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Direct Compensation

• Direct compensation refers to monetary benefits offeredand provided to employees in return of the services they

provide to the organization. The monetary benefitsinclude basic salary, house rent allowance, conveyance,leave travel allowance, medical reimbursements, specialallowances, bonus, Pf/Gratuity, etc. They are given at a

regular interval at a definite time.

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Basic Salary

• Salary is the amount received by the employee in

lieu of the work done by him/her for a certainperiod say a day, a week, a month, etc. It is themoney an employee receives from his/her employerby rendering his/her services

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House Rent Allowance

• Organizations either provide accommodations to itsemployees who are from different state or country or

they provide house rent allowances to its employees.This is done to provide them social security andmotivate them to work.

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Conveyance

• Organizations provide for cab facilities to theiremployees. Few organizations also provide vehiclesand petrol allowances to their employees to motivatethem.

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Leave Travel Allowance

• These allowances are provided to retain the besttalent in the organization. The employees are givenallowances to visit any place they wish with their

families. The allowances are scaled as per theposition of employee in the organization.

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Medical Reimbursement

• Organizations also look after the health conditionsof their employees. The employees are providedwith medi-claims for them and their family

members. These medi-claims include health-insurances and treatment bills reimbursements.

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Bonus

• Bonus is paid to the employees during festive seasonsto motivate them and provide them the social security.The bonus amount usually amounts to one month’ssalary of the employee.

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Special Allowance

• Special allowance such as overtime, mobileallowances, meals, commissions, travel expenses,reduced interest loans; insurance, club memberships,etc are provided to employees to provide them socialsecurity and motivate them which improve theorganizational productivity.

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INDIRECT COMPENSATION

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Indirect Compensation

• Indirect compensation refers to non-monetary benefitsoffered and provided to employees in lieu of the

services provided by them to the organization. Theyinclude Leave Policy, Overtime Policy, Car policy,Hospitalization, Insurance, Leave travel AssistanceLimits, Retirement Benefits, Holiday Homes.

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Leave Policy

• It is the right of employee to get adequate number of leave while working with the organization. Theorganizations provide for paid leaves such as, casualleaves, medical leaves (sick leave), and maternity

leaves, statutory pay, etc.

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Overtime Policy

• Employees should be provided with the adequateallowances and facilities during their overtime, if theyhappened to do so, such as transport facilities, overtimepay, etc

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Hospitalization

• The employees should be provided allowances to get

their regular check-ups, say at an interval of one year.Even their dependents should be eligible for the medi-claims that provide them emotional and social security

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Insurance

• Organizations also provide for accidental insuranceand life insurance for employees. This gives them theemotional security and they feel themselves valued inthe organization.

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Leave Travel

• The employees are provided with leaves and travelallowances to go for holiday with their families. Someorganizations arrange for a tour for the employees of theorganization. This is usually done to make theemployees stress free.

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Retirement Benefits

• Organizations provide for pension plans and otherbenefits for their employees which benefits them afterthey retire from the organization at the prescribed age.

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Holiday Homes

Organizations provide for holiday homes and guesthouse for their employees at different locations. These

holiday homes are usually located in hill station andother most wanted holiday spots. The organizationsmake sure that the employees do not face any kind of difficulties during their stay in the guest house.

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Flexible Timings

• Organizations provide for flexible timings to theemployees who cannot come to work during normalshifts due to their personal problems and validreasons.

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Need of CompensationManagement

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INCENTIVES

• Employee incentives are a good way of showingrecognition to your workforce and they canhelp to keep workers motivated. In giving outemployee rewards, you're also demonstratingthe types of behavior, actions and performancethat the company values most highly. This

reinforces those values to the workforce.

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Programmes designed by management tomotivate employees to work more efficientlywith increased productivity , and greateremployee satisfaction.

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Steps to building a good incentiveprogramme:-

Communication

Pick a Reward

Suggestions

Setting Goals

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Benefits:-

Benefits are forms of value, other than payment, that areprovided to the employee in return for their contribution tothe organization, that is, for doing their job.

Employee benefits typically refers to retirement plans,health life insurance, life insurance, disability insurance,vacation, employee stock ownership plans, etc.

Benefits are increasingly expensive for businesses toprovide to employees, so the range and options of benefitsare changing rapidly to include, for example, flexibleb fit l