Compensation Startegry Grp 7

7/29/2019 Compensation Startegry Grp 7

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COMPENSATION STARTEGIES

Smita Verma

Raghav Jaju

Mayank Sahay

Jaineet Kaur Sethi


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Importance of Compensation

Compensation is one of many human resource tools thatorganizations use to manage their employees.

Motivate and retain skilled employees and ensure talent

management.

Important for an organization to link compensation to itsoverall goals and strategies and ensure alignment with its HR

strategy.

The compensation strategy differentiates the organization on

the job market and builds the attractiveness of the companyfor the top talents.

Gaining competitive advantage is one of the major motives.


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CompensationStrategies

FringeBenefits

Incentives

Perqs

DearnessAllowance


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Fringe Benefits

Fringe or employment benefits, also known as benefits inkind, are compensations made to an employee beyondregular wages or salaries by reason of their employment.

FringeBenefits

StandardNon-

Standard


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Objectives of Fringe Benefits

Create a sense of belongingness among employees and to retain them.

Hence, fringe benefits are called Golden Hand-cuffs. Acts as a selling point to entice higher-quality employees to work for your

company over another one To reduce staff turnover

Motivate the employees by identifying and satisfying their unsatisfied

needs.

Provide qualitative work environment and work life.

Provide security and protect the health of the employees

Meet requirements of various legislations relating to fringe benefits.

Rising prices and cost of living has brought about demand for provision of

extra benefit to the employees.


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Principles of Fringe Benefits


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Examples of Fringes


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Administration of Fringe Benefits


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Guidelines to make Fringe Benefits

more Effective


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Fringe Benefits

Cash compensation

Social security and well-being

Development and education

Employee stock purchase program.

5% discount of WIPRO stocks (up to 10% of salary payments) Leave of absence programs (sabbaticals etc.)

Relocation program.

Railway half-fare season ticket.

Family Service: Support in the areas of Childcare

Homecare and Eldercare. Bonus for recommending new employees.

Special conditions for insurance

Sickness and accident income plan


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INCENTIVECOMPENSATIONSYSYTEM


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INCENTIVES SCHEME

Schemes where the workers earning vary in

same proportion as output

Schemes where earnings vary proportionately

than output

Schemes where earnings vary proportionately

more than output

Schemes where earnings differ at different

levels of output


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LIMITATIONS OF INCENTIVE

COMPENSATION SYSYTEM

They are practical only when performance can

be measured easily and objectively

They are often taken as administrative burden

They are likely to focus on only a narrow

range of behaviour,perhaps at the expense of

other behaviour


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Team & Group Incentives Reward

System

GAINSHARING

A team and group based incentive systemdesigned to share the cost savings from

productivity improvements with employees.SCANLON PLAN

A type of gainsharing plan in which the

distribution of gain is tilted much more heavilytowards employees and across the entireorganization


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PROFIT SHARING

An incentive system in which ,at the end of

year, some portion of the company profits is

paid into a profit sharing pool ,which is then

distributed among employees.

EMPLOYEE STOCK OWNERSHIP PLANS

Group level incentive system in employeesare gradually given a major stake in ownership

of cooperation


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Incentive Systems inBrakes India Foundry


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Brakes India Limited is the leadingmanufacturer of Automotive and Non-Automotive Braking Systems and Ferrous

Castings in India. Established in 1962 Brakes India Foundry has introduced

appropriate incentive systems from 1999 toencourage the employees.

One of such incentive scheme is SuggestionScheme


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Suggestion Scheme


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Suggestions are collected from individual employee withrespect to energy conservation, productivity, quality, safetyetc., and immediate reward is given to allthe receivedsuggestions to motivate the employees to give more andmore suggestions.

These suggestions are reviewed by the suggestioncommittee and evaluated in terms of cost, benefit and easeof implementation.

For implementing chosen suggestions, teams are formed

Based on cost savings, safety and productivity CashReward is also given to motivate the employees.

The best suggestions are rewarded every year with specialpayment and also a Best Suggestion rolling trophy.


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Suggestion forms


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Perq to Executive Include The

Following:

Car

Free Parking

Kidnapping and ransom protection

Counseling Service Spouse travel

Home entertainment allowance

Club membership

Season tickets to entertainment events.

Use of company credit cards


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Role of Salary and Commission

Company Salary Comission Perks HRA/PF (Rs Crore)Total

RIL 0.60 23.44 0.48 --- 24.52

Tata Steel 0.62 1.20 0.37 --- 2.20

L&T 0.60 2.42 0.15 0.81 3.98

Tata Motors 0.32 1.10 0.18 0.87 1.69

Bharti Airtel 5.17 7.50 --- --- 12.67

ICICI 0.98 0.52 0.70 0.26 2.47


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Company lease vs self rent

Employee can claim HRA exemption. The tax

exemption on HRA is computed as the

minimum of following three conditions:

i. Actual HRA on the pay slip

ii. 40-50% of the basic salary

iii. The rent amount minus 10% of the salary.


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Driving a company car

If employer provides with a car lease option,

one should consider availing of the same as it

would be a tax efficient option.

Perq value is equal to Rs 1,800 per month ifthe cubic capacity of car is up to 1,600. For

cars with higher cubit capacity, the perquisite

value is Rs 2,400 per month.


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Group mediclaim

This is a common benefit offered to employees

irrespective of their grade and the premium is

less than half of an individual mediclaim.

Most group health insurance products offer

wider coverage and they are more lenient than

individual policies.


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DEARNESS ALLOWANCE

The allowance was introduced into Indiafollowing the First World Warand was initiallyentitled the "Dear Food Allowance".

As of June 2012, dearness allowance (DA) iscalculated as a percentage ofan Indian citizen's basic salary

Allowances paid to employees in order toenable them to face the increasing dearness ofessential commodities
http://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Salaryhttp://en.wikipedia.org/wiki/Salaryhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/First_World_War


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DA includes any payment made to protectan employee against inflation and risingprices

Not restricted to specific occupationEmployees

granted DA and this continues followingreemployment with the Central or State

Government In other cases of reemployment, access to

DA is subject to the limitofemoluments last drawn

Pensioners


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Prior to 1972, there was no element of D.A. on

pensions. From 01.04.1972 there was a flat

rate of D.A. to all the pensioners.

With effect from 1.1.2006, Dearness allowance

is granted to compensate price increase above

to which the revised pay scales relate. This

will be sanctioned twice a year, payable from 1January and 1 July.


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Executive Compensation

Pick yourperks

Find yourbest buyers

Protectyour back


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In conclusion, a successful negotiation hinges onthe willingness of both the parties to hear eachother and an ability to arrive at a commondenominator in a spirit of accommodation.Hence, do not be overtly rigid and at the sametime do not give in to the employer totally.

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Compensation Startegry Grp 7