Compensation Trends

Recognize the lifestyle and standard of living of multigenerational employees in a flexible, cost effective and efficient manner

Compensation Management
Process where by organizations arrange and structure the pay and benefits provided to employees.

The Changing Effective Organization Its a new economy

Old (Early 20th Century) Industrial Technical People seen as spare parts Narrow task, simple skills Hierarchical and Autocratic Competitive Slow to change New (21st Century) Service/Knowledge People seen as Resources/Assets Multiple task, broad skills Flat and Participative/ Self directed work teams Cooperative and Collaborative Rapid change
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People Performance Productivity Profit

Equal Pay Act of 1963

Prohibits unequal wages for equal jobs in which performance requires equal skill, effort and responsibility and when the jobs are performed under similar working conditions Unless based on seniority system; a merit system; quantity or quality of production; or a differential based on factors other than sex

Designing a Program
Lead or lag the industry? Pay for performance? Automatic step increases? Cost of living/Across the board? Ensuring internal/external equity? Market driven?

Organizational Philosophy
Compensation programs viewed as cost vs. investment value added to organization aligned with business plan

Compensation Strategy
Market Position Job Value Pay structure Rewards Administration

Direct Compensation Programs

Base Pay Programs Variable Pay Programs Incentive Programs

What do employees want

Appreciation and recognition of good work Chance for growth Feeling in on decisions Good wages Good working conditions Help on personal problems Interesting work Job Security

Compensation Programs Overview

Alignment and Consistency are essential Job Analysis Position descriptions Job Evaluation Pay grades

Type of wages

The main types of wages are

1. Subsistence wage; or Just Wage 2. Minimum wage; 3. Fair Wage; and 4. Living Wage 5. Efficiency Wage

Subsistence Wage
Subsistence Wage: - The wage that can meet only bare physical needs of a worker and his family is called subsistence wage.

Minimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in many controls, there are differences of opinion about the benefits and drawbacks of a minimum wage.

 Minimum wage is the wage that is able to provide not only for bare physical needs but also for preservation of efficiency of worker plus some measure of education, health and other things

Minimum Wages Act, 1948

The employer has to pay minimum wages to employees in certain scheduled industries. At present the minimum wages act is applicable in 44 scheduled industries

 there is a separate minimum wage legislation in India. Minimum Wages Act, 1948 is an Act to provide for fixing minimum rates of wages incertain employments and it extends to the whole of India.

 With effect from November 2009, the National Floor Level of Minimum Wage has been increased to Rs 100 per day from Rs 80 per day (which was in effect since 2007). Recently with effect from April 1, 2011 the National Floor Level of Minimum Wage has been raised to Rs 115 per day.

Fair wages
1) Wage levels and wage-fixing mechanisms that provide a living wage floor for workers, while fulfilling with national wage regulations (such as the minimum wage, payment of wages, overtime payments, provision of paid holidays and social insurance payments), 2) It ensures proper wage adjustments and lead to balanced wage developments in the company (with regard to wage disparity, skills, individual and collective performance and adequate internal communication and collective bargaining on wage issues)

Cont
Fair wages is an adjustable step that moves up according to the capacity of the industry to pay, and the prevailing rates of wages in the area of industry.

Living Wage
1) Living wage is that which workers can maintain the health and decency, a measure of comfort and some insurance against the more important misfortune of life. 2) In any even the minimum wage must be paid irrespective of the extent of profits, the financial condition of the establishment or the availability of workmen at lower wages. 3) The wages must be fair, i.e. sufficiently high to provide standard family with ,food, shelter, clothing, medical care and education of children appropriate to the workmen.

 A fair wage lies between the minimum wage and the living wage which is the goal. Wages must be paid on an industry wise and region basis having due regard to the financial capacity of the unit

Efficiency wage
Higher than market wage paid to encourage higher output and to raise worker morale, and to discourage absenteeism and inventory shrinkage.