Unit 1.pptx Compensation Management Anna Unive

Anna Univ

1. INTRODUCTION TO COMPENSATION AND BENEFITS

2. Compensation A compensation system consists of total remuneration received by an employee inclusive of financial rewards (fixed and variable pay) and the benefits. Reward system also incorporates non-financial rewards such as recognition, praise, achievement, responsibility, personal growth and so on Compensation is defined as the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.

3. Compensation serves several key purposes: Attraction and Retention : Competitive pay helps attract top talent and retain skilled employees within the organization. Motivation : Proper compensation motivates employees to perform well and meet organizational goals, fostering a productive work environment. Fairness and Equity : Ensures fair pay for similar roles and responsibilities, promoting equity within the workforce. Compliance : Helps organizations comply with labor laws and regulations regarding minimum wage, overtime, and benefits. Recognition and Reward : Recognizes and rewards employee performance and contributions, reinforcing positive behaviors. Job Satisfaction : Contributes to overall job satisfaction, which can lead to higher morale and lower turnover rates.

4. Compensation Types Piece-rated T ime-rated and S kills-based approaches.

5. Piece-Rate Compensation Piece-Rate Compensation Definition : Piece-rate compensation is a pay system where employees are compensated based on the number of units they produce or complete, rather than by an hourly wage or salary.

6. Key Features Payment Structure : Employees earn a fixed amount for each item produced or task completed (e.g., per widget, per completed assembly). Productivity Focus : This system incentivizes workers to increase output and efficiency, as their earnings directly correlate with their productivity. Common Industries : Frequently used in manufacturing, agriculture, construction, and assembly line work. Advantages Increased Motivation : Workers may feel more motivated to work efficiently and produce more to increase their earnings. Clear Performance Measurement : Performance is easily measurable based on output, simplifying assessments of productivity. Flexibility : Allows workers to control their income potential based on their effort and output levels.

7. Time-Rate Compensation Time-rated compensation refers to a system where employees are paid based on the amount of time they work, typically measured in hours or days . This contrasts with performance-based compensation, where pay is tied to the results or outcomes of an employee's work.

8. Hourly Wages or Salaries : Employees are paid a set amount per hour or a fixed salary based on their work hours. Overtime Pay : For hours worked beyond a standard workweek (e.g., more than 40 hours per week), employees might receive additional pay, often at a higher rate. Job Security and Stability : This system often provides more predictable earnings than performance-based systems, which can be advantageous for employees seeking financial stability. Work Hours Tracking : Accurate tracking of hours worked is crucial to ensure proper compensation. This can be managed through time clocks, timesheets, or electronic systems. Benefits : Time-rated compensation might include various benefits like health insurance, paid time off, and retirement contributions .

9. Skill Based Compensation Skills-based approaches to compensation involve paying employees based on the skills and competencies they possess , rather than solely on their job title, position, or the amount of time they work. This method aims to align pay with the value that specific skills bring to the organization.

10. Skill Assessment : Employees’ skills are assessed and categorized based on their proficiency levels. This might include technical abilities, certifications, or other competencies relevant to the job. Pay Structure : Compensation is linked to the skills employees have. For example, an employee with advanced technical skills or certifications might receive higher pay compared to one with fewer skills. Skill Development : Employees are encouraged to acquire new skills or improve existing ones through training and education. This often leads to higher pay as their skill set expands. Job Flexibility : Skills-based compensation can provide greater flexibility in job roles and responsibilities. Employees can be tasked with diverse functions based on their skill set, rather than strictly defined job descriptions . Career Progression Competitive Advantage

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12. Severance Pay Severance Pay refers to the compensation provided by the employer to the employee in case of termination of their employment by reasons of retrenchment, Layoff, or mutual agreement. 

13. Types Of Termination Of Employment Voluntary termination An employee’s employment with a corporation ends freely when referred to as voluntary termination. This might be due to a worker’s motives, such as starting their own business, finding new and better employment, or leaving their current profession. Non-voluntarily Termination Employees get fired involuntarily when forced to quit a company against their choice. When making layoffs, terminating workers, cutting staff, etc., a corporation has the option of involuntary termination. Layoffs and restructuring Reduced employee numbers are referred to as downsizing and layoffs in business. Employees that are downsized are typically fired for no fault of their own. Companies rearrange their workforces and reduce headcount to cut expenses. When a corporation declares

14. Getting Dismissed Employees fired for wrongdoing need not be given a 30-day notice in several nations, including India. Unlawful terminations The employer must provide a reasonable explanation or reasons for letting an employee go . Caste, ethnicity, colour, gender, and other factors are prohibited grounds for firing an employee in many nations. An employee cannot be dismissed for these reasons if they have taken maternity leave, a leave of absence, or reported misbehaviour in the workplace. Termination according to a contract

15. What Are The Constituents Of A Severance Package? The remaining regular pay of the employee An additional payment based on months of service Payment for unused vacation or sick leave A payment in respect of the notice period Medical, life insurance, or dental Some employers offer continuation insurance benefits, not inclusive of payment of bills. Stock options Retirement benefits Unemployment benefits – if they were fired for reasons other than serious misconduct.