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Prof R K Singh AIMA Centre for Management Education New Delhi

Prof R K Singh AIMA Centre for Management Education New Delhi. eHR 01 Human Resource Management . Compensation : The HRM function that deals with every type of reward individuals receive in exchange for performing organizational tasks. eHR 01 Human Resource Management . Compensation :

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Prof R K Singh AIMA Centre for Management Education New Delhi

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  1. Prof R K Singh AIMA Centre for Management Education New Delhi

  2. eHR 01 Human Resource Management Compensation : The HRM function that deals with every type of reward individuals receive in exchange for performing organizational tasks.

  3. eHR 01 Human Resource Management Compensation : • It is the major cost of doing business for many organizations. • It is the chief reason why most individuals seek employment. • Employees exchange/trade labour and loyalty for financial and non-financial compensation.

  4. eHR 01 Human Resource Management Objectives of Compensation : • To create a system of rewards that is equitable to the employee and the employer alike. • The desired outcome is an employee who is attracted to the work and motivated to do a good job for the organization.

  5. eHR 01 Human Resource Management The most important objective- “Fairness/Equity has three dimensions: 1. Internal Equity : Ensuring more compensation for more difficult jobs. 2. External Equity : This ensures that jobs are fairly compensated in comparison to similar jobs in the labour market. 3. Individual Equity : This ensures equal pay for equal work.

  6. eHR 01 Human Resource Management 7 Criteria for Effectiveness of Compensation: 1. Adequate 2. Equitable 3. Balanced 4. Cost-effective 5. Secure 6. Incentive Providing 7. Acceptable to the employee

  7. eHR 01 Human Resource Management Effective Compensation Program Helps In - • Attracting Talent • Retaining Talent • Ensuring Equity • Developing New/Desired Behaviour • Controlling Costs • Complying with Legal Rules

  8. eHR 01 Human Resource Management Determination of Individual Pay :Two Basic Issues • How should one employee be paid relative to another when they both hold the same job? “Should we pay all employees doing the same work at the same level the same?” • If not, on what basis should we make the distinction-seniority or merit or some other basis?

  9. eHR 01 Human Resource Management Pay Differentials are based on : • Individual differences in Experiences, Skills and Performance • Expectations that seniority, higher performance or both deserve higher pay.

  10. eHR 01 Human Resource Management Methods of Payment : Employees can be paid for - • The Time They Work • The Output They Produce • Skills • Knowledge • Competencies Or A Combination of These Factors

  11. eHR 01 Human Resource Management Methods of Payment : Flat Rate : Single Flat Rate regardless of seniority or performance. Payment for Time Worked : Wage : Payment is calculated at an hourly rate. Salary : Pay calculated at an annual or monthly rate.

  12. eHR 01 Human Resource Management Variable Pay : Incentive Compensation 1. Merit Incentive (Based on the Performance Rating) 2. Individual Incentives (units produced/sold) 3. Team Incentives 4. Organization-wide Incentives 5. Stock Option Plans Fringe Benefits : The extra benefits provided to employees in addition to the normal compensation paid in the form of wage or salary.

  13. eHR 01 Human Resource Management Main Features of Fringe Benefits : 1. Supplementary Forms of Compensation : 2. Paid to all employees (Unlike Incentive) 3. Indirect Compensation, usually extended as a condition of employment and are not directly related to performance. 4. Help raise the living conditions of employees. 5. May be statutory or voluntary: PF is a statutory benefit whereas Transport is a voluntary benefit.

  14. eHR 01 Human Resource Management Need for Benefits : 1. Employees’ Demands 2. Trade Union Demands 3. Employer’s Preference 4. As a Social security 5. To Improve Human Relations

  15. eHR 01 Human Resource Management Types of Fringe Benefits : 1. Payment for Time Not Worked e.g. Paid Holidays. 2. Employee Security : e.g. Retrenchment Compensation : Industrial Disputes Act 1947 “One month’s notice or salary to all the workers who are retrenched/laid-off after one year’s of continuous service”. Applicable to non-seasonal industrial establishments employing 50 or more workers.

  16. eHR 01 Human Resource Management 3. Safety and Health : Accident/Health Insurance 4. Workmen’s Compensation Act 1923 : To meet the contingency of invalidity or death of a worker due to an employment injury or an occupational disease. 5. Health Benefits 6. Voluntary Arrangements 7. Welfare and Recreational Facilities 8. Old Age and Retirement Benefits

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