Every industry or corporations develop their compensation models based on three components .The basic components of pay model are:-
1. Compensation objectives
2. The strategic policies that form the foundation of compensation system
3. The techniques of compensation.
COMPENSATION OBJECTIVES
Compensation systems are designed and managed to attain certain objectives in any company. The basic objectives include:-
• Efficiency
• Equity
• Compliance with laws and regulations
The efficiency objectives are:-
1. Improved performance, Increasing quality, Delighting customers
2. Controlling labor costs.
The equity objectives are:-
1. designing pay systems that recognize employee’s contribution.
2. designing pay systems that recognize employee’s need.
Equity is the fundamental to compensation system. The equity signifies that offering fair treatment to all the employees and offering a fair day pay for a fair’s day work. Thus equity attempts to ensure fair treatment for all the participants.
The Compliance with rules and regulations:-
The compliance objectives are:
Conforming to the various central and state wage legislations and regulations.
But regarding these objectives the laws and regulations tend to be changing so the compensation system is adjusted according to it.
Fundamental objective of pay systems is defining what is fair is often difficult but we believe it is helpful to routinely question relative fairness of alternatives which does not mean that all employees will be treated equally but instead treated fairly or with justice in a given situation.
The strategic policies that form the foundation of compensation system:-
Every employer must address the policy decision shown on the left side of the pay:
1. Internal consistency,
2. External competitiveness,
3. Employee contribution
4. Administration of the pay system.
These strategic policies form the buildings blocks with regard to which the pay system is founded.
Internal consistency:-
It refers to comparison amongst jobs or skill levels inside a single organization. Jobs and skills are compared in terms of their relative contributions to the organizations objectives. Internal consistency becomes a factor in determining the pay rates both for employees doing equal work and for those doing dissimilar work.
Internal consistency policies affect all the three compensation objectives. Pay relationship within the organization effect employee decisions to stay with the organization, to become more flexible by investing in additional training. By motivating them for increased training pay relationship indirectly affect the efficiency of the workforce and hence, the effectiveness of the total organization.
External competitiveness:-
It refers to how an employer positions its pay to what competitors are paying. The policy regarding external competiveness has a twofold effect on objectives:
To ensure that the pay is sufficient to attract and retain employees
To control labour costs so that the organization prices of products or services can remain competitive.
We can say that external competitiveness directly affects both efficiency and equity.
Employee’s contribution:-
It refers to relative emphasis placed on performance. This emphasis is important as it directly affects employees attitudes and work behaviours. Employers with strong pay performance policies are more likely to place greater emphasis on incentives and merit schemes as part of their pay system.
Administration of pay system:-
The policy regarding administration of the pay system is the last building block in the compensation model. It is possible to design a system which has all the above objectives but these objectives can’t be achieved unless it is managed properly. The managers must plan the elements of pay which is included in the system, communication with the employees and judge whether the system is achieving its objectives.such information is needed to tuine or redesign the system, to adjust to changes and to highlight potential areas for further investigation.
PAY TECHNIQUES
Pay Techniques make up the pay system in the organization. Technique ties the four basic policies to pay objectives. Internal alignment is typically established though a sequence of techniques that starts with analysis of the work done and the people needed to do it. Information about the person and the job is collected, organized and evaluated. Based on these evaluations, a structure of the work is designed.
Significance of the pay model in the global scenario:-
With the growing complexities in organization regarding pay structures, all the companies prefer to follow the pay model suggested by Milkovich. The main reasons for the following up this particular model are:
1. The pay structure depicts relationships among jobs and skills or competencies inside an organization.
2. It is based on the relative importance of the work in achieving the organization’s objectives.
3. The fairness objective in the pay model affects employee attitudes and behaviors as well as the organization’s regulatory compliance.
4. The pay techniques in the pay model helps to define the relevant labor markets in which the employer competes, conduct surveys of other employers’ pay , and use that information in conjunction with the organization’s policy decisions to generate a pay structure.
5. Another significance of the pay structure is that it influences how efficiently the organization is able to attract and retain a competent workforce and control its labor costs.
6. External competitiveness helps in setting up the organization pay level, see what the competitors are paying to its employees for the same job. It verifies the forms of pay and emphasize is given on employee contributions through seniority pay increase, stock options, performance based approaches, retention moves, attract new people and motivate the existing ones.
From India, Gurgaon
221. Compensation objectives
2. The strategic policies that form the foundation of compensation system
3. The techniques of compensation.
COMPENSATION OBJECTIVES
Compensation systems are designed and managed to attain certain objectives in any company. The basic objectives include:-
• Efficiency
• Equity
• Compliance with laws and regulations
The efficiency objectives are:-
1. Improved performance, Increasing quality, Delighting customers
2. Controlling labor costs.
The equity objectives are:-
1. designing pay systems that recognize employee’s contribution.
2. designing pay systems that recognize employee’s need.
Equity is the fundamental to compensation system. The equity signifies that offering fair treatment to all the employees and offering a fair day pay for a fair’s day work. Thus equity attempts to ensure fair treatment for all the participants.
The Compliance with rules and regulations:-
The compliance objectives are:
Conforming to the various central and state wage legislations and regulations.
But regarding these objectives the laws and regulations tend to be changing so the compensation system is adjusted according to it.
Fundamental objective of pay systems is defining what is fair is often difficult but we believe it is helpful to routinely question relative fairness of alternatives which does not mean that all employees will be treated equally but instead treated fairly or with justice in a given situation.
The strategic policies that form the foundation of compensation system:-
Every employer must address the policy decision shown on the left side of the pay:
1. Internal consistency,
2. External competitiveness,
3. Employee contribution
4. Administration of the pay system.
These strategic policies form the buildings blocks with regard to which the pay system is founded.
Internal consistency:-
It refers to comparison amongst jobs or skill levels inside a single organization. Jobs and skills are compared in terms of their relative contributions to the organizations objectives. Internal consistency becomes a factor in determining the pay rates both for employees doing equal work and for those doing dissimilar work.
Internal consistency policies affect all the three compensation objectives. Pay relationship within the organization effect employee decisions to stay with the organization, to become more flexible by investing in additional training. By motivating them for increased training pay relationship indirectly affect the efficiency of the workforce and hence, the effectiveness of the total organization.
External competitiveness:-
It refers to how an employer positions its pay to what competitors are paying. The policy regarding external competiveness has a twofold effect on objectives:
To ensure that the pay is sufficient to attract and retain employees
To control labour costs so that the organization prices of products or services can remain competitive.
We can say that external competitiveness directly affects both efficiency and equity.
Employee’s contribution:-
It refers to relative emphasis placed on performance. This emphasis is important as it directly affects employees attitudes and work behaviours. Employers with strong pay performance policies are more likely to place greater emphasis on incentives and merit schemes as part of their pay system.
Administration of pay system:-
The policy regarding administration of the pay system is the last building block in the compensation model. It is possible to design a system which has all the above objectives but these objectives can’t be achieved unless it is managed properly. The managers must plan the elements of pay which is included in the system, communication with the employees and judge whether the system is achieving its objectives.such information is needed to tuine or redesign the system, to adjust to changes and to highlight potential areas for further investigation.
PAY TECHNIQUES
Pay Techniques make up the pay system in the organization. Technique ties the four basic policies to pay objectives. Internal alignment is typically established though a sequence of techniques that starts with analysis of the work done and the people needed to do it. Information about the person and the job is collected, organized and evaluated. Based on these evaluations, a structure of the work is designed.
Significance of the pay model in the global scenario:-
With the growing complexities in organization regarding pay structures, all the companies prefer to follow the pay model suggested by Milkovich. The main reasons for the following up this particular model are:
1. The pay structure depicts relationships among jobs and skills or competencies inside an organization.
2. It is based on the relative importance of the work in achieving the organization’s objectives.
3. The fairness objective in the pay model affects employee attitudes and behaviors as well as the organization’s regulatory compliance.
4. The pay techniques in the pay model helps to define the relevant labor markets in which the employer competes, conduct surveys of other employers’ pay , and use that information in conjunction with the organization’s policy decisions to generate a pay structure.
5. Another significance of the pay structure is that it influences how efficiently the organization is able to attract and retain a competent workforce and control its labor costs.
6. External competitiveness helps in setting up the organization pay level, see what the competitors are paying to its employees for the same job. It verifies the forms of pay and emphasize is given on employee contributions through seniority pay increase, stock options, performance based approaches, retention moves, attract new people and motivate the existing ones.
From India, Gurgaon
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