Understanding Payroll, Salary, and Compensation: How Do They Impact Employee Motivation and Retention?

Hello,

I am sharing Complete Details on Payroll, Salary & Compensation that I have collected through various sources

This result is efforts of many people who have used their expertise, time & hard work to explain the concept of compensation as simple as possible

Thank You

Octavious

For various links to my posts, kindly visit the links provide herein below



https://www.citehr.com/99968-major-hr-links.html






Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. The lucrative compensation will also serve the need for attracting and retaining the best employees.

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. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.




Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows:





Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity.


Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. The monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.

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Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. They include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes.

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• A good compensation package is important to motivate the employees to increase the organizational productivity.
  
• Unless compensation is provided no one will come and work for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals.
  
• Salary is just a part of the compensation system, the employees have other psychological and self-actualization needs to fulfill. Thus, compensation serves the purpose.
  
• The most competitive compensation will help the organization to attract and sustain the best talent. The compensation package should be as per industry standards.
  

Strategic compensation is determining and providing the compensation packages to the employees that are aligned with the business goals and objectives. In today's competitive scenario organizations have to take special measures regarding compensation of the employees so that the organizations retain the valuable employees. The compensation systems have changed from traditional ones to strategic compensation systems.


Today's compensation systems have come from a long way. With the changing organizational structures workers' need and compensation systems have also been changing. From the bureaucratic organizations to the participative organizations, employees have started asking for their rights and appropriate compensations. The higher education standards and higher skills required for the jobs have made the organizations provide competitive compensations to their employees.

Compensation strategy is derived from the business strategy. The business goals and objectives are aligned with the HR strategies. Then the compensation committee or the concerned authority formulates the compensation strategy. It depends on both internal and external factors as well as the life cycle of an organization.

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Evolution of Strategic Compensation




In the traditional organizational structures, employees were expected to work hard and obey the bosses' orders. In return they were provided with job security, salary increments and promotions annually. The salary was determined on the basis of the job work and the years of experience the employee is holding. Some of the organizations provided for retirement benefits such as, pension plans, for the employees. It was assumed that humans work for money, there was no space for other psychological and social needs of workers.




With the behavioral science theories and evolution of labour and trade unions, employees started asking for their rights. Maslow brought in the need hierarchy for the rights of the employees. He stated that employees do not work only for money but there are other needs too which they want to satisfy from there job, i.e. social needs, psychological needs, safety needs, self-actualization, etc. Now the employees were being treated as human resource.

Their performance was being measured and appraised based on the organizational and individual performance. Competition among employees existed. Employees were expected to work hard to have the job security. The compensation system was designed on the basis of job work and related proficiency of the employee.




Today the compensation systems are designed aligned to the business goals and strategies. The employees are expected to work and take their own decisions. Authority is being delegated. Employees feel secured and valued in the organization. Organizations offer monetary and non-monetary benefits to attract and retain the best talents in the competitive environment. Some of the benefits are special allowances like mobile, company's vehicle; House rent allowances; statutory leaves, etc.


Calculation of gross salaries and deductible amounts is a tedious task which involves risk. Some of the organizations use the traditional manual method of payroll processing and some go for the advanced payroll processing software. An organization opts for any of the following payroll processing methods available


Manual payroll system is the traditional payroll system which involves pen and ink, adding machine, spreadsheet, etc instead of computers, software and other computerized aids. The process was very popular when there were no computerized means for payroll processing.

Now-a-days it is only few small scale organizations in the remote areas that use the manual payroll. Sometimes the construction industry and manufacturing industry also use the manual payroll systems for the contractual labour, as theses contracts are on daily/weekly basis.

There is full control in the hands of owner. But the process is tedious, time consuming and risky as it is more prone to errors.

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Accountant is a professional having a degree/diploma course in finance/accountancy. He/she is responsible for all the activities related to payroll accounting. He/she has the sound knowledge of accounting principles and globally accepted standards.

The process adds costs to the organization. It involves paying someone who is responsible for calculating the salaries of others. The financial control regarding salary goes in the hand of accountant.


In today's computerized environment, payroll system has also developed itself into automated software that performs every action needed by the payroll process. It helps in calculating the payable amounts and deductions very easily. It also helps in generating the pay slips in lesser time. Automated calculations result in no errors. Data is validated automatically by the software.

It needs professionals to make use of the software for its efficient working.


Payroll outsourcing involves a third party (an outsourcing company) in the calculations of salaries and deductions. The outsourcing organization is responsible for all the activities of the payroll accounting. It saves time and cost for the organization. If there is more number of employees (say more than 900-1000) in the organization, payroll outsourcing would be very much beneficial.

The data is provided to the consultants/outsourcing firms. The various payroll functions undertaken by the outsourcing organizations are as follows:

<ul>Analysis of Payroll records, payroll taxes

Medical claim processing

Employee Insurance & Provident fund processing

Thank you, Dear,

This information is very helpful. But can you also tell me about the cost of living analysis in Delhi as we want to start the City Compensatory Allowance in our company.

Regards,
Ruchika

Hi Octavious,

This is something fabulous - the value of this work is known in depth to a person working in Payroll. Thank you very much for the detailed concept of Compensation.

Thanks and Best Wishes,
Navroz Panjwani

Dear Octavious,

Thank you for posting such a nice and elaborate information on payroll and salary. Where do you work? Let's know more about you as we all need such a guide.

Regards,
Manish

Hello Octavious,

I am sharing complete details on payroll, salary, and compensation that I have collected through various sources. This result is the efforts of many people who have used their expertise, time, and hard work to explain the concept of compensation as simply as possible. Thank you, Octavious.

Hi Dinesh,

My name is Dinesh Yadav. I am working in administration as an administrative officer, and I am very keen to transition into HR as it is my field of interest to learn the techniques and legalities involved. Currently, I am planning to pursue my BA in HR, but I was unable to secure admission this time in several colleges like MET and Welings due to a low score. Therefore, I am considering doing it through ICFAI. Can you please guide me on what exactly I should do to begin now and explore any other possibilities for achieving this goal?

Regards,
Dinesh 😉

Hello Octavious,

I am trying to download the "compensation" files, but when I open them, I get an error. Could you mail me these files (without zipping them) directly to my email ID: sambodhkaul@hotmail.com? Sorry for the trouble, but I am having difficulty opening zipped files on my PC. Please mail me these files; I really need them. Thanks for your help and sorry for bothering you so much.

Have A Nice Day!!!!

Sambodh

Dear Octavious,

I seem to be the only person who cannot thank you since I cannot open any of the above documents. Would it be possible to email me the same at ishikapoor@gmail.com or send me the password for the documents as some are asking for it?

Regards

I am pursuing my MBA-HR. My project is on compensation and benefits survey in general insurance industries. I need some questionnaires to conduct this survey, so please help me.

Hi all,

I require a small clarification: what should be the salary structure for a take-home salary of 7500/- Rs? Please help me out in this matter. How should I consider the ESI (1.75%) in my components?

My components:
Basic 3000 HRA 1800 Conveyance 1500 Others 1200
--_________
Net Home 7500
PT 80 PF ESI

What should be the ESI and PF calculation for the above package? Please help me out in this regard. Waiting for a reply.

Hello Everybody,

Can anyone please email me the 3 files (unzipped) directly at my email ID: sambodhkaul@hotmail.com

The names of the files are:

1. SALARY EXCEL
2. SALARY PDF-PPT
3. SALARY WORD

Please, please email me the unzipped forms of these files because my PC is not allowing me to access zipped files. Thanks in advance.

Regards,
Sambodh

Dear Sir,

I have a query. I have seen the LTA rules in your file. Are these rules applicable to private organizations? Or are these only for government employees? Kindly reply.

Regards,
Deepa

Hi,

I am a management trainee (HR) in a pharmaceutical company. They have asked me to prepare a project on the compensation package, i.e., explaining each component of the compensation package. Could anyone please help me?

Awaiting feedback.

Thanks

Many thanks for the useful information with details. In some companies, the CTC is calculated as per EPF, ESI, and BONUS, where the Employer's contribution is included in the CTC PACKAGE. Kindly provide a calculation sheet with the above option. This will be helpful for all companies based on their preferences.

Basudeva Choudhury, Delhi

Mobile No. 9718390567

Hi, I have not been able to view the attachments. If possible, could you please forward them to my email id [Login to view].

Also, I wanted to know what the criteria are for a firm to apply for a PF account. Is there any specified number of employees required?

Dear Octavious

Thanks for such a useful and informative material bt apart from this i would like to know that wht is difference between payroll and compensation.

Regards
Reshma

Dear Sir,

Thank you a zillion for this valuable post. Next, I would like to get some suggestions from your good self as to what particular area I can focus on for my summer training project.

I have just started my summer internship in a scheduled bank and would like to work on compensation management. I want to bring something substantial to the table at the end of my project.

I am sincerely waiting for your reply.

Regards,

Syed Amir
syedamir29@gmail.com

Dear Octavious,

This and various other posts of yours have benefited all of us CiteHR users. Kindly share some information about yourself with us, such as who you are and what you do. How did you acquire such a vast knowledge base of HR? It is amazing. I have greatly benefited from your contributions.

Thank you.

Dear Syed,

You have already chosen the path that you wish to pursue in your career. I would suggest that if you aim to make a remarkable impact in the field you have chosen, why not consider developing something in line with the 401K plan?

Instead of solely focusing on compensation and benefits, try to look at the bigger picture. I mean, consider incorporating more strategic financial management into compensation and benefits.

Thank you,
Octavious

Dear Sir,

I am pleased to receive a reply from you. Next, could you please explain the topic further and suggest what strategic applications I can implement? Additionally, you mentioned the 401K plan. Could you elaborate on what it entails as I have never come across it before?

Thank you in anticipation.

Regards,
Syed Amir

Hi Octavious,

It is great stuff. I am AJITHAA HASAN, an MBA HR fresher. Thank you for helping me understand what happens in the payroll department. I have a few queries: How do organizations determine the salary (both monetary and non-monetary benefits) for different levels? How do they segregate HRA, DA, medical claims, and non-monetary benefits? How do the percentages of HRA, DA, etc., vary for each position? Do organizations need to adhere to a standard format? Please clarify my doubts, senior.

Thanks,
AJITHAA HASAN

Hi,
Thanks for the information. I need to know more about compensation. Actually, what factors do we need to consider while drafting CTC? How can we make it more cost-effective and easy to understand?

Dear Sir,

I would like to get to know you better and would prefer to be your student so that I can learn and empower myself with more knowledge. This will enable me to help not only my company but also other HR professionals who may come in the future. My email ID is tinaignu@rediffmail.com.

Thank you.

Hi Octavious,

Thank you so much for the valuable information that you have shared with everyone. However, would you be able to provide me with information on payroll procedures and Excel sheets that have to be prepared by a third party handling payroll for their clients?

Regards,
Vijay

Dear Octavious,

It's great stuff. You have covered everything related to SALARY. Please look into the Tax calculation provided; it seems they are the previous year's tax rates. Please do notice and make changes.

Thanks,
Santhosh

Would somebody be able to provide a salary survey for the IT and non-IT company according to years of experience and designation.

Best Regards,

Manish

Dear Sir,

Is it possible to reduce the salary of an employee due to some reason? Please suggest.

Ashok

Hi Prerna,

I am Prerna and I am a new member. I am a second-year MBA student. I wanted some help to decide on the topics for my dissertation. I would request you to give your suggestions.

Thanks and regards,
Prerna

Hi Anil,

Thank you for your inquiry. I would be happy to assist you with the breakdown of the percentage for Basic, HRA, and special allowance in your salary.

Typically, the percentage allocation for these components varies by company and is subject to the organization's policies. However, a common breakdown could be around 50-60% for Basic, 30-40% for HRA, and 10-20% for special allowance.

If you require further details or have any specific questions, please feel free to ask.

Best regards

It is possible to withdraw the provident fund even if the employer does not verify the withdrawal form.

Regards,
Vikram Rana

Yes, it is possible to withdraw PF if the employer does not verify the form. You can go to the PF authorities and complain there.

No employer can stop your PF.

Thanks

Hi,

I have replied back to your post. Hope you saw it. I wanted your help. My management team has asked me to prepare a policy for the meal card users and then share it with the account people so that it can be entered into Tally. The policy should contain information on meal coupons, specifying the limit for each designation. I was just wondering what the format should be and how I should start. I really need your help; you seem like a senior in this field.

Best Regards,

The information you shared is very useful for the newly joined employees. I have one doubt regarding professional tax. In a year, how many times do we have to file returns to the department and what are the steps we need to follow for that process? Kindly guide me on how to file the return.

Dear Sir,

Thank you very much. I have gained knowledge on the payroll process and now I would like to learn more about HR-related topics. Could you please schedule an appointment with me at your convenience? Below are my contact details:

Name: Jothiprakash.D.R
Email: drjothi.mba@gmail.com

Thank you for your time and consideration.

Best regards,
Jothiprakash

Mind-blowing insight, Octavious, for somebody like me who has not had any exposure to Compensation and Benefits. I am very grateful to you. Thank you very much.

Best Regards,
Bhushan

Hello,

The data is absolutely educative. I am working on my project on compensation, so it has been very valuable for me. Anyway, thank you for providing such productive data and great help for my project.

Do any of you have a questionnaire related to the topic of compensation management? I am preparing my summer training project on the same topic and really need some help.

Hi Friends,

I am currently designing a Long-Term Incentive Plan for my organization. Can someone share a PPT or LTI Plan that you might be aware of?

Thanks.

The information you have posted is really useful.

Hi, this is Vishal Mehta ( A management Student )

Working on a project regarding a Startup Company in Outsourcing Industry (Specifically Payrolling)

Request you to help me with few queries

can be the target segment in the initial phase 1. (target companies in terms of number of employees)

will be the staffing strategy.

will be the average productivity of a payrolling processing staff. How many employees pay roll can be processed by 1 person.
with the use of software.

are the key risk and challenges running in this business?

is the ideal pricing strategy in domestic and international market? (in terms of price per check processed)

kind of margins are their in this business?

can be various sales model that can be used to approach the target segments?

are the upcoming markets to promote this business?

there any major legal complications while dealing foreign clients?

Hope you will assist me gathering this information.

Regards,
Vishal Mehta

Request you to help me with a few queries:

1. What can be the target segment in the initial phase? (target companies in terms of the number of employees)
2. What will be the staffing strategy?
3. What will be the average productivity of a payroll processing staff? How many employees' payroll can be processed by one person with the use of software?
4. What are the key risks and challenges in running this business?
5. What is the ideal pricing strategy in the domestic and international market? (in terms of price per check processed)
6. What kind of margins are there in this business?
7. What can be the various sales models that can be used to approach the target segments?
8. What are the upcoming markets to promote this business?
9. Are there any major legal complications while dealing with foreign clients?

Hope you will assist me in gathering this information.

Regards,
Vishal Mehta

Dear Sir,

Thank you very much! This was incredibly informative. I learned a lot from this and it is a valuable resource for anyone interested in pursuing a career in Generalist HR.

Regards,
Girish

Hi Octavious,

I am doing my distance HR and have limitations to the real-time HR practices. However, I have seen your numerous posts, which have been a great help to me in understanding various HR practices. I am on the verge of finishing my course and am looking for an HR role in my new job. Currently, I am only involved in very meager HR activities in addition to my non-HR based profile. For my company, I created and conducted an Induction program for a team of 50 employees. I am seeking more practical experience in areas such as payrolls, appraisals, and other domains of HR. Unfortunately, there is no scope for this in my current company. Can you or anyone else guide me on how to prepare for an HR role? Perhaps by sharing your real-time experiences to advise on the do's and don'ts.

Thanks.

I am working in an export house where no increment or performance appraisal exists. I need a system through which I can increment staff on a half-yearly or yearly basis. Secondly, I also need a format for a monthly HR report.

Thanks,
Atif

Dear Sir/Madam,

I am working as an HR manager in an export house, and I am in need of a proper monthly or annual increment system as well as a format for the HR monthly report. Your assistance in this matter would be greatly appreciated.

Thank you,
Atif

Dear All,

I'm working as an HR Coordinator in a leading Retail Supermarket in Saudi Arabia, and I was given the task to create our company's compensation manual. I'm quite new to the compensation role. I would like to ask what should be the content of the compensation manual. I would appreciate it if someone could provide/send a sample of it.

MIK

Hi,

Could anyone please send the Staff Performance Evaluation sheet and Production Monitoring formats for the tailoring industry?

Regards,
Suresh Kumar M

This is vital important information.

Sachin

Dear user,

What is dearness allowance and conveyance? How do I calculate them? Please provide me with an answer.

Thank you.

Payroll Software Takes Over All Manual Processes

Get a Better Insight on SaaS-Based Payroll Software

What to Look for in Payroll Software?

There is no wonder that managing attendance, leave, travel expenses, and statutory compliance is a bit confusing and hard to manage with payroll. There is no clear path to where one solution begins and the other ends. Don’t you think that you should have a clear idea of what you need? To run a successful business, managers must ensure that employees are being paid on time. Previously, all calculations were done manually. A lot of people were required to keep files, noting down every single performance fluctuation, leave, deduction, and bonus. This process proved to be quite lengthy and hectic. Good payroll software can save HR, managers, and accountants from complicated and tedious payroll tasks. Instead of spending endless time managing and maintaining the files, payroll software is a solution that can save you from nasty tasks. So, manual vs. SaaS-based Payroll Software really bears no comparison.

What Are the Options Available for Payroll?

Running Payroll Manually

It takes a lot of time and effort to ensure that the payroll process is done successfully. Managing spreadsheets for the payroll process is not only time-consuming but also a very tedious and lengthy process. You have to take responsibility for every employee from hiring to resignation or retirement. You need to collect documents and manage a file for it. You need to calculate the number of hours worked, manage statutory compliances, maintain cheques, etc. In small and developing businesses, the payroll process is still done manually. There may be few employees initially, but still, keeping an eye on the payroll process to get error-free payroll is not an easy job. You also need to fulfill the tax requirements of employees on time. And as the payroll is not integrated with other HR activities, there is a possibility of getting errors and duplication in the payroll process.

On-Premise Payroll Processing

Lots of people are involved, wasting a significant amount of money, time, and resources to complete their payroll process on time. It involves high capital investment. It also requires training for every individual. Deployment speed is very low as it raises a requirement for high-end servers, setting them up on-premise, enabling a platform for the system, and adding a proper support and maintenance structure.

Premise Payroll Processing

Negotiating software and licensing fees and keeping up-to-date the hardware, i.e., servers, etc., physical space, air conditioning, maintenance, and upkeep of the entire on-premise system is very costly. Also, the adoption rate is lower as the high level of customization creates a learning gap that the workforce must fill.

Payroll Consultant

A payroll consultant offers support and advice to the payroll department and beyond, playing an essential part in the running of this key area of the business. A payroll consultant can help you take over your payroll work, maintain your compliance, and help to run everything smoothly. They can help you set up a new payroll system to calculate your payroll. They also prepare necessary payroll reports. Taking care of your statutory compliances is also their duty. They can advise how payroll can run smoothly to make the process more efficient.

Payroll Consultant

But a payroll consultant also involves a downside. Involving a third-party person who is not your employee increases the risk of security in your payroll process. This may reduce the direct control you have in the way your work is done. It also leads to a higher cost. It may not be as high as full-time employees, but still, it is not a cheaper solution.

SaaS-Based Payroll

Software as a service, in short SaaS, is a service provided online or in the cloud. Over the past years, online service has increased in the payroll process.

SaaS-Based Payroll

Start payroll process anytime: It is very easy and almost effortless to run your payroll as it is available 24/7. You just need to provide some details such as your company or employee details and get a secured login. Then you can run your payroll whenever you want.

Stay Compliant: As the system is frequently updated with the latest legislative information, you no longer have to worry about your statutory compliance.

Safe & Secure: Your data is stored in well-protected infrastructure which is frequently maintained and upgraded. You no longer have to worry about server crashes, data loss, security, confidentiality, etc. SaaS is an advanced online application that helps in running the payroll easily and efficiently. Processing payroll now just takes a couple of minutes for every pay period so that you can focus more on your core business. This is a better way to grow your business faster.