Assignment: Discuss the concept Compansation and how the
compansation is determined in Indain industry. Provide the factual data.
Submitted By: Richa .R.M Sinha
Batch: 18
Ref No. KH2009SMBA18P038
Submitted to: Prof Chehulkar
Submitted On: 23rd January 2011
Managment of Compansation is one of the most important and strategic aspect of human
resourse management. Employees and employers both the parties are very much
concerned and serious about iy as money is crucial incentive and directly or indirectly
related with fullfilment of all human needs.
Compansation is defined as some total of all forms of
payments ans rewards provided to employees for performing tasks to achive
organisational objectives.
Compansation system is to create a system of reward which
will attracts employees to work, will motivate them to work and lift their performance and
there by productivity. It is a very powerful impact on the satisfaction level and behaviour
of the employees such as absenteesum and Turnover.
Edward .E.Lawler has emphasised two things " that when
pay is tied to performance, it contirbutes to motivation further beacuse pay is impertate &
pervasive in the organisation any important organisational change will require a change in
the pay system.
Below is given the Compansation Structure:
Total Compansation
Finacial Nonfinancial
(Extrinsic rwards) (Intrinsic rewards)
* wages/salary * benefits
* incentive
* bonus etc.
Compansation this includes direct compansation (gross pay) and indirect compansation
(employer's contribution to verious schemes like life, health, accident, retierment and
welfare etc.Progressive organisation are utilizing compansation & reward system as
effective tools to develop,build and maintain " human capital" for compititive advantage
by following ways:
•Compansation can serve to attract qualified applicants to te organisation.
•Compansation helps to retain competent employees in the organisation.
•Compansation serves as an incentive to motivate employees to put forth their best
efforts.
•Maintaining the costs of compansation can also contribute to organisational
effcetiveness since compansation is a significant cost for most of employers.
To make a compansation policy most effective it should possess below given features.
•Adequate: Minimum governmental, union and mamagerial levels should met.
•Eduitable: Each person is paid fairly,in line with his/her efforts, abilities,training nad
so on.
•Balanced: Pay, benefits nad other rewards provide a reasonable total reward package.
•Cost effcetive: Pay is not excessive , considering what is the enterprise can afford to
pay.
•Secure: The employee's security needs relative to pay and the needs which pay
satisfies are met.
•Incentive Providing: Pay motivates effective and productive work.
•Acceptable to the employer: The employees understands the pay system and feels it
is a reasonable system for the enetrprise and himself.
The current format of the Compansation which is used is like the one given below:
Basic + D.A (dearness allowance)
+ HRA (40% of the basic)
+ Allowances
* Loan
* Moblie Exp.
* Petrol Exp
* Car Exp.
* Special Allw.
* Wahsing Exp.Etc.
+ Fringe Benefits ( Lease flats, mobile, foreigen tour etc.)
+ Retension Bonus
Proffesional Tax
Provident Fund
= Total CTC (cost to company)