...| | Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees.Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. Components of Compensation System Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows: Types of Compensation Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity. Direct Compensation Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. The monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus...
Words: 948 - Pages: 4
...Compensation Management Q1.a. What is the role of compensation and rewards in modern organization? What arethe advantages of a fair compensation system? Ans1a. Role of Compensation and Reward in Organization: Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men. Land, Labor, Capital and Organization are four major factors of production. Every factor contributes to the process of production/business. It expects return from the business process such as Rent is the return expected by the Landlord. similarly Capitalist expects Interest and Organizers i.e Entrepreneur expects profits. The labour expects wages from the process. It is evident that other factors are in-human factors and as such labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos. Labour therefore expects to have fair share in the business/production process. Advantages of Fair Compensation System: Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following: 1. If an ideal compensation system is designed, it will have positive impact on the efficiency and results produced by workmen. 2. Such system will encourage the normal worker to perform...
Words: 9398 - Pages: 38
...Compensation and Reward Management UNIT 17 COMPENSATION STRATEGY, STRUCTURE, COMPOSITION Objectives After reading this unit, you should be able to: l appreciate compensation function and objectives; l analyse compensation issues and trends; l assess the characteristics of executive compensation and its determinants; l understand the principles and practices of compensation administration; and l identify the major components of wage structure in India. Structure 17.1 Introduction 17.2 Compensation Issues 17.3 Compensation Function 17.4 Compensation Policies and Objectives 17.5 Compensation Administration 17.6 Compensation Determinants 17.7 Compensation Survey 17.8 Compensation Structure 17.9 Job Evaluation System 17.10 Pay Equity 17.11 Executive Compensation 17.12 Compensation Trends 17.13 Wage Structure in India 17.14 Case Study 17.15 Summary 17.16 Self-Assessment Questions 17.17 Further Readings 17.1 22 INTRODUCTION One of the most difficult functions of human resource management is that of determining the rates of monetary compensation. It is not only complex, but significant both to the organisation and employees. Employee compensation decisions are crucial for the success of an organisation. From a cost perspective alone, effective management of employee compensation is critical because of the total operating costs. Another...
Words: 6295 - Pages: 26
...COMPENSATION MANAGEMENT Compensation is a key factor in attracting and keeping the best employees and ensuring that organization has the competitive edge in an increasingly competitive world. The Compensation Management component enables one to differentiate between one’s remuneration strategies and those of his competitors while still allowing flexibility, control and cost effectiveness. It provides a toolset for strategic remuneration planning that reflects organization culture and pay strategies, and it empowers line managers within a framework of flexible budget control. Compensation Management allows one to control bottom-line expenditures and offer competitive and motivating remuneration, be it fixed pay, variable pay, stock options, merit increases, or promotion – in other words, total compensation. In brief, it includes Create centralized and decentralized budgets Plan and administer compensation adjustments at the manager level Plan and administer compensation adjustments within budget Performing Job Pricing Define pay grades and salary structures to identify the internal value of jobs and positions in your organization Administer long-term incentives. FEATURES Compensation Management comprises the following components: Job Pricing This component uses to store and manipulate results from external job evaluation systems, and data from external marketing surveys. This data can be used as a starting point for building salary structures associating with jobs and...
Words: 4526 - Pages: 19
...East West University TERM PAPER On Compensation strategy of RAHIMAFROOZ HRM412 Submitted to: SSM Sadrul Huda Assistant Professor Department of Business Administration Submitted by: Mahbuba Chowdhury 2004-3-10-013 Sec-01 Md. Tarekul Islam 2005-2-10-161 Sec-01 Shamsun Nahar Airin 2005-2-10-231 Sec-02 Tangina Jesmin 2005-3-10-029 Sec-02 Date of Submission: 14.08.2008 Acknowledgment At first we present our due regards to the Almighty, who has provided us the brilliant opportunity to build and complete this term paper successfully with good health & sound mind. We would like to acknowledge our instructor SSM Sadrul Huda for his guidance starting to data collection and preparing for the writing; our regards and heartfelt thanks to him. Moreover, we are grateful to our administration as they provide us with the facility to use computer lab for browsing net & study room for teamwork. May be it would have been impossible to finish the report in time if we didn’t get the facility. Letter of Transmittal August 10, 2010 SSM Sadrul Huda Assistant Professor Dept of Business Administration East West University 45 Mohakhali C/A, Dhaka 1212 Dear Sir, Here is the term paper that you have asked us to prepare as a group for our course Compensation Management (HRM- 412). We have done group work for this term paper and did it as per as the rule. We are encouraged...
Words: 4510 - Pages: 19
...mpensation management Disclaimer This document contains a collection of online assignment questions intended solely for the use of the SCDL students. If you are not the intended recipient, please delete the document. This document may contain viruses. I have taken every reasonable precaution to minimize this risk, but not liable for any damage you may sustain as a result of any virus in this document. You should carry out your own virus checks. Please note that this document is susceptible to change and I shall not be liable for any improper, untimely or incomplete transmission. I have taken every reasonable precaution to make sure that the questions from other subjects do not creep in. If this happens without my knowledge, please ignore it and bring it to my notice so that I can rectify it at the earliest. I do not guarantee the occurrence of these questions in your FINAL EXAMINATIONS. Thank you for all the support. *********************************************************************************************************************************************** Multiple Answer Question Extent of employees turnover depends upon :- Correct Answer Physical conditions within organisation , Type of industry , Male to female ratio True/False Question Performance standards & norms for incentive payments should be set up high for better results. Correct Answer False Multiple Choice Multiple Answer Question E.S.I. Act aims at providing...
Words: 6355 - Pages: 26
...THE MANAGEMENT OF EXECUTIVE COMPENSATION Posted on November 16, 2011 1 EXECUTIVE COMPENSATION Notes on THE MANAGEMENT OF EXECUTIVE COMPENSATION….. Executive compensation is the total remuneration or financial compensation a top executive receives within an organization. This includes a basic salary, any and all bonuses, shares options, and any other company benefit. Over the past three decades, executive compensation has risen dramatically beyond the rising levels of an average worker’s wage. Executive compensation is an important part of corporate governance, and is often determined by a company’s board of directors. Executive compensation is a very important thing to consider when evaluating an investment opportunity. Executives who are improperly compensated may not have the incentive to perform in the best interest of shareholders, which can be costly for those shareholders. While new laws and regulations have made executive compensation much clearer in company filings, many investors remain clueless as to how to find and read these critical reports. This article will take a look at the different types of executive compensation and how investors can find and evaluate compensation information. WHO IS AN EXECUTIVE? A person or group having administrative or managerial authority in an organisation. The chief officer of a government, state or political division. Chief executive officer (CEO), one of the highest-ranking corporate officers (executives) or administrators...
Words: 2251 - Pages: 10
...ISSN 1822-6760. Management theory and studies for rural business and infrastructure development. 2010. Nr. 5 (24). Research papers. CRITICAL ISSUES FOR COMPENSATION AND INCENTIVES MANAGEMENT: THEORETICAL APPROACH Ramunė Čiarnienė, Milita Vienažindienė Kaunas University of Technology, Vilnius Co-operative College For most people, pay is a primary reason for working. Indeed, compensation is at the core of any employment exchange, and it serves as a defining characteristic of any employment relationship. The study focuses on critical points of compensation and incentives management. The fundamentals of a good incentive program include the elements of vision, potential, communication and motivation and can be realized if incentive promises are fulfilled – by both employer and employee. The aim of the paper is to identify the most important attributes of compensation and incentives management. Research method is the analysis and synthesis of scientific literature, logical, comparative and graphic representation. On the base of analysis, authors of this paper present the model of incentive system for positive employee attitudes and behaviors. Keywords: compensation, employees, incentives, management. Introduction Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. Pay may be received directly in the form of cash (e.g., wages, merit increases, incentives, cost of living adjustments) or...
Words: 2728 - Pages: 11
...For organisations to achieve their goals, it is important that management control systems motivate managers and influence their behaviour to align their goals with the goals of the organisation (goal congruence). This can be achieved by reward and incentive systems because managers will tend to focus on the activities that are rewarded. Research have shown that people will be more motivated by the potential of earning rewards than by the fear of punishment. A managers total compensation package consists of salaries, benefits and an incentive compensation. Incentive compensation plans are divided into short-term and long-term plans. Under a short-term plan, managers are usually paid in cash. The total amount that can be paid out to employees in a given year is called the “bonus pool” and relates to the overall profitability in a current year. Bonus pools can be established setting the bonus equal to a set percentage of the profits or base bonuses on profitability relative to the industry. Under the short-term plan, some organisations might follow a deferred compensation plan, which spreads out the payments to managers over a period of years. Advantages of this are that managers can estimate their cash income for the year and even after retiring, the manager will continue to receive payments for a number of years. However, the payments may not relate to the performance in the year it was earned. With long-term plans, for an example, managers are usually given the option...
Words: 1282 - Pages: 6
...Bangladesh. Vision: Our Vision is to become a low cost leader in the market by competing with the existing dominant firms using low cost strategy and provide standard chemical & cosmetics to the root level customers. Organizational Structure: Job Description of General Manager: * Hires, trains, and motivates all Department managers. * Directs and monitors all management or supervisory personnel functions and completes formal performance evaluations of all department managers. * Meets with the comptroller/office manager monthly to review departmental forecasts for consistency with the annual forecast. * Meets with managers individually to develop monthly and annual goals and objectives, and to review actual performance. * Monitors the daily operating control (DOC), recommending improved courses of action where necessary. * Ensures that the monthly financial statement is complete, accurate, and submitted on time to the factory. * Develops and maintains a good working relationship with lending institutions and manufacturer personnel. * Communicates management policies and procedures to all employees and ensures that they are understood and followed. * Provides enthusiastic leadership to help shape employees' attitudes and build morale. * Holds regularly scheduled managers meetings to ensure that every department is operating efficiently and profitably. * Reviews all requests for training, approves those which are appropriate...
Words: 3116 - Pages: 13
...A Snapshot of AXP Management Compensation Overview: Compensation Package Philosophy and Design The idea behind American Express (AXP) executive compensation program is to reward outstanding leadership that drives results and cultivates sustainable shareholder value. Paying awards in various time horizons from short term, medium term, to long term, the company works on aligning the interest of its shareholders and senior executives. A combination of fixed but predominantly variable awards is structured to encourage annual and sustainable performances. To study its executive compensation plan, the composition of payout package can be divided in terms of base salary, annual incentive award, cash portfolio grant award, performance restricted stock award, and stock option award (see Exhibit 1). CEO’s 50% versus other executive’s 59% short-term compensation encourages focus on long-term performances. In fact, “over 84% of the total direct compensation delivered in 2013 was variable and tied to performance, including financial results, strategic initiatives, and stock performance” (AXP Proxy Statement). A detailed description of the performance measurement is shown in Exhibit 2. Analysis: Management Performances versus Management Compensation The executive management at AXP may seem to be excessively over-compensated to some outside analysts but not to the internal board. From 2013 to 2014 (see Exhibit 3), target revenue growth of 8% annually was missed by half and EPS growth was...
Words: 631 - Pages: 3
...Primary Components of Compensation Management By: Desteni Lawhorn HR434 Compensation Management Park University Submitted: April 24, 2011 Too much focus on trends and hot topics. Not enough focus on customizing programs and processes to address real needs. People have programs looking for an application rather than analyzing the issue and then determining what's the best program or process. Too many start at the end and work toward the beginning. Logically they should start at the beginning. -Bruce Ellig Compensation management is more than just remuneration to appeal or retain capable employees, it is the leverage an organization utilizes to obtain, and retain its human capital and provide competitive positions within the organization. Recently, Human Resource departments have focused on the latest compensation trends or are geared toward rewards without merit, relevance or fit. This is a common mistake as compensation management should be focused on primary components of job analysis, pay structure and salary surveys. Human Resource departments must apply these fundamentals in the compensation management system in order to integrate well in an organization. Compensation management affords an organization the ability to reward superior execution and maintain the top employees in a particular field that contribute to the overall success and profitability of an organization. Through utilization of the basic fundamentals, organizations can visibly assess the employee’s...
Words: 1709 - Pages: 7
...and selection, conducting induction and ensuring that the company’s policies (such as health and safety and equal opportunities) complied with legislation. Typically, she would only visit regional offices to attend disciplinary or grievance meetings. Whilst the company has broad guidelines on how each department is managed, the general attitude among senior management at HQ has been that as long as each office is performing adequately, they are happy not to intervene or get too involved at regional level unless directly asked to do so. However following the recent growth of the firm from a relatively small, tight-knit organisation to a larger, more bureaucratic company, the senior managers are keen to introduce a ‘performance culture’ into the firm and to formalise and standardise its key HR processes. As part of an ongoing process of reviewing HR policies and practices at the regional sales offices, you have been asked to compile details of the way in which reward is handled in each office with a view to standardising practices across the firm. Currently, all basic pay is determined according to what senior management feel is the ‘going rate’ for sales representatives nationally through a rudimentary benchmarking exercise conducted every two years by the...
Words: 1242 - Pages: 5
...Compensation Management (PACM) Release 4.6C HELP.PACM Compensation Management (PA-CM) SAP AG Copyright © Copyright 2001 SAP AG. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. Microsoft , WINDOWS , NT , EXCEL , Word , PowerPoint and SQL Server are registered trademarks of Microsoft Corporation. IBM , DB2 , OS/2 , DB2/6000 , Parallel Sysplex , MVS/ESA , RS/6000 , AIX , S/390 , ® ® ® AS/400 , OS/390 , and OS/400 are registered trademarks of IBM Corporation. ORACLE is a registered trademark of ORACLE Corporation. INFORMIX -OnLine for SAP and Informix Dynamic Server Informix Software Incorporated. ® ® ® ® ® ® TM ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® ® are registered trademarks of UNIX , X/Open , OSF/1 , and Motif are registered trademarks of the Open Group. HTML, DHTML, XML, XHTML are trademarks or registered trademarks of W3C , World Wide Web Consortium, Massachusetts Institute of Technology. JAVA is a registered trademark of Sun Microsystems, Inc. JAVASCRIPT is a registered trademark of Sun Microsystems, Inc., used under license for technology invented and implemented by Netscape. SAP, SAP Logo, R/2, RIVA, R/3, ABAP, SAP ArchiveLink, SAP Business Workflow, WebFlow...
Words: 23388 - Pages: 94
...Compensation management theories Reinforcement theory Reinforcement theory proposes that you can change someone’s behavior by using reinforcement, punishment and extinction. Rewards are used to reinforce the behavior you want and punishments are used to prevent the behavior you do not want. Extinction is a means to stop someone from performing a learned behavior. Reinforcement is a behavioral construction where control is achieved by manipulating the consequences of behavior. A business manager using reinforcement theory might employ reward for desirable behavior by staff and punishments for undesirable behavior to help steer employees toward intended performance goals. Reinforcement theory states that a response followed by a reward is more likely to recur in the future (Thorndike's Law of Effect). The implication for compensation management is that high employee performance followed by a monetary reward will make future high performance more likely. By the same token, high performance not followed by a reward will make it less likely in the future. The theory emphasizes the importance of a person actually experiencing the reward. TYPES OF REINFORCEMENT Positive Positive reinforcement results when the occurrence of a valued behavioral consequence has the effect of strengthening the probability of the behavior being repeated. The specific behavioral consequence is called a reinforcer. Example, sales person that exact extra effort to meet a sales quota (behavioral)...
Words: 666 - Pages: 3