employee compensation and practices

Employee Compensation Strategies & Practices

Salman Morris MBA (FUUAST)

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Human Resource Management

Overview


1. What is Employee Compensation?2. What is Strategic Employee Compensation?3. Strategic Employee Compensation & Practices (Examples)

Wegmans Food Market Inc. Descon Engineering Limited

4. Legal Consideration Regarding CompensationCivil Rights Act 1991

Fair Labor Standard Act 1938Equal Pay Act 1963Walsh-Healey public Contract Act 1936

5. Basic Pay Scales (BPS)Civil Services Reform Commission of Pakistan 1972Revision basic Pay scale of Pakistan 2016

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3 1. What is Employee Compensation?

What’s in it for Me?

Nearly every individual asks this question before engaging in any Job that:




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Employee Compensation

Financial Pays

Org. Culture Environment

Organizational Values

Behaviors

Relationship

Benefits

Components of Employee Compensation


5 Definition of Employee Compensation

“It is what employees receive in exchange for their contribution tothe organization. It is a comprehensive term which includescomponents of compensation offered to the employees.”

Or“Compensation is a systematic approach to providing monetaryand non-monetary value to employees in exchange for workperformed.”




6 What is Strategic Employee Compensation?

• “Use Compensation as Strategy for competitiveness”

• Strategic compensation management requires asking, “What

are our strategic aims?”; then asking,

“What are the employee behaviors or actions needed to

achieve these strategic aims?”;

and then putting in place compensation programs

to produce those employee behaviors.


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o A tool for enhancing organizational performance and sustainedcompetitiveness.

o Aligning employee behaviors to the strategic direction of the organization.

o To push Employees towards general strategy the organization.

o A customization of compensation system to create a type culture attracting aworkforce that possesses required KSA’s that support organization’s overallstrategic goals and Objectives.

SWOT Analysis: Use your employees as your strength


Definition



8 Compensation Strategy could be:

Above Market Pay rates

Pay for higher qualified more productive workers who’sreplacement cost is high, i.e. Professionals and technical field Employees

Middle Market pay rates

Attempting to balance of employer costs and need to attract and retain employees and/or the rate policy practiced in the market.

Below Market pay rates

Paying all that the firm can affordTaking advantage of the abundant supply ofpotential employees in a loose labor market. P

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Targets/goals/objectivesAlignment of Compensation Strategy


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10 Real World Examples(In Strategic & Practice Context)

1. Wegmans Food market Inc.

Introduction• American Pvt. Ltd. Co.• Food Super Market Chain• Founded in 1916, Rochester, NY

Achievements • Ranked in top 100 Firms in 1998• After that Ranked in top 10 for 8 consecutive Years• Best Grocery Store Award winner 2007• Large U.S Grocery chain 2012 & 2014 by consumers report



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Wegmans exemplifies this. Competitors drive prices down. The usual reaction is tocut employee pay. Wegmans instead views its workforce as central to its strategy of“optimizing service while controlling costs by improving systems and productivity ”For example, one dairy department employee designed a new way to organize thecooler, thus improving ordering decisions and inventory control. Wegmans’compensation policies aim to elicit just such employee commitment. It offers abovemarket pay rates, affordable health insurance, a full range of benefits, In sum,Wegmans’ pay policies aim to produce the employee behaviors the companyneeds toachieve its strategic aims.

Wegmans Food market Inc. (continued)



12 Wegmans Food market Inc. (continued)

Wegmans Vs. Market

Wegmans pay policies are one reason for the firm’s exceptional profitability

o Employee Turnover (6-7% full

timers and 38% for Part timers)

o Average Sales $950,000 per week

o Annual Sales &46 million

o Stores are 120000 square feet

much larger then competitors

o Industry Average 47%

o Industry or National Avg. $361,564/ week

o Typical Competitor Walmart’s annual sales

$23.5 million

o Stores much smaller than Wegmans



13 Wegmans Food market Inc. (continued)

Compensation Practice

Strategy Employees are central force of overall strategy of the business.

Policy Above market rate offered, exceptional working environment to attract and retain talent or KSA’s they want.

Philosophy Recognize our employees as most important asset



14 2. Descon Engineering Limited

Introduction• Based in Lahore, Punjab, Pakistan• Established in 1977• Engineering, Chemical, power sector

Achievements • One of the leading organizations in Pakistan and

Middle East• Pakistan’s largest engineering and manufacturing

concern• Take 126th position out of 250 best construction

companies in 2013, the only Pakistani company.•



15 2. Descon Engineering Limited

The reward structure considered most competitive ones in Pakistan. Notaccording to model as exercised in public sector organizations of Pakistan.salary is negotiated with each employee on account of nature of work, qualification, experience, skills, expertise and then a contract is signed between employee and companyDescon sure that high achieving and performing employees are satisfied with their reward package being equal to or exceeding what they might earn in the external market.Advocates externally competitive reward packagesEmployee Category includes Permanent, Contract Base and temporary, Pay linked to performance Criteria.Acquired KSA’s if add value to the organization are recognized in the rewardstructure.Employee who successfully complete training, and enhance skills accordinglyEntitled to increment in pay and promotion.

#8. Slide 8



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Descon Engineering Limited

Compensation Practice

Pay Strategy Above and Middle Market pay strategy

Pay structure Based on qualification, experience, skills, expertise and then a contract is signed

Categorized Employees

(permanent, contract based, temporary) Each one of these has

different pay policies in accordance with the relevant grades, designations, nature of work, responsibility and contribution towards organizational objectives

Philosophy Be sensitive to the market supply and demand for a qualified workforce when project financially feasible.

Pay Increment Pay increment recognized subject to add value to organization



17 4. Legal Consideration Regarding Compensation

Civil Rights Act 1991

o Prohibits discrimination on the basis of race and prohibits racial harassment onthe job.

o Returns the burden of proof that discrimination did not occur back to theemployer.

o Reinforces the illegality of employers who make hiring, firing, or promotingdecisions on the basis of race, ethnicity, gender, or religion.

o Permits women and religious minorities to seek punitive damages inintentional discriminatory claims.

Provision(s)



18 Fair Labor Standard Act 1938

Provision(s)

o Provides limit of minimum wage or pay

o Maximum working Hours (40 per week)

o Overtime pay (exceeding 40 our)

o Child labor Protection

o Employee must be 16 years old



19 Equal Pay Act 1963

Provision(s)

o An amendment to the Fair Labor Standards Act designed to require

equal pay for Women doing the same work as Men.



20 Walsh-Healey public Contract Act 1936

Provision(s)

o Minimum wage

o Working Conditions for Employees

o Government contract amounting to

more than $10,000 annually.



21 Muhammad Shakeel

Voluntary Benefits (Continue)

1. Preferred provider organizations (PPOs)

Organization that requires using specific physicians and health-care

facilities to contain the rising costs of health care.

2. Health Insurance Continuation (HIC)

Provides for continued employee benefits up to three years after an

employee leaves a job.



22 Voluntary Benefits (Continue)

3. Health Insurance Portability and Accountability (HIPPA)

Deals primarily with health-care entities. This has generally not

been a concern for most organizations, but many learned that if they had

self-insured health insurance benefit programs, they, too, must comply with

HIPAA requirements.

Paid off Time

1. Vacation and Holiday Leave

Vacation time is usually related to the length of time on the job

some companies also allow personal days that can be used for any

reason.



23Disability Insurance Programs

provides salary continuation for:

short-term disabilities (sick leave)

long-term disabilities (coverage usually effective after 6

months)

some companies provide financial incentives to

employees to not use their sick leave

long-term disability plans usually replace a portion of

the employee’s salary, often 60%



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Group Term Life Insurance

benefit is usually based on one’s annual rate of pay

supplemental insurance increases coverage to two to five-times

the employee’s salary

Travel Insurance

life insurance for business travel-related deaths (not including

normal commuting)

Survivor Benefits



25 Syed Muhammad FaizanCasual as always

Compensation philosophies

1. Recognize your employees most important human asset of your business

2. Be sensitive to the market supply and demand for a qualified workforce

3. When project looks feasible carefully and competitively recruit qualified personnel.

4. the Compensation Policies & Procedures should be transparent and easily

understandable to every employee.

Surprise..???



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5. Pay salaries must be competitive in labor markets in which we recruit

employees

6. Reward employees for their achievements in relation to established

performance standards

7. Provide a management system for salary administration throughout the

organization

8. Provide opportunities for increases in pay in full compliance with all

relevant local, State and federal laws, rules and regulations

Compensation philosophies (Continued)



27 5. Basic Pay Scales (BPS)

Revision of basic pay scale of civil servants of Federal Government 2016



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The Only Easy Day, Was

Yesterday Farewell

(Salman Morris)

Thank You

employee compensation and practices

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