PREPARED BY : RAJA NAZIAN ADILA

DEFINITIONS

Compensation is the remuneration received by an employee in return for his/her contribution to the organization. (Mousumi S. Bhattacharya & Nilanjan Sengupta, 2009)

Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction. (Milkovich, 2011)

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.(Deloitte 2010)

Compensation is the human resource management function that deals with every type of reward individuals receive in exchange for performing organizational tasks. (Ivancevich 2013)

Compensation is the system designed to attract and retain employees as well as to motivate them to improve their skills and efficientcy towards the achievement of organizational goals

THE LAW GOVERNING THE WORKMEN'S COMPENSATION IN MALAYSIA (Legal & Regulatory Policy Specialist (Malaysia) 2011)

 The Workmen's Compensation Act 1952. Provides for the compensation payment to an injured employee or worker arising out of and in the course of employment or contracting occupational disease. Where the employee or worker dies in the event of fatal accident or contracting an occupational disease or in the course and arising out of performing his duty or work, the Workmen's Compensation Act 1952 provides for the compensation payment to the worker's dependants. Administered by the Department of Labour and applies throughout Malaysia.

WHO IS COVERED UNDER THE WORKMEN'S COMPENSATION ACT 1952

Malaysian workers are no longer covered under the Workmen's Compensation Act 1952 with effective from 1st July 1992. Local workers will be covered under the Employees Social Security Act 1969. Only foreign workers are covered under this Act in respect of compensation for employment injury as well as non-employment injury vide Workmen's Compensation (Foreign Worker's Scheme) (Insurance) Order 1993.

IMPORTANCE OF COMPENSATION MANAGEMENT (HAY GROUP, 2009)

PROPER RETURN
POSITIVE CONTROL MINIMIZE TURNOVER

GROWTH AND ADVANCEMENT OPPORTUNITY

JOB EVALUATION
LABOUR ACT
EFFICIENCY AND COOPERATION AMONG WORKERS

BETTER PERFORMANCE

TYPES OF COMPENSATION

(MILKOVICH, 2011)
COMPENSATION

DIRECT

INDIRECT

BASE PAY

INCENTIVE PAY

LEGALLY REQUIRED

OPTIONAL

COMPONENTS OF COMPENSATION (MCCLUNE 1997)

WAGES AND SALARY

INCENTIVES

FRINGE BENEFITS/PERQUISITES

ALLOWANCES

EVOLUTION OF COMPENSATION (MALAYSIA PAYROLL SERVICE, 2010)

FACTORS INFLUENCING COMPENSATION VARIETY AMONG DIFFERENT COUNTRIES (HAY GROUP, 2009)

EXTERNAL

INTERNAL

DOMESTIC

INTERNATIO NAL

LABOUR MARKET COST OF LIVING LABOUR UNION GOVERNMENT LEGISLATION SOCIETY ECONOMY PARENT NATIONALITY LABOUR MARKET CHARACTERISTIC LOCAL CULTURE HOME AND HOST COUNTRY GOVERNMENT ROLES INDUSTRY TYPE COMPETITORS

BUSINESS STRATEGY JOB EVALUATION PERFORMANCE APPRAISAL

GOAL ORIENTATION CAPACITY TO PAY COMPETITIVE STRATEGY ORGANIZATIONAL CULTURE

THE COMPENSATION SYSTEMS IN THE DIFFERENT COUNTRIES (DELOITTE, 2013)

CRITERION Orientation

MALAYSIA Performance Oriented

JAPAN Seniority based -

RUSSIA Job level Based

MIDDLE EAST Nationality and job level group

Link with
performance Basis of

Excellent linkage

Moderate
linkage

Poor linkage

Moderate Linkage

Annual merit

Increase

increase

Seniority and Seniority in age, Job level performance ratings, spring wage negotiation

Job Level

Influencing Cultural variables

Achievement orientation Material

Hierarchy; Patience

Material Possessions

Material Possessions Status seniority

possession

STEPS TO DESIGNING A PAY STRUCTURE (MILKOVICH & NEWMAN (2008).

STEP 1: JOB ANALYSIS STEP 2: JOB EVALUATION STEP 3: PAY POLICY IDENTIFICATION STEP 4: PAY SURVEY ANALYSIS STEP 5: PAY STRUCTURE CREATION

COMPENSATION STRUCTURE (ADECCO, 2012)

 The documents, usually produced and maintained by human resource (HR) departments, establish salary ranges for each paid position. The configuration and scale of pay are dependent on the specific duties to be performed as part of each position. The scale for workers at every level includes minimum and maximum amounts that are outlined in the structure, and pay variations on the scale often take skill level and experience into account.

EXAMPLE COMPENSATION STRUCTURE IN MALAYSIA (Adecco Salary Guide,Malaysia,2012)

Position Job Description Qualification Experience Minimum Salary Assistant HR Manager/ HR Manager Responsible for the planning and Diploma/Degree control of the full spectrum of HR duties - that includes recruitment, training and labour relations etc. Likely to have supervisory 5-10 5,000 Maximum Salary 12,000

experience. Compensati on Benefits Manager Responsible for the overall Degree with 5-10 7,000 12,000

& compensation and benefits structure Specialist / for Diploma in

an organisation. Will likely work Compensation closely with the HR Manager. and Benefits

THE IMPORTANCE OF COMPENSATION STRATEGY FOR HR PROCESSES (HAY 2009)

METHODS OF COMPENSATION (DELDOT PROFESSIONAL SERVICES PROCUREMENT MANUAL, 2009)

Method No. 1: Cost Plus Fixed-Fee Method No. 2: Lump Sum Method No. 3: Cost per Unit of Work Method No. 4: Specific Rates of Compensation

COMPETENCE BASED

JOB BASED

EMERGING PAY SYSTEMS (MILKOVICH 2011)

SKILL BASED

JOB BASED

SKILL BASED

COMPETENCE BASED

WHAT IS VALUE?
PAY STRUCTURE

COMPENSABLE FACTOR
BASED ON JOB PERFORMED / MARKET PROMOTION

SKILL BLOCK

COMPETENCIES

BASED ON SKILL BASED ON CERTIFIED / MARKET COMPETENCY DEVELOP / MARKET SKILLS ACQUISITION COMPETENCIES DEVELOPMENT CONTINOUS LEARNING FLEXIBLE LATERAL MOVEMENT

PAY INCREASES

ADVANTAGES

CLEAR EXPECTATION SENSE OF PROGRESS PAY BASED ON VALUE OF WORK PERFORMED

CONTINOUS LEARNING FLEXIBILITY REDUCE WORK FORCE

DRAWBACK

POTENTIAL BUREAUCRACY AND INFLEXIBILITY

HIGHER COST FOR CONTINOUS TRAINING PROGRAM

FAVOURITISM

BROADBANDING (MILKOVICH, 2011)

BROADBANDING IS CREATING A SALARY STRUCTURE THAT CONSOLIDATES THE RELATIVELY LARGE NUMBER OF RANGES FOUND IN A TRADITIONAL STRUCTURE INTO FEWER RANGES.

BROADBAND STRUCTURES ARE CHARACTERIZED BY FEWER SALARY RANGES THAT HAVE WIDER RANGE SPREADS, LARGER MIDPOINT DIFFERENTIALS AND A LESSER DEGREE OF OVERLAP.

BROADER WORKFORCE SKILLS

CAREER DEVELOPMENT AMONG EMPLOYEES

SUPPORT A NEW CULTURE OR FLATTER ORGANIZATION STRUCTURE

EXAMPLE : KENEXA, AN IBM COMPANY

ADVANTAGES

 FACILITATES PAY FOR PERFORMANCE SUPPORTS DUAL CAREER LADDERS, PERMITTING SUPERVISORY AND SUBJECT MATTER EXPERTS (TECHNICAL EXPERTS) TO BE RECOGNIZED. FACILITATES CAREER DEVELOPMENT BY ENABLING EMPLOYEES TO MOVE WITHIN THE SAME BAND WHILE RECOGNIZING ACHIEVEMENTS WITH PAY ADJUSTMENTS

 EMPLOYEES CAN RECEIVE SALARY INCREASES WHEN THEY IMPROVE JOB KNOWLEDGE, SKILLS AND ABILITIES WITHOUT HAVING TO BE RECLASSIFIED. ENHANCES ORGANIZATIONAL EFFECTIVENESS BY PRODUCING FLATTER ORGANIZATIONAL STRUCTURES AND REDUCES THE PERCEIVED NEED TO CREATE ADDITIONAL LEVELS OF CLASSIFICATION AND/OR SUPERVISION TO JUSTIFY HIGHER PAY

 NOT EQUIPPED OR FIT FOR EVERY ORGANIZATION STRUCTURE MAY CONFLICT WITH AN ORGANIZATIONS WAY OF CONDUCTING BUSINESS AN EMPLOYEE CAN NOT RECEIVE MORE PAY THAN THE MAXIMUM RANGE WITHIN THEIR BAND.

INTERNATIONAL COMPENSATION (FRED LUTHAN,2012)

BASE SALARY

BENEFITS

ALLOWANCES

COMMON ELEMENTS

INCENTIVES

TAXES