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Human Resource Management, 5E 1
Managing Basic Remuneration
Human Resource Management, 5E 2
Learning Objectives
• Identify the different components of remuneration
• Describe the theories of wage and salary payments
• Identify the variables that influence employee remuneration
• Point out the wage policy of Government• Explain the wage concepts• Explain how special groups can be
compensated
Human Resource Management, 5E 3
Components of Employee Remuneration
Remuneration
Financial Non-financial
Job ContextChallenging jobResponsibilities
RecognitionGrowth prospects
SupervisionWorking
conditionsJob sharing, etc.
PerquisitesCompany car
Club membershipPaid holidays
Furnished houseStock option
Schemes, etc.
Fringe BenefitsPF
GratuityMedical Care
Accident ReliefHealth and Group
Insurance, etc.
IncentivesIndividual plans
Group plans
Hourly and Monthly rated
WagesSalaries
Direct Indirect
Environment
Human Resource Management, 5E 4
Theories of Remuneration
• Reinforcement theory
• Expectancy theory
• Equity theory
• Agency theory
Human Resource Management, 5E 5
Consequences of Pay Dissatisfaction
Desire for More Pay
Performance
Strikes
Grievances
Search for Higher Paying Jobs
Absenteeism
Turnover
Pay Dissatisfaction
Lower Attractiveness of Job Job
Dissatisfaction
Absenteeism
Psychological Withdrawal
Visits to the Doctor
Poor Mental Health
Human Resource Management, 5E 6
Influencing Factors of Remuneration
Human Resource Management, 5E 7
Linkage of Remuneration Strategy to Business Strategy
Business StrategyMarket Position and
MaturityRemuneration
StrategyBlend of
Remuneration
Invest to growMerging or growth rapidity
Stimulate entrepreneurialism
High cash with above average incentive for individual performance. Modest benefits,
Manage earnings-protect markets
Normal growth to maturity
Reward management skills
Average cash with moderate incentives on individual, unit, or corporate performance. Standard benefits.
Harvest earnings-reinvest elsewhere
No real growth or decline
Stress
Below-average cash with small incentive tied to cost control. Standard benefits.
Source: Wayne F. Cascio, Managing Human Resources, McGraw-Hill, 1995, p.352.
Human Resource Management, 5E 8
Remuneration Model
Job Description
Job Evaluation
Job Hierarchy
Pay Survey
Pricing Jobs
Human Resource Management, 5E 9
Raising Salaries
2003 2004(Increase in percent)
IT 15 17
ITES 23 25
Telecom (Services) 10 12
Insurance 23 25
Banking (Retail) 12 15
Manufacturing 6 7
Pharma 20 22
Source: Business Today, September 12, 2004. p.46
Human Resource Management, 5E 10
Challenges of Remuneration
Monetary vs. Non-Monetary Rewards
Employee Participation
Pay Secrecy
Salary Reviews
Comparable Worth
Eliticism or Egalitarianism
Skill-based Pay
Remuneration
Below Market or Above
Market Rates
Human Resource Management, 5E 11
Skill-based Pay and Job-based Pay Compared
Factors Job-based Skill-based
Pay structure Based on job performance Based on ability to perform
Employer’s focusJob carries wage; Employee linked to job
Employee carries wage; Employee linked to skills.
Employee focusJob promotion to earn greater pay
Skill acquisition to earn greater pay.
AdvantagesPay based on value of work performed
Flexibility; Reduced workforce.
DisadvantagesPotential personnel bureaucracy; Inflexibility
Potential personnel bureaucracies; Cost controls.
Source: Raymond A. Stone, Human Resource Management, John Wiley & Sons, 1995, p.324.
Human Resource Management, 5E 12
Wage Concepts
• Minimum wage– provides for sustenance of life but also for
preserving efficiency
• Fair wage– comparable with standard wages elsewhere
• Living wage– providing essentials plus certain comforts
Human Resource Management, 5E 13
Reality Check
• Do you think that people work mainly for pay? Ascertain views of your classmates. Presentation and discussion can follow in this class.
Human Resource Management, 5E 14
Reality Check
• How far luck does influence pay? Have you come across any individual who has been lucky enough to be more than he or she deserves?