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Mastering Employee Compensation Systems for Organizational Success

Understand the importance of compensation systems to attract, retain, and motivate employees. Learn about principles, industry and job characteristics, employee behavior, and potential problems. Explore models like performance-based compensation and fringe benefits. Discover how to design and benchmark a competitive compensation package.

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Mastering Employee Compensation Systems for Organizational Success

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  1. Employee Compensation System

  2. Compensation • Nothing but the REMUNERATION package offered by the organization to attract the talented person for different position, such as • For Dy.managers • For Manager • For Executive officer • For lower level officer

  3. For an organization to attract and retain talent, it is of utmost importance that it is able to provide an attractive compensation package. • Along with the brand value of the organization, for attracting top talent, a well designed compensation package plays a crucial role

  4. Compensation system • It is the backbone of HRM • It hold the real power to - attract - retain and - motivate Employees to give outstanding performance • The system may differ from company’s to company

  5. Principles of compensation system • According to Steven Applebaum of Concordia University, the following principles play’s vital role in determining the better compensation for better employee

  6. market conditions • If the market is good the companies are ready to pay more

  7. Employee Characteristics • Based on the - education - seniority - qualifications - experience The employee must give preference for good compensation

  8. Industry Characteristics • Based on the status or standard of the company the wages may vary considerably. • Ex- Software companies pay good packages when compare with manufacturing wage package

  9. Job Characteristics • Here the packages may vary according to - mental requirements - physical requirement - skill requirement - level of public contact - the effort required to carry out the work

  10. Employee behavior characteristics • Here, the packages may vary based on - performance - absenteeism - turnover

  11. Problems • Compensation is a critical issue for organisational effectiveness. • Dissatisfaction in compensation system can cause number of HR related problems. - poor employee performance - regular absenteeism - low employee turn over - poor employee involvement

  12. problems • Unless compensation system is effective, the other interventions such as - development - empowerment - communication - career planning Will not produce any positive results for the organisation.

  13. Models of Compensation • From the above information it could be clearly understand that compensation package is ultimately plays very significant role for the organizational effectiveness as well as the employee effectiveness. • It is the ultimate task of the HR to design the perfect compensation package for tackling the competitors.

  14. Models of Compensation • There are two important models of compensation 1. performance based compensation 2. fringe benefits 3. Gain Sharing 4. ESOP

  15. performance based compensation • It involves rewarding employees as per their performance or results achieved.

  16. fringe benefits • The fringe benefits have often been described as - welfare Expenses - other than wages - social charges

  17. Gain Sharing • It is also known as - production incentives, - Profit Sharing - Team Incentives

  18. ESOP • Employee stock ownership plan is a right granted to an employee to purchase a specified number of shares of stock of the company at a predetermined price during a specified period.

  19. How does a company go about designing their compensation package?

  20. Compensation Benchmarking • Compensation Benchmarking is a key element in designing a pay package.

  21. Procedure • identify similar organization existing in your city. • check and compare with their salary structure with respect to specific grades and how the fitmentation part is done in their industry. • Generally other company HR cannot give this info. Some Top officials in your industry or HR Head needs to tackle this. • Survey for atleast 3 - 4 companies.

  22. Procedure • Like this you need to do for the 'N' number of positions you need to compare with your salary standards. • If it is a deviation about 5 % you don’t have to worry about it. Anything above 10 % then a focus required on this. • While doing the Survey one has to prepare a set of questionnaire and this needs to be circulated to the other companies and do the analysis. • Also one has to focus on their attrition analysis and then only take a final call on this.

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