Recent Trends in Compensation Management.pdf

Recent Trends in Management, a sub topic in Compensation Management subject for the third year management students

1. Dr. Parveen Kaur Nagpal
Recent Trends in Compensation

2. Dr. Parveen Kaur Nagpal
CONTENTS
◎CompensationtoSpecialGroups:TeamBasedPay,Remunerating
Professionals,ContractEmployees,CorporateDirectors,CEOs,Expatriates
andExecutives.
◎RecentTrends:GoldenParachutes,e-compensation,SalaryProgression
Curve,CompetencyandSkillbased,BroadbandingandNewPay,Cafeteria
Approach.

3. Dr. Parveen Kaur Nagpal
COMPENSATION TO SPECIAL GROUPS
◎Specialgroupsarethepeoplewhoseworkperformanceiscentraltothestrategic
successofthecompany.
◎Thesegroups,ifnotperformeffectively,willresultinthelossoftheentire
organization.
◎Thespecialgroupsreceivetreatmentinformof:
•Add-onpackagesnotreceivedbyotheremployees.
•Uniquecompensationcomponentsintheorganisation.
◎Compensationstrategiesforspecialgroupssuchasteams,professionals,contract
employees,corporatedirectors,CEOs,expatriates,andexecutivesneedtobe
customizedtoreflecttheuniquerequirementsoftheseroles.
◎Eachgrouppresentsspecificchallengesintermsofperformancemeasurement,legal
considerationsandincentivestructures.

4. Dr. Parveen Kaur Nagpal
COMPENSATION TO SPECIAL GROUPS
CompensationtoSpecialGroupsinclude:
I.TeamBasedPay
II.RemuneratingProfessionals
III.ContractEmployees
IV.CorporateDirectors
V.ChiefExecutiveOfficers
VI.Expatriates
VII.Executives

5. Dr. Parveen Kaur Nagpal
TEAM BASED PAY
◎Companycompensatesemployeesbasedontheperformanceoftheirteam
ratherthanindividualachievements.
◎Encouragescollaborationandcollectiveaccountabilityforresults.
◎Teamsincludemanagementteams,workteams,qualitycircles,virtualteams
andproblem-solvingteams.
◎CompensationStructure:
•SharedBonuses:Teamsreceivebonusesiftheymeet/exceedperformance
•ProfitSharing:Teamsharesaportionoftheprofits.
•Skill-BasedPay:Teammembersmayreceivehigherpayforacquiringor
masteringspecificteam-orientedskills(e.g.,leadership,problem-solving).

6. Dr. Parveen Kaur Nagpal
TEAM BASED PAY
AdvantagesofTeamBasedPay:
◎Encouragescollaborationandteamwork
◎Encouragesskillsharing,boostsengagementandmorale
◎Alignsteamperformancewithorganizationalobjectives
◎Reduceinternalcompetition
LimitationsofTeamBasedPay:
◎Freerideeffect(Thosewhocontributelittlearecalledfreeriders)
◎Cancreatetensionifsometeammemberscontributemorethanothers
◎Difficulttoassessindividualperformancewithintheteamcontext.
◎Membersmaycompeteagainsteachother.

7. Dr. Parveen Kaur Nagpal
REMUNERATING PROFESSIONALS
◎Professionalssuchasengineers,doctors,andlawyersoftenhavehighly
specializedskills,makingtheircompensationpackagesdistinctfromgeneral
employees.
◎Theirinitialpayisforknowledgetheybringtotheorganisation.
◎Astheirknowledgebecomesobsoleteaftersometime,itbecomesachallenge
fortheHRmanagersinretainingthem
◎Professionalswhoaregoodattheirworkareretainedintheorganization
◎Professionalcompensationincludesbasepay,performanceincentives,and
additionalperksforskills.

8. Dr. Parveen Kaur Nagpal
REMUNERATING PROFESSIONALS
◎CompensationStructureofProfessionals:
•BaseSalary:Higherthanaveragetoreflecttheirspecializedknowledge
•ProfessionalDevelopment:Paidcertifications,training,andmembershipin
professionalbodies
•Performance-BasedIncentives:Bonusesformeetingprojectmilestones,
deliveringhigh-qualitywork,oracquiringnewclients.

9. Dr. Parveen Kaur Nagpal
REMUNERATING PROFESSIONALS
AdvantagesofRemuneratingProfessionals:
◎Attractstoptalentwithspecializedknowledge
◎Motivatescontinuouslearningandskilldevelopment
◎Increasesproductivity,increasesproductivity
◎Retainsexpertise
◎Boostscompanysreputation
LimitationsofRemuneratingProfessionals:
◎Professionals,duetotheirspecializedskills,demandhighersalaries,benefits,and
bonuses,whichcanincreasetheorganization'slabourcosts.
◎Retaininghighlyspecializedprofessionalscanbedifficultduetocompetitiveoffers.
◎Highcompensationforprofessionalsmayleadtoincomeinequalitywithinthe
organization,causingdissatisfactionordemotivationamongotheremployees

10. Dr. Parveen Kaur Nagpal
CONTRACT EMPLOYEES
◎Contractemployeesarehiredforspecificperiodsorprojects.Their
compensationistypicallystructureddifferentlythanfull-timeemployeesdueto
thetemporarynatureoftheirroles.
◎Theyareengagedbyemploymentagencies,thatprovidemanpowerwhen
requiredbythecompany.Thecompanypaystheagencythatinreturn,is
responsibletopaytheemployees.
◎Theyworkequallyalongwiththepermanentemployeesbutreceivelow
wagesandbenefitsforthesamework.
◎Theyarenotoncompany’spayrollandreceivelessthanconventional
employeesanddonotgetadditionalbenefits.

11. Dr. Parveen Kaur Nagpal
CONTRACT EMPLOYEES
◎CompensationStructureofContractEmployees:
•FixedorHourlyPay:Contractworkersareoftenpaidafixedfeeforthe
projectoronanhourlybasis.
•NoTraditionalBenefits:Contractworkersdonotreceivebenefitslikehealth
insurance,retirementplans,orpaidleaveunlessnegotiated.
•CompletionBonuses:Insomecases,contractemployeesmayreceivebonuses
forcompletingaprojectaheadofscheduleorunderbudget.

12. Dr. Parveen Kaur Nagpal
CONTRACT EMPLOYEES
AdvantagesofRemuneratingContractEmployees:
◎Flexibilityinstaffingforshort-termprojects
◎Canbecost-effectivesinceemployersdonotneedtoofferfullbenefits.
◎Fasterhiring
◎Contractemployeesmaybemanagedbythird-partyagencies,reducingthe
administrativeworkloadonthecompany’sHRdepartment.
LimitationsofRemuneratingContractEmployees:
◎Lackoflong-termstabilityforworkers
◎Maynotbeasinvestedinthecompany’slong-termgoals.
◎Limitedknowledgeofcompanycultureandpolicies
◎Lesscontroloverqualitywork

13. Dr. Parveen Kaur Nagpal
CORPORATE DIRECTORS
◎CorporateDirectorsareresponsibleforoverseeingthemanagementofa
companyorabusinessunit,ensuringthatthecompanyoperatesinthebest
interestofshareholders.
◎CompensationStructure:
•BoardFees:Forattendingmeetings,oftenreceivingafixedfeepermeeting.
•StockOptions:Aligningtheirinterestswiththoseofthecompany’s
shareholders.
•Retainers:Annualretainers(forservingontheBoard)
•LiabilityInsurance:Tocoverthemfromlegalrisks(fraud/criminaloffenses)
associatedwiththeirdecisions.

14. Dr. Parveen Kaur Nagpal
CORPORATE DIRECTORS
AdvantagesofRemuneratingCorporateDirectors:
◎AttractsexperiencedandqualifiedindividualsontheBoard
◎Alignstheinterestsofdirectorswithshareholders.
◎Offerssignificantincentivesforcompanygrowthandprofitability
◎Retentionofexpertise
LimitationsofRemuneratingCorporateDirectors:
◎Directorcompensationcanrepresentasignificantexpenseforacompany
◎Canleadtoconflictsofinterestifnotmanagedcarefully
◎Highcompensationmaybescrutinizedbystakeholders.
◎Directorsmay,attimes,faceconflictsbetweentheirownfinancialinterestsandtheir
dutiestothecompanyanditsshareholders

15. Dr. Parveen Kaur Nagpal
CEO (CHIEF EXECUTIVE OFFICER)
◎CEOsareresponsiblefortheoverallmanagementandstrategicdirectionof
anorganization/acrossmultipledivisions
◎Theircompensationisusuallythehighestwithinacompanyduetothehigh
levelofresponsibility.
◎CEOscompensationshouldbedesignedtoensureexecutivesfocusonbest
interestsoffirmandstockholders.
◎CEOsmakedecisionstosolidifytheirpositionsandmaximisetherewardsthey
receivepersonally.
◎TheCEOshaveintrinsicworthandhencedemandhighpremium.
◎CEOsearnhighersalaryastheymaketheorganisationsuccessfulwiththeir
expertiseandefforts.

16. Dr. Parveen Kaur Nagpal
CEO (CHIEF EXECUTIVE OFFICER)
◎CompensationStructureofCEO:
•BaseSalary:Ahighbasesalaryduetothemagnitudeoftheirresponsibilities.
•PerformanceBonuses:AsignificantportionofCEOcompensationis
performance-based,withbonusestiedtoachievingfinancialtargets,market
sharegrowth,orstockpriceperformance.
•StockOptions/Equity:Theygetastakeinthecompany'slong-termsuccess.
•PerksandBenefits:Companycars,privatejets,orhousingallowances

17. Dr. Parveen Kaur Nagpal
CEO (CHIEF EXECUTIVE OFFICER)
AdvantagesofRemuneratingCEOs:
◎Providesstrongincentivestodrivecompanygrowthandachievestrategicgoals
◎AlignsCEOgoalswithlong-termcompanyperformancethroughequity
◎Retentionofkeyleadership
◎Awell-structuredcompensationpackagecanretainaCEOduringcriticaltimes
LimitationsofRemuneratingCEOs:
◎Substantialexpenseforthecompany
◎HighCEOcompensationcanleadtopublicscrutinyordiscontentamongemployees.
◎Compensationstructuresneedtobalanceshort-termgainswithlong-termcompany
health.
◎DisproportionatelyhighCEOcompensationcomparedtoaverageemployeesalaries
cancreatediscontentandaffectemployeemoraleandmotivation.

18. Dr. Parveen Kaur Nagpal
EXPATRIATES
◎Expatriatesareemployeeswhoaresenttoworkinanothercountryforafixed
period.Theircompensationmustaccountfordifferencesincostofliving,taxes,
andthechallengesofrelocation.
◎CompensationStructure:
•BaseSalary:Highertocompensateforthecostoflivinginaforeigncountry.
•Cost-of-LivingAdjustments(COLA):Tooffsetthehigherlivingexpensesin
thehostcountry.
•HousingAllowance:Allowancesorcompany-providedhousing.
•RelocationandRepatriationPackages:Costofmovingtoandfro
•HardshipAllowances:Forworkinginlessdesirableordangerouslocations.
•TaxEqualization:Adjustingpaytooffsettaxdifferencesbetweenhomeand
hostcountriesforexpatriates.

19. Dr. Parveen Kaur Nagpal
EXPATRIATES
AdvantagesofRemuneratingExpatriates:
◎Ensurestalentmobilityacrossinternationaloperations
◎Motivationfortakingonchallengingassignmentsabroad.
◎Retainvaluableemployeeswhoarecrucialforinternationaloperations.
◎Additionalbenefitslikehousing,education,andrelocationallowancescaneasethe
transitionforexpatriates.
LimitationsofRemuneratingExpatriates:
◎Highcostofmanagingexpatriatecompensationpackages.
◎Taxandlegalcomplexitiesacrossdifferentcountries.
◎Mayfacedifficultiesadjustingtoanewculture,language,orenvironment
◎Riskofassignmentfailure

20. Dr. Parveen Kaur Nagpal
EXECUTIVES
◎ExecutivessuchasCOOs(ChiefOperatingOfficers),CFOs(ChiefFinancial
Officers)andCIOs(ChiefInformationOfficers)supporttheCEO,each
overseeingspecificbusinessareas(operations,finance,informationand
technology).
◎CompensationStructureofExecutives:
•BaseSalary:Highbasesalariestoreflecttheirleadershiproles.
•PerformanceIncentives:Bonusestiedtotheachievementofdepartment-
specificoroverallcompanyperformancegoals.
•Equity/StockOptions:LikeCEOs,theseexecutivesmayreceivestockoptions
toaligntheircompensationwithcompanyperformance.
•Perks:Executivesoftenreceivebenefitssuchasexecutivepensions,company
cars,andexpenseaccounts.

21. Dr. Parveen Kaur Nagpal
EXECUTIVES
AdvantagesofRemuneratingExecutives:
◎Attractsandretainstoptalentforcriticalbusinessfunctions.
◎Performance-basedremuneration(e.g.,bonuses,stockoptions)motivatesexecutives
◎Equity-basedcompensationlikestockoptionsalignsexecutives'goalswith
shareholders'interests.
LimitationsofRemuneratingExecutives:
◎Largecompensationpackages,especiallyfortopexecutives,canbeexpensivefor
companiesandmayreduceprofitsifnotwell-managed.
◎Excessiveexecutivepaycanleadtopaydisparitieswithintheorganization,causing
dissatisfactionanddemotivationamonglower-levelemployees
◎Highexecutivepaycanattractnegativeattentionfromtheinvestors,orthepublic,
especiallyifthecompany'sperformanceoremployeewelfareislacking.

22. Dr. Parveen Kaur Nagpal
RECENT TRENDS IN COMPENSATION
RecentTrendsinCompensationInclude:
I.GoldenParachutes
II.e-compensation
III.SalaryProgressionCurve
IV.CompetencyandSkillbased
V.Broadbanding
VI.NewPay
VII.CafeteriaApproach

23. Dr. Parveen Kaur Nagpal
GOLDEN PARACHUTES
◎Anagreementbetweenacompanyandanemployee(keyexecutive)specifying
thattheemployeewillreceivecertainsignificantbenefitsifemploymentis
terminatedasaresultofmergerortakeover.
◎AlsoknownasSeverancepackageorTerminationagreement
◎Thepaymentcanbemadeincash,stockoptions,severancepayoranything
elseacceptedinthecontract
◎Goldenparachutesarenamedassuchbecausetheyareintendedtoprovidea
softlandingforemployeesofcertainlevelswholosetheirjobs
◎Example:DellmergedwithstoragegiantEMCin2016.Asperthetermsofhis
goldenparachute,EMC'sCEOreceived$27millionincompensation.

24. Dr. Parveen Kaur Nagpal
GOLDEN PARACHUTES
AdvantagesofGoldenParachute
◎Attractsandretainstoptalent
◎Reduce/Removeconflictofinterestduringamerger
◎Reducehostiletakeovers(withoutapproval/consent)
LimitationsofGoldenParachute
◎Requirethecompanytopayalotofmoney
◎Executiveswithagoldenparachutemaynotactinthebestinterestof
shareholders.

25. Dr. Parveen Kaur Nagpal
GOLDEN PARACHUTES
Attimes,executivesdelayorsabotagethemergerthroughdefencessuchasa
poisonpill,crownjewelsdefence,orPac-mandefence.
PoisonPill-Ashareholderrightsplan,morecommonlyknownasapoisonpill,isa
company’sdefenceagainstapotentiallyhostile,orunsolicited,takeoverattempt.
Thegeneralideaofapoisonpillistodiscourageanyoutsidetakeoverattemptby
eithermakingthecompanylessdesirableorbytypicallyanacquirer’sownershipof
thetarget.
E.g.:In2000,HULemployedapoisonpillstrategywhenitfacedapotentialhostile
takeoverbyaforeigncompany.Theyissuednewsharestoexistingshareholders,
makingitdifficultfortheacquirertogaincontrolwithoutincurringhighcosts.

26. Dr. Parveen Kaur Nagpal
GOLDEN PARACHUTES
CrownJewelsarethemostprofitableorvaluablecorporateunitsorassetsthat
belongtothecompany.Theyarethecompany’smostprizedorvaluableassetsin
termsofprofitability,futurebusinessprospects,orassetvalue.
TheCrownJewelDefencestrategyinmergersandacquisitions(M&A)iswhenthe
targetcompanyofahostiletakeoversellsitsmostvaluableassetstoreduceits
attractivenesstothehostilebidder.Thecrownjeweldefenceisalast-resort
defencesincethetargetcompanywillbeintentionallydestroyingpartofitsvalue,
withthehopethattheacquirerdropsitshostilebid.
E.g.:TataGrouphasbeenknowntosafeguarditskeyassets(likeTataSteelorTCS)
duringtakeoverattempts.Byhighlightingthevalueandstrategicimportanceofits
crownjewelcompanies,Tatacandeterpotentialacquirers.

27. Dr. Parveen Kaur Nagpal
GOLDEN PARACHUTES
ThePac-ManDefenceisastrategyusedbytargetedcompaniestopreventa
hostiletakeover.Thistakeoverpreventionstrategyisimplementedbythetarget
companyturningthingsaroundbytryingtotakeovertheacquirer.
ThepurposeofthePac-ManDefence,aswithanydefensivestrategyagainsta
hostiletakeover,istomakeatakeoververydifficultfortheacquiringcompany,in
hopesthatitwillabandontheattempt.
E.g.:In2016,GitanjaliGemsfacedahostiletakeoverattemptfromacompetitor.To
counterthethreat,thecompanyemployedthePac-ManDefensebyexpressing
interestinacquiringasignificantstakeintherivalfirm.Thistacticaimedtoshift
thefocusfromGitanjalibeingatargettobecominganacquirer,thusthwartingthe
originaltakeoverattempt.

28. Dr. Parveen Kaur Nagpal
E -COMPENSATION
◎E-compensationorelectroniccompensationisamethodofusingcomputer-
basedandweb-basedtechnologiestoplanemployeecompensation
◎Itreferstotheuseofdigitalplatformsandtoolstomanageemployee
compensationprocesses.
◎IthelpsHRprofessionalsfocusonstrategicactivitiesinsteadofpaperwork
◎Itincludes:
•Digitalsalaryadministrationsystem
•Onlinebenefitsenrolmentandmanagement
•Performancemanagementsoftwareintegratedwithcompensation
•Analyticstoolsforcompensationplanningandbenchmarking

29. Dr. Parveen Kaur Nagpal
E -COMPENSATION
Recenttrendsine-compensation:
◎Tyingexecutivepaytospecificperformancemetrics,suchasrevenuegrowth,
profitabilitytoensurealignmentwithshareholderinterests.
◎Greateremphasisonmobileaccessibilityforemployeesandmanagers
◎IntegrationofAIandmachinelearningforpredictiveanalyticsanddecisionsupport
◎Enhanceddatavisualizationtoolsforbettercommunicationofcompensation
information
◎Enhancedtransparencyincompensationstructures
◎Re-evaluatingcompensationpackagestoconsiderlocation-basedpayadjustments,
costofliving,andremoteworkstipends.

30. Dr. Parveen Kaur Nagpal
SALARY PROGRESSION CURVE
◎Salaryprogressioncurverepresentshowanemployee'ssalarytypically
increasesovertimewithinanorganizationorcareerpath.
◎Alsocalledas“CareerCurves”or“MaturityCurves”
◎Factorsinfluencingthecurve:
•Experience
•Skillandcompetency
•Performanceandproductivity
•Promotions
•MarketconditionsandIndustrystandards
•Companypolicies
•Location
•EconomicandOrganizationalFactors

31. Dr. Parveen Kaur Nagpal
SALARY PROGRESSION CURVE
Years of
ExperienceSalary Remarks
0 -1 ₹5,00,000Entry–level salary
1-2 ₹5,40,0008% annual increment
2 -3 ₹5,83,2008% annual increment
3 -4 ₹6,70,680Promotion, 15% hike
4 -5 ₹7,24,3408% annual increment
5 –6 ₹7,82,2908% annual increment
6 –7 ₹9,00,000Promotion, 15% hike

32. Dr. Parveen Kaur Nagpal
RECENT TRENDS INSALARY PROGRESSION CURVE
◎Flatterorganizationalstructuresleadingtofewerpromotionopportunities
◎Increasedemphasisonskills-basedpayratherthantenure-basedincreases
◎Morefrequentjobchangesbyemployees,disruptingtraditionalprogression
◎Greatersalarytransparency,influencingemployeeexpectations
◎Adoptionofbroadbandpaystructures,allowingformoreflexibleprogression
withinarole
◎Increaseduseofvariablepayandbonusestosupplementbasesalarygrowth
◎Focusontotalrewardspackagesratherthanjustbasesalaryprogression

33. Dr. Parveen Kaur Nagpal
USE OF A SALARY PROGRESSION CURVE
◎Helpsdesigncompetitivesalarystructuresbyvisualizinghowsalariesshould
progressovertimefordifferentrolesorlevelswithintheorganization.
◎Helpsinbudgetingandforecasting
◎Assistsinlinkingsalarywithperformance
◎Ensuresthatsalaryprogressionisfairandequitableacrosssimilarrolesandlevels
◎Letsemployeesseeaclearpathforsalarygrowth,enhancingjobsatisfactionand
alsocareerdevelopment
◎Facilitatesbenchmarkingagainstindustrystandardsbycomparingthe
organization’ssalaryprogressionwithcompetitors
◎Supportscompliancewithlabourlawsandregulationsregardingpayequityand
transparencybyprovidingdocumentedsalaryprogressiontrendsthatcanbe
reviewedandreportedasnecessary.

34. Dr. Parveen Kaur Nagpal
COMPETENCY AND SKILL BASED PROGRESSION CURVE
◎Acompetencyandskill-basedsalaryprogressioncurvelinkssalarygrowthto
thedevelopmentofspecificcompetenciesandskillsratherthanjusttenureor
experience.
◎Inthisapproach,employeesarerewardedastheyacquirenewskills,
demonstratecompetencies,orachievecertifications.
◎Factorsinfluencingcompetencyandskill-basedsalaryprogressioncurve:
•TechnicalandSpecializedskillacquisition
•CompetencyDemonstration–Leadership,Problem-solving,Decision–making
•ProfessionalCertifications
•AdvancedEducation
•Increasedjobscope
•Strategicroles

35. Dr. Parveen Kaur Nagpal
COMPETENCY AND SKILL BASED PROGRESSION CURVE
Skill/
Competency
Salary Remarks
Entry-level
(Basic skills)
₹6,00,000Base salary with foundational
marketing knowledge
New Skill
(SEO
Certification)
₹6,60,00010% increment for learning
SEO
Advanced Skill
(CRM
Mastery)
₹7,26,00010% increment for mastering
CRM tools
Competency
(Team
Leadership)
₹8,34,90015% increment for
demonstrating leadership
competency
Strategic
Competency
(Digital
Strategy)
₹9,59,13515% increment for strategic
marketing competency
Competency &
Skill Mastery
₹11,02,005
Combined increases based on
multiple competencies/skills

36. Dr. Parveen Kaur Nagpal
USE OF COMPETENCY AND SKILL BASED PROGRESSION CURVE
◎Providesaclearpathforemployeestounderstandthecompetenciesandskills
requiredforadvancement,encouragingthemtopursueprofessionaldevelopment.
◎Helpsorganizationsidentifyhigh-potentialemployeesbasedontheirskillsand
competencies,facilitatingtargetedtalentdevelopmentandsuccessionplanning
◎Allowsfortailoredtraininganddevelopmentinitiativesthatalignwithcareer
progression
◎Assistsincreatingjobdescriptionsthatfocusonrequiredcompetenciesandskills
◎Fostersacultureofcontinuouslearning
◎Ensuresskillsalignwithbusinessgoals
◎Supportsequitablecompensationpracticesbylinkingpayincreasesand
promotionstodemonstratedcompetenciesandskillsratherthanjustlengthof
service.

37. Dr. Parveen Kaur Nagpal
BROADBANDING
◎Consolidatingmultiplepaygradesorsalarybandsintoafewbroaderbands.Instead
ofhavingnarrowsalaryrangesforeachpositionorrole,companiesgroupseveral
positionsintoasinglebroadband.
◎Allowsgreaterflexibilityforsalaryprogressionwithinabroadersalaryrange,
encouragingcareerdevelopmentacrossdifferentjobfunctionsratherthanvertical
promotionsalone.
◎Focusesonsimplifyingandexpandingsalaryranges,allowingflexibilityinrole
changeswithinthesamesalaryband.
◎Inatraditionalstructure,ajunioranalyst,analyst,andsenioranalystmighteachhave
distinctpayranges.Inbroadbanding,theseroleswouldfallunderonebroadband
withawidersalaryrange,allowingsalaryprogressionwithinthebandasemployees
gainskillsandresponsibilities.

38. Dr. Parveen Kaur Nagpal
BROADBANDING
AdvantagesofBroadbanding:
◎Flexibility–Payadjustmentsbasedonindividualperformanceandmarketstructure
◎Skillbasedprogression
◎Simplifiedcompensationstructure
◎Facilitateslateralmovementacrossroleswithinthesameband,allowingemployees
toexploredifferentcareerpaths
LimitationsofBroadbanding:
◎Salarycompression
◎Lackofclarity
◎Potentialforpaydisparities
◎Biasorfavoritism

39. Dr. Parveen Kaur Nagpal
USES OF BROAD BANDING
◎Usedtodesigncompetitivesalarystructuresthatreflectmarkettrendsand
organizationalgoals
◎Supportsemployeedevelopmentinitiativesbylinkingskillsandcompetenciesto
careerprogressionopportunities.
◎Assistsinidentifyinghigh-potentialemployeesanddevelopingthemforfuture
leadershiprolesbypromotingskillenhancement.
◎Alignsperformanceevaluationswithcompensationdecisions,ensuringthathigh-
performingemployeesarerewardedappropriately.
◎Attractscandidatesbyofferingflexibleandcompetitivepayoptionsthatarebasedon
individualskillsandexperienceratherthanrigidpaygrades.
◎Facilitatestransitionsduringorganizationalrestructuringbyprovidingflexible
compensationoptionsthataccommodatenewrolesandresponsibilities.

40. Dr. Parveen Kaur Nagpal
NEW PAY STRUCTURE
◎Newpaystructuresfocusonpayingemployeesbasedonskills,competencies,or
performanceratherthanstrictlyonjobtitlesorseniority.
◎Thesestructuresreflectthemodernfocusonperformance-basedpay,market-based
pay,andskill-basedpay.
◎Aimtomotivateemployeestoimprovetheirskillsandcompetencies,offeringsalary
increasestiedtotheircontributionsandperformanceratherthanlengthofservice.
◎Components:
•Skill-BasedPay
•CompetencyBasedpay
•MarketBasedpay

41. Dr. Parveen Kaur Nagpal
NEW PAY STRUCTURE
AdvantagesofNewPayStructure:
◎Offersemployeesmorechoicesincompensationoptions,allowingthemtotailor
theirpackagestotheirneeds
◎Encouragescontinuouslearning
◎Alignspaywithperformance
◎Adapts/adjuststomarkettrendsandjobroles
LimitationsofNewPayStructure:
◎Complexity
◎Iflackofclarity,thenemployeesmaybeunsureabouthowtoprogress
◎Transitioningtoanewpaystructurecanincurcostsrelatedtotraining,technology
Ensuringthenewstructureremainscompetitivewithmarketratescanbe
challenging.

42. Dr. Parveen Kaur Nagpal
CAFETERIA APPROACH
◎Aflexiblebenefitsplanthatallowsemployeestochoosefromavarietyof
benefitsoptionsthatbestmeettheirindividualneedsandpreferences.
◎Employee-centricbenefitsmodelthatenhancesflexibilityandcustomization.
◎TypesofCafeteriaPlans:
•FullFlexPlan:Employeesreceiveawidevarietyofbenefitchoiceswith
maximumflexibility.Theycanoptforspecificbenefitlevelsordeclinecertain
benefitsinexchangeforothers.
•CorePlusPlan:Employeesselectcorebenefits(e.g.healthcoverage)while
givingthemflexibilityinselectingadditionalbenefitsfromalist.
•ModularPlan:Employeeschoosefromasetofpredefinedbenefitpackages,
eachcateringtodifferentneeds(e.g.,afamilyplan,aretirement-focused
plan,etc.).

43. Dr. Parveen Kaur Nagpal
CAFETERIA APPROACH
Example:
Anemployeehas₹50,000benefitsbudgetallocatedbythecompany.Theymay
bepresentedwiththefollowingcafeteriamenu:
HealthInsurance:₹20,000
DentalInsurance:₹5,000
ChildcareAssistance:₹15,000
RetirementSavings:₹10,000
Theemployeemightdecidetooptforhealthanddentalinsurance,andusethe
remainingbudgetforretirementsavings,forgoingchildcareassistanceifthey
don’tneedit.

44. Dr. Parveen Kaur Nagpal
CAFETERIA APPROACH
AdvantagesofCafeteriaApproach:
◎Employeescanchoosebenefitsthatsuittheirpersonalandfamilyneeds,leadingto
highersatisfaction
◎Employeesatisfaction
◎Attractionandretention
◎Caterstoworkforcewithdiverseneeds
◎Costmanagement-Employerscansetaspecificbudget
LimitationsofCafeteriaApproach:
◎AdministrativeComplexity
◎Toomanychoicesmayleadtoconfusion
◎RiskofInadequateCoverage(e.g.,optingforminimalhealthinsurancecoverageto
getmorevacationdays).

45. Dr. Parveen Kaur Nagpal
Lets Revise….

46. Dr. Parveen Kaur Nagpal
MULTIPLE CHOICE QUESTIONS
Whatistheprimaryobjectiveofteam-
basedpay?
a)To reward individual
accomplishments
b)Toencouragecompetitionamong
teammembers
c)Topromotecollaborationand
sharedaccountability
d)Toreducetheoverallcompensation
budget
Answer:c)Topromotecollaboration
andsharedaccountability
Whichofthefollowingisacommon
componentofexpatriatecompensation
packages?
a)Performancebonuses
b)Taxequalization
c)Hourlypay
d)Stockoptions
Answer:b)Taxequalization

47. Dr. Parveen Kaur Nagpal
MULTIPLE CHOICE QUESTIONS
Whatisthemainchallengeof
compensatingcorporatedirectors?
a)Aligningtheircompensationwith
organizationalculture
b)Legalrestrictionsoncompensation
c)Aligningtheirinterestswith
shareholders
d)Offeringcompetitivehourlywages
Answer:c)Aligningtheirinterestswith
shareholders
Whichofthefollowingbestdescribes
broadbandingincompensation?
a)Offeringfewersalarybandswitha
widerrangeofpay
b)Increasingthenumberofjobtitlesto
offerpromotions
c)Aligningsalaryprogressionstrictly
withtenured)Offeringadditional
bonusesforteamperformance
Answer:a)Offeringfewersalary
bandswithawiderrangeofpay

48. Dr. Parveen Kaur Nagpal
MULTIPLE CHOICE QUESTIONS
Inthecontextofcompensating
professionals,whichofthefollowingis
mostlikelytobeincludedintheir
package?
a)Healthinsuranceonly
b)Paidcertificationsandtraining
c)Team-basedbonuses
d)Equityoptions
Answer:b)Paidcertificationsand
training
Contractemployeesaretypically
compensatedwith:
a)Comprehensivebenefitspackages
b)Stockoptionsandbonuses
c)Fixedorhourlypaywithout
traditionalbenefits
d)Long-termemploymentcontracts
Answer:c)Fixedorhourlypaywithout
traditionalbenefits

49. Dr. Parveen Kaur Nagpal
MULTIPLE CHOICE QUESTIONS
Whichofthefollowingisatypical
compensationfeatureforCEOs?
a)Hourlywagesandovertimepay
b)Basesalarywithperformance-
basedincentivesandstockoptions
c)Onlycommission-basedpay
d)Taxequalizationfordomestic
assignments
Answer:b)Basesalarywith
performance-basedincentivesand
stockoptions
Onekeyadvantageofthecafeteria
approachtocompensationis:
a)Providingemployeeswithlimited
benefitoptions
b)Encouragingemployeestoselect
specificcareerpaths
c)Allowingemployeestochoose
benefitsthatmeettheirindividual
needs
d)Enforcing standardized
compensationacrossallroles
Answer:c)Allowingemployeesto
choosebenefitsthatmeettheir
individualneeds

50. Dr. Parveen Kaur Nagpal
MULTIPLE CHOICE QUESTIONS
Whatisacommonadvantageof
performance-basedpayforexecutives?
a)Itguaranteesafixedsalary
regardlessofperformance
b)Italignsexecutivecompensation
withthecompany'slong-term
success
c)Itsimplifiesthecompensation
process
d)Itreducestheneedforemployee
engagementprograms
Answer:b)Italignsexecutive
compensationwiththecompany'slong-
termsuccess
Inateam-basedpaysystem,what
couldbeapotentialdownside?
a)Increasedcompetitionamongteam
members
b)Difficultiesinassessingindividual
contributionswithinateam
c)Highersalarybudgetsduetofixed
payincreases
d)Lackofcollaborationamongteam
members
Answer:b)Difficultiesinassessing
individualcontributionswithinateam

51. Dr. Parveen Kaur Nagpal
CASE -LET
Rahul,ahigh-performingexecutive,isbeingconsideredforaninternational
assignmenttomanagehiscompany'soperationsinAsia.Thecompanyplansto
offerhimanexpatriatecompensationpackagetoensurehisseamlesstransition.
Hispackageincludesahigherbasesalary,cost-of-livingadjustments(COLA),
housingallowance,andahardshipallowanceduetothechallenginglocation.
Additionally,thecompanyisofferingtaxequalizationtoensurethatRahuldoes
notbearaheaviertaxburdenwhileworkingabroad.
Q1.ExplainthekeycomponentsofRahul’sexpatriatecompensationpackageand
therationalebehindofferingthesame.
Q2.Whatistheroleoftaxequalizationinexpatriatecompensationpackages,
andwhyisitcriticalforensuringaseamlesstransitionforexecutiveslikeRahul?

52. Dr. Parveen Kaur Nagpal
CASE -LET
A1.HigherBaseSalary,Cost-of-LivingAdjustments(COLA),HousingAllowance,
HardshipAllowance,TaxEqualization
A2.TaxequalizationensuresthatexpatriateslikeRahuldonotpaymoretaxes
duetodifferenttaxsystemsinthehomeandhostcountries.Thecompany
compensatesforanyexcesstaxliabilitiesinthehostcountrytokeepthenetpay
atparwithwhatRahulwouldhaveearnedinhishomecountry.Thisiscrucial
becauseinternationalassignmentscanleadtohighertaxliabilities,andwithout
taxequalization,executivesmaybereluctanttoacceptsuchassignments.It
createsfinancialcertainty,motivatingRahultofocusonhisprofessionalduties
withoutworryingaboutcomplextaxissues.

53. Dr. Parveen Kaur Nagpal
CASE -LET
ZeepeeCorporationhasadoptedateam-basedpaymodelinoneofitsproduct
developmentunits.Theteamisresponsiblefordesigningandlaunchinganew
product,andtheirbonusesaretiedtothesuccessoftheproject.Theteam
includesbothhighlyexperiencedandnewemployees.Astheprojectprogresses,
themoreexperiencedteammembersfeeltheyaredoingmostoftheworkbut
receivingthesamebonusasthejuniormembers.Thiscreatestensionwithinthe
team,andproductivitybeginstodrop.
Q1.AnalyzethepotentialissuescausedbyauniformbonusdistributioninZeepee
Corporation'steam-basedpaymodel,especiallyconcerningtheexperiencedteam
members.

54. Dr. Parveen Kaur Nagpal
CASE -LET
A1.InZeepeeCorporation,theuniformbonusdistributionhascreated
dissatisfactionamongexperiencedteammembers.Theyfeelthatdespitetheir
greatercontributionandexpertise,theyreceivethesamerewardsasjunior
members,whichleadstoperceptionsofunfairness.Thisissueundermines
motivationandcanresultindecreasedproductivity.Theproblemarisesbecause
thecompensationstructuredoesnotdifferentiatebasedonthelevelof
contributionorexperience,failingtorecognizethevaryinglevelsofinputby
teammembers.Consequently,experiencedmembersmaylosetheirincentiveto
putinextraeffort,whichaffectsoverallteamperformanceandmorale.

55. Dr. Parveen Kaur Nagpal
CASE -LET
Q2.HowcouldZeepeeCorporationmodifyitsteam-basedpaymodeltoaddress
theconcernsofexperiencedemployeeswhilemaintainingacollaborativeteam
environment?
A2.ZeepeeCorporationcouldimplementahybridcompensationmodelthat
balancesbothteamandindividualcontributions.Thiswouldinvolve:
•Providebonusesbasedonamixofteamsuccessandindividualperformance
•Offeradditionalcompensationtoteammemberswhopossesscriticalskillsor
takeonleadershiprolesintheproject.
•Establishclear,transparentcriteriaforperformanceevaluationtoensure
fairnessinthebonusdistribution.

56. Dr. Parveen Kaur Nagpal
CASE -LET
Q3.Evaluatehowthetensionbetweenexperiencedandjunioremployeesat
ZeepeeCorporationcouldimpacttheoverallproductivityoftheteam
A3.Thetensionbetweenexperiencedandjunioremployeescanleadtoadecline
inoverallteamproductivityatZeepeeCorporation.Whenexperiencedmembers
feelundervalued,theymayreducetheirefforts,whichdiminishesthequalityand
speedoftheteam’swork.Thiscanresultinmisseddeadlines,lower-quality
output,anddecreasedinnovation,asseniormembersmightwithholdknowledge
orskills.Additionally,unresolvedtensioncanleadtopoorteamdynamics,
communicationbreakdowns,andalackofcollaboration,furtheraffecting
productivity.Ultimately,thiscouldjeopardizethesuccessoftheprojectand
reducetheoveralleffectivenessotheteam-basedpaymodel.

57. Dr. Parveen Kaur Nagpal
QUESTIONS
1.Explaintheconceptofteam-basedpayanddiscussitsadvantagesand
disadvantagesinthecontextofmotivatingbothexperiencedandnewemployees.
2.Howdoesthecompensationstructuredifferforprofessionalscomparedto
contractemployees?Highlightthekeycomponentsofeachcompensation
package.
3.Discusstheimportanceofexpatriatecompensationandthekeyelements(like
COLA,hardshipallowances,taxequalization)includedinthesepackages.Whyare
theseelementscrucialforensuringasuccessfulinternationalassignment?
4.Whatare'goldenparachutes'inexecutivecompensation,andhowdotheyimpact
organizationaldecision-making,especiallyduringmergersandacquisitions?

58. Dr. Parveen Kaur Nagpal
QUESTIONS
5.Explaintheconceptofe-compensationanddiscusshowitischangingtheway
organizationsmanageemployeeremunerationandbenefits.
6.Definethe'salaryprogressioncurve'andexplainhowcompetencyandskill-
basedmodelsareintegratedintomoderncompensationstructures.
7.Whatisbroadbandingincompensation,andhowdoesitdifferfrom
traditionalsalarybands?Discussitsadvantagesandpotentialchallenges.
8.Discussthecafeteriaapproachtocompensationandhowitempowers
employeestotailortheirbenefitspackages.Whataretheadvantagesand
potentialrisksofthisapproach?

59. Dr. Parveen Kaur Nagpal
Thank you!
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