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Total Compensation System (THE OBJECTIVES OF TOTAL COMPENSATION SYSTEM?…
Total Compensation System
WHAT IS COMPENSATION
Compensation is a systematic approach in providing monetary value to employees in exchange for work performed.
Compensation can be achieved in several purposes such as assisting in recruitment, job performance, and job satisfaction.
WHAT IS TOTAL COMPENSATION SYSTEM?
Total compensation system is the total of all rewards regardless of financial and non-financial aspects offered by the company to employees in return for their services. It is adjusted according the the business needs, goals and available resources.
PURPOSE OF COMPENSATION
recruit and retain qualified employees.
increase or maintain morale/satisfaction.
reward and encourage peak performance.
achieve internal and external equity.
reduce turnover and encourage company loyalty.
modify (through negotiations) practices of unions.
HOW IS COMPENSATION GIVEN?
Employee Performance
Seniority
Set of rules and procedures
THE OBJECTIVES OF TOTAL COMPENSATION SYSTEM?
It should be in the form of package.
It should be paid to each employee on the basis of their abilities and training.
It should motivate the employees towards increasing productivity.
It should be capable of taking care of employees for safety and security needs.
It should be flexible and clear.
It should not be excessive.
It should be decided by the management as per the norms fixed by the legislations in consultation with the union.
It should attract the best for the company.
It should have a pay systems where higher the compensation the more productive and competitive employee are.
It should have benefit systems where company can match a benefit system that matches employees strategies and objectives.
WHO CONDUCTS TOTAL COMPENSATION SYSTEM?
HR manager
WHAT ARE THE ELEMENT INVOLVED IN DESIGNING OF A COMPENSATION SYSTEM?
Job Descriptions
Job Evaluation
Job Analysis
Salary and Benefits Surveys
Pricing Jobs
WHAT ARE THE TYPES OF COMPENSATION?
Financial Compensation
Direct Financial
Bonus
Incentives
Commission
Wages & Salaries
Indirect Financial
Benefit refer to a broad range of practices including health insurance, vacation, leave policies, and retirement and savings plans.
Non-Financial compensation
refers to satisfaction a person receives from the job itself or from the psychological/physical environment in which the employee works.
WHAT ARE THE FACTOR THAT INFLUENCES DIRECT FINANCIAL COMPENSATION?
Labor Market
Labor Unions
Economy
Interindustry Wage Differentials
Legislation
WHAT IS TRADITION WAGE SYSTEM?
Tradition wage system sets pay levels in a narrow band with regular annual increases. This can be up to 3 to 4 percent pay increase annually.
WHAT ARE THE ADVANTAGE AND DISADVANTAGE OF TRADITION WAGE SYSTEM?
Advantage:
Guaranteed Promotions and Benefits
Job Security
Facilitate the administration of the wage program
Eliminate favoritism
Disadvantge:
Decrease the motivation
Dissatisfaction from hardworking/young employee
Slow career growth
Company is not competitive enough hence causing employee to leave the company
WHAT IS TRADITION WAGE SYSTEM BASED ON?
Cost-of-Living Adjustments (COLAs)
Evenly distributed between employees
Seniority Pay/ Long term Incentive Compensation
Base wage
Performance-Based Pay
WHAT IS FLEXIBLE WAGE SYSTEM?
A flexible wage system would enable companies to reward employee with bigger bonuses in good times and adjust and better manage its wage costs in bad times.
HOW IS FLEXIBLE WAGE SYSTEM USEFUL?
adjust and better manage its wage costs in bad times.
reward employee with bigger bonuses in good times
WHAT IS THE AIM OF FLEXIBLE WAGE SYSTEM?
To remain cost-competitive by being flexible enough to meet and adjust to changes in business conditions.
To become cost-effective by linking financial rewards to the profitability of the company.
To improve staff motivation by linking financial rewards to the performance of individual employees.
WHAT ARE THE PRINCIPLES OF FLEXIBLE WAGE SYSTEM?
Wages should reflect the value of the job
Wage increase should lag behind productivity growth
Wage increase should take into account company’s profitability and individual performance
Wage increase should not always be given on a permanent basis
There should be a measure of stability in the worker’s income
WHAT ARE THE FEATURES OF FLEXIBLE WAGE SYSTEM?
Variable wage component
Annual wage supplement (AWS)
Small service increment
Base Wage
Salary range
Annual Variable Component
Monthly Variable Component
WHAT ARE SOME OF THE CONSTRAINTS FOR COMPENSATION?
Common overtime issues
Training time
Travel time
Incentives for employees
Compensatory time off
Exempt and Non-exempt Status