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Compensation
Management of Employees
Sharika Gupta
The article focuses onto the factor
considerations that are useful while designing and reviewing the
employee compensation packages. The author has further attempted
to show a positive association between compensation design & a
host of factors.
The
decision of determining a compensation package to suit the
organization is an issue of utmost importance to any enterprise,
since it can prove to be very crucial to attract, retain, and
motivate the employees. It is rightly said that putting a price
tag on a staff job can be a lot harder than pricing your company's
products and services.
THE
TRADITIONAL PAY CHEQUE
Traditional
pay scales in companies reflect job characteristics like
importance of the work, decision/ responsibility level. The salary
has been and will continue to represent the positional level in
the organization. The HR community also spends considerable time
in collecting market and industry data. The market ultimately
decides pay levels, but it also assumes that people occupying
similar positions in organizations, or having similar experience
or skills, must be on the same salary irrespective of
contributions.
The
time is now for organizations to re-engineer their salary system.
The meaning of pay has to change just like the economic and social
orders have undergone a change. The basis to determine pay is
gradually shifting from position to performance, status to
contribution. This will have some revolutionary consequences.
Companies are driven hard to conserve precious human as well as
financial capital. The route therefore is not far away from
performance and pay cheque linkage. The new mantra must be,
"get paid only if there is contribution". That is
remuneration according to the expected level of contribution. The
guaranteed pay syndrome must now end.
Individual
performance as a determinant of pay increase has been identified
as the most important internal equity. Companies must then lean
towards systems wherein the better performers at least will see
the linkage of raises to their contributions. Work cultures are no
more authoritarian and encourage constant innovation, risk taking,
quick problem solving, the status as basis for Ray also must
vanish soon. There is a considerable merit in linking compensation
to corporate and individual performance.
Evidence
shows that there is positive association between organisation
performance and compensation. As the compensation mode moves away
from status or position price to contribution and performance, the
work culture also undergoes change.
HR
practitioners may find following factors useful while designing or
reviewing the employee compensation package:
ECONOMIC
ENVIRONMENTAL FACTORS:
-
Overall
macro-economic environment.
-
Neutralization
of inflation
-
Business
potential and growth of the company.
-
Cost
of living indices.
-
Industry
wage levels.
-
Survey
of, campus placement induction level packages.
-
Legal
and statutory framework relating to compensation.
ORGANIZATIONAL
FACTORS:
-
Capacity
of company to pay.
-
Identification
of key slots.
-
Analysis
of employee turnover or attrition data.
-
Assessment
of employee expectations.
-
Fixed
compensation versus variable compensation.
-
Cost
to company by monetising various benefits and perquisites.
-
Performance
linked compensation.
-
Incentives
and annual increments.
-
Employee
Stock Options
-
Flexibility
to employees for structuring their compensation package within
overall parameters. General-purpose asset backed secured soft
loans and advance by the employer to keep the employee under
debt repayable to the organization.
-
Attractive
handshake package for surplus manpower.
-
Effectiveness
in acquiring, retaining and motivating the appropriate mix of
manpower.
-
Issues
of consistency, continuity and change.
-
Transparency,
equity and fairness.
-
Positioning
of company as model employer.
-
In-house
entrepreneurial and investment avenues.
-
In
house execution versus outsourcing cost comparisons of jobs and projects.
-
Relativities
between induction and top level.
-
Relativities
between generalists and specialists.
FINANCIAL
FACTORS:
-
Flexibility
to regulate the wage cash outflows to match the variations in
company's liquidity position e.g. elements of wage package,
which can be deferred or curtailed during cash crunch
situations.
-
Value
added per employee.
-
Value
added per rupee of personnel payment.
-
Wage
bill to turnover ratio.
-
Net
of tax value of the package in the hands of employee
SECURITY
FACTORS:
Sharika
Gupta,
E-Commerce, MCSE, MBA, Phd (Pursuing),
Rai Business School, Rai University
Phone: 26959000 (Extn: 336)
Personal Ph: 9811093921
Personal e-mail: sharika_gupta@hotmail.com
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