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Compensation Structure-Indian Practices

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  1. Compensation Structure-Indian Practices

  2. Salary Structure The salary structure consist of organization’s salary grades or ranges & its level for single jobs or groups of jobs. 1. Graded salary structures 2. Salary Progression curves

  3. Graded Salary Structure A typical salary structure is one with a sequence of salary ranges or grades, each of which has a defined minimum & maximum. In this process you are assuming that all the jobs allocated into a grade are broadly of the same value. However, you must ensure that actual salaries in your organization by the same length of service. You may cover all the jobs in your organization by the same structure of salary ranges or you may design different structures for different levels of jobs.

  4. A Properly designed salary should have the following features- • All jobs are allocated into a salary grade within the structure. • Each salary grade must consist of a salary range. • Jobs can be regarded with in the structure when it is decided that their value has altered. • Market rates are taken care. • The salary grade should be wide enough. • A differential should be mentioned b/w mid point of each salary grade. • Progression within a grade depends on the performance of the individual. • The no. of salary grades or range depends on- • The number of distinct levels of job. • The width of each salary grade • The extent of the overlap if any ,b/w grades & • The salary level appropriate for the most junior jobs.

  5. Make-up of a salary grade • The learning Zone • The qualified Zone • The Premium Zone

  6. Designing the Salary Structure Step 1: Establish by market rate surveys & studies of existing structures & differentials of the most senior & most junior job to be covered by the structure. Step 2: Draw up salary grade structure b/w the upper & lower limit as established in step 1. Step 3: Conduct a job evaluation exercise, preferably by means of a simple scheme-ranking scheme, although this could refined by using paired comparisons. Step 4: Obtain market rate data, bearing in mind that there is likely to be range of market rate rather than a precise figure. Step 5: Slot the jobs into the grade structure in accordance with the result of both the job evaluation & the market rate surveys.

  7. Salary Progression Salary progression procedure relate increases in salary to merit. It should be aimed at relating salary compensation to performance consistently & equitably while retaining an adequate degree of salary control over salary costs. The essential features of a systematic procedure for salary progression should be- • The salary ranges are divided into defined areas or zones, as discussed earlier. The individual will pass through these zones as he progresses. • There should be incremental systems, which will indicate the rates at which individuals can progress according to merit or experiance

  8. Pay-structure in Practice Jobs are usually classified in to different groups to reflect broadly the occupational grouping such as the following: • Managerial & Professional:Top,Middle & junior. • Technical/Supervisory • Administrative & Clerical staff • Manual(workers)

  9. Basic Pay • The basic wage provides a stable base to the wage structure. It is built upon the wage concepts recommended by the fair wage committee(1948) & the 15th Indian labour conference(1957) to which references were made earlier. The patterns was set by tribunals & courts in the post second world war period. It now varies & progresses according to periodic job evaluation ,wage settlements, awards by tribunals, wage boards, pay commission etc.

  10. Basic Pay The following is a set of such criteria: • The degree of skill • The experience involved • The training required • The responsibilities undertaken • The mental & physical requirements • The hazard attendant on the work , & • The fatigue involved

  11. Basic Pay The bases of wage differentials are given below: • Interpersonal differentials: • Inter-Occupational differentials: • Inter-area differentials: • Inter-firm differentials:

  12. Dearness Allowances(DA) “The word ‘Dearness Allowance’ primarily suggest & refer to allowance paid to employees in order to enable them to face the increasing dearness of essential commodities.”

  13. Dearness Allowances(DA) DA usually have three parameters • The Index Factor- All India Consumer Price Index(AICPI). • The manner in which the variation in the index selected is used. • Point Factor

  14. Dearness Allowances(DA) • There are different patterns of calculating DA,using the above parameters. Four major patterns are here- • The Central DA(CDA): • The Industrial DA(IDA): • Double Linkage :

  15. Allowances • Successive wage settlement/award have brought up a number of allowances which from an integrated part of the pay-packet.

  16. Overtime Payment • Working overtime in industry is possibly as old as industrial revolution. The necessity of the managements seeking overtime working from employees become inevitable mainly to overcome inappropriate allocation of manpower & improper scheduling,absenteeism,unforseen situations created due to genuine difficulties like breakdown of machines.In many companies, overtime is necessary to meet urgent sudden upswings in production schedules, or to give management a degree of flexibility in matching labour capacity to production demends.

  17. Annual Bonus The bonus component of the industrial compensation system, though quite an old one, had assumed a statutory status only with the enactment of the payment of bonus act,1965.The act is applicable to factories & other establishments employing 20 or more employees. The minimum rate of 8.33% of the salary earned.The maximum is fixed at 20%.

  18. Incentive System The term “Incentive” has been both, in restricted sense of participation & in the widest sense of financial motivation. It is used to signify inducements offered to employees to put forth their best in order to maximize production results.

  19. Fringe Benefits The remuneration that the employees receive for their contribution cannot be measured by the mere estimation of wage & salaries paid to them. certain supplementary benefits & services known as “Fringe Benefits” are also available to them. The characteristics of fringe benefits are: • The benefits are distinctly additional to regular wages paid to workers