Question que-1 : As an HR manager on what basis employees remunerations and incentives be decided, explain wit example.
Que-2. Suppose you are placement coordinator of leading b-school how will you secure placement and packages for your students in MNCs, prepare full project report on that.
Answer DHRUV,
HERE IS THE ANSWER FOR Q1.
Q2, I HAVE NO INTENSE EXPOSURE.
I CAN ONLY GENERALISE THE ANSWER.
que-1 : As an HR manager on what basis employees remunerations and incentives be decided, explain wit example.
COMPENSATION FACTORS
COMPENSATION management is about a range of interconnected
processes that aim through both financial and non-financial means
to address what employees value in the employment relationship.
It is not just a set of techniques.
Factors affecting Compensation in an organization are
-Corporate business strategy
-Corporate HRM strategy
-Demand and Supply of human talent
-Organization values
-Market Rates
-Industry Trends
-Performance Related
-Flexibility / responding to changes.
-Motivation oriented
-Work related
-Productivity based
-Budget factor
-Competence based
-Contribution factor
-Organization grade structure
-Job evaluation [ relative size of jobs ]
-Non financial benefits
-Employee benefits.
-Internal job value.
-External job value.
-Perceived value of an employee at a given time.
-Affordability.
-Trade Union factor.
etc.
Any combination of factors would be applicable in a given
period of time.
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Compensation Analysis and Benchmarking
Understanding your organization’s competitive pay position relative to the marketplace is
critical to attracting, retaining, and motivating your workforce. However, organizations do
not always have the time or human resources to evaluate their jobs against market data.
With an external agency can provide you with a complete evaluation of your organization’s
compensation and pay practices relative to the marketplace by geographic location, job
function, and industry. With a thorough understanding of your competitive position, you will
be able to better align your organization’s pay practices with business strategy.
Benefits
• Evaluate the effectiveness of your compensation philosophy relative to both the
market and your business strategy
• Understand at a detail level, your organization’s base and total cash compensation
position relative to the marketplace by individual and by job.
• Identify any important issues relative to the design and mix of compensation elements
to ensure the most effective alignment with business strategy
• Obtain objective and unbiased compensation analysis, uncontaminated by internal
political influence
• Develop appropriate salary ranges and salary structures, that enable your organization
to attract, retain, and motivate high performing employees
Methodology
USE a five-step methodology to evaluate your company’s compensation against
the marketplace.
1) Organization and Job Analysis
First, conduct a review to fully understand your strategy, organizational structure and
compensation philosophy in order to put market pricing in an appropriate context. Next,
apply job analysis techniques to understand the roles and work being performed and the
relative ranking of jobs. In the analysis, review existing job documentation as well as
collect data using a proprietary job analysis questionnaire, where needed.
2) Job Matching & Weighting
Job Matching ensures the appropriate alignment of your internal job structures with
marketplace benchmarks. Select and review appropriate
compensation survey sources. As part of the process, import your organization’s
employee data, as well as corresponding survey data, into a
compensation job matching database. Within that database, match your jobs to survey
jobs, based on results of the job analysis and close review of each survey source. Weight
each selected survey job based on its proximity to your company’s job
3) Analysis
Using compensation database system, calculate a market consensus for each of your
jobs, using any weighting applied to each survey match. then calculate your competitive
position relative to the market pay position in terms of percent above or below the market.
This analysis can be calculated several ways including by: individual, job, grade, and
functional area.
4) Reporting
generate reports . Some of our reports include:
• Individual employee’s pay versus the market consensus
• Compensation by job versus market consensus
• Compensation by grade versus market consensus
• Functional analysis of compensation
5) Recommendations
Based on your organization’s current market position, develop recommendations to help
you better align pay practice with your compensation philosophy and business objectives.
=====================================================================
Why Analyze Compensation Data?
*Awareness, to identify the elements that actually influence salary, wages and other types of compensation
Fairness, to determine if the elements are uniformly applied; and, if so what the impact is on minorities and women
"An ounce of prevention is worth a pound of cure"
BASIC DATA REQUIREMENTS
Data elements that are identified as affecting compensation
Current data for each of the identified elements
The first step in conducting a compensation self-assessment is to determine what factors are used to establish compensation levels for each job within the company. These factors vary from company to company and from industry to industry. Typically. many companies include such factors as
length of time at the company or in the position or both
grade or pay level
research on the market value of the position
performance evaluation ratings
educational degrees or certifications required
related experience in previous employment
Many times factors to be identified at this step of the process are included in various procedural manuals that also include criteria for entry in various levels, definitions of terms used, and ranges for bonus payments or salary increases at given grade levels.
THREE TOOLS FOR COMPENSATION ANALYSIS
MEDIAN APPROACH
AVERAGE APPROACH
TABLE AND SORT FEATURES
The three approaches that are described are ones that are currently used .
The median approach is one that is easy to use and provides much useful information; however, more sophisticated statistical tests do not usually use the median for comparisons.
The average approach permits the comparison of averages and also extension to statistical tests.
The discussion of tables and sorts using a personal computer describes the easiest and simplest set of analyses.
The examples that follow all concentrate on salary analysis. A person's salary may represent only one part of his or her total compensation and it may be necessary to analyze other elements such as commissions or bonuses. In addition to analyzing salary, it may be necessary to analyze other factors, such as experience or time on the job, in order to explain differences in the salary between groups of similarly situated employees.
MEDIAN COMPENSATION ANALYSIS
The median is one way to describe the mid point of the group of salaries being analyzed. It is the salary figure that is larger than or equal to half of the other salaries and equal to or smaller than half of the other salaries. In identifying the median, it is easiest if the items are arranged in ascending or descending order. For example, in the following group of salaries
$32,988
$19,552
$19,344
$18,304
$18,264
the median is $19,334, since $19,334 is the number at the middle of the distribution. If there were an even number of salaries in the distribution, the median is computed by computing the average of the middle two salaries. For example, if the group of salaries was
$35,704
$33,255
$33,022
$31,900
$29,786
$28,659
the median would be $32,465, which is the average of $33,022 and $31,900, which are the middle two salaries./P>
The median is useful for analysis because it is not affected by very high or very low salaries in the distribution. In many cases, it is a more revealing measure than the average, which is described next. It is usually more revealing when the data being analyzed contains a relatively small number of salaries with values at one extreme, either very high or very low.
In conducting a compensation analysis, the median value for example, for men and for women is calculated and compared for each element affecting compensation. The medians are then compared, both individually by element and for combinations of elements, such as length of service and pay, or performance ratings and pay. In making these comparisons between elements, one might ask:
Does the group with higher median pay also have longer median periods of service?
Does the group with higher median pay also have higher median performance evaluation ratings?
Are there other business factors that explain the higher median pay of a group?
The size of the difference should also be taken into consideration. For example, does only a few months difference in seniority warrant several thousand dollars difference in compensation? Or, are the differences in compensation slight, less than $100 a year so that they might easily be explained by other factors not included in the analysis.
It is assumed that time-in-grade is more significant than company seniority in determining current salary.
In grade 14, further investigation seems indicated since the median annual salary for females is several thousand dollars less than the median annual salary of males and females have less than a one year difference in median time-in grade.
In grade 10, further investigation does not seem indicated since there is only a small difference in the median annual salary of females compared to that of males and the median years in grade for females is less than the median years in grade for males.
In grade 6, further investigation seems indicated since the median annual salary of males is less than the median annual salary of females, but there is less than one year difference in median time in grade between the two groups.
AVERAGE COMPENSATION ANALYSIS
The average or arithmetic mean is another way of describing the mid point of a group of salaries being analyzed. The average is computed by adding the salaries in a distribution of salaries being analyzed, and then dividing their sum by the number of salaries. The average is useful for comparing the sizes of the terms in two groups, for example comparing the average salary of men to the average salary of women. One can then ask questions such as the ones suggested below:
Is the average salary roughly the same for each group or is one much larger than the other?
Does the group with the higher average salary also have longer average periods of service?
Does the group with the higher average salary also have higher average performance ratings?
Are there other business factors that explain the higher average pay of the group?
For each element affecting compensation, the average for men and for women is calculated and compared. These should be done for each salary level, grade level, time in position, etc. For example, in the table below, the male average salary is shown in the second column, the third column shows the difference between the male average salarv for each grade level and the female average salary. The fourth column shows the difference in the average seniority of females compared to malcs and the fifth column shows the average difference in performance evaluation scores.
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TO DEVELOPMENT A COMPENSATION STRATEGY FOR THIS
ORGANIZATION, WE
-review the company vision goal.
-review the company mission statement.
-review the corporate objectives
-review the corporate strategies
-review the organization structure
-review the management process
-review the HR OBJECTIVES
-review the HR STRATEGIES
-review the current market rates for similar business.
-Demand and Supply of human talent
-Organization values
-Market Rates
-Industry Trends
-Performance Related
-Flexibility / responding to changes.
-Motivation oriented
-Work related
-Productivity based
-Budget factor
-Competence based
-Contribution factor
-Organization grade structure
-Job evaluation [ relative size of jobs ]
-Non financial benefits
-Employee benefits.
-Internal job value.
-External job value.
-Perceived value of an employee at a given time.
-Affordability.
-Trade Union factor.
etc.
Any combination of factors would be applicable in a given
12 MONTHS
PLUS
THE JOB DESCRIPTIONS OF EACH LEVELS
establishes measures to rank Know-how, Problem Solving, Accountability, and Working Conditions:
Know-how includes sub categories to evaluate technical know-how, managerial know-how, and human resources know-how.
Problem Solving Includes sub-categories dealing with the thinking environment and the thinking challenge required of a job.
Accountability Measures three factors – freedom to act, magnitude of the decision-making, and impact of the decision-making.
Working Conditions Measures four elements – the physical environment, physical effort, sensory attention, and mental stress.
==========================================
THE ORGANIZATION STRUCTURE COULD BE
1.CEO
2.GENERAL MANAGER [ OPERATION]
3.SENIOR MANAGER[ LEVEL 5 ----400 ]
4. MIDDLE MANAGERS [LEVEL 4----250 ]
5.FIRST LINE[LEVEL 3----180 ]
6.SENIOR STAFF [ LEVEL 2----135 ]
7.JUNIOR STAFF.[LEVEL 1----100 ]
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THIS IS JUST A BASE EXAMPLE OF BASE SALARY
IF THE JUNIOR STARTS AT 100 -----30,000 ANNUAL.
THEN THE SENIOR MANAGER AT 400 ------120,000 ANNUAL
==================================
NOW, CONSIDER THE FOLLOWING BEFORE DEVELOPING
COMPENSATION STRATEGY
Employee Inputs and Preferences
• Perceptions of external pay equity
• Perceptions of internal pay equity
• Pay delivery beliefs
— Form (cash, gainsharing, benefits)
— Method (individual, small group, large group)
• Risk tolerance
• Trust in management
-----------------------------------------------
o Business and Operating Inputs
• Operations and Manufacturing strategy
• Sales development strategy
• Percentage of compensation costs to total product/
service costs
• Percentage of compensation costs to controllable
product/service cost
• Existing markets/products
• Potential markets/products
• Anticipated volume
• Reinforce/enhance work design
• Maintain cultural change processes
• Other operating issues
----------------------------------------------------
o Industry and Labor Market Practices
and Trends
• Availability and quality of work force
• Industry practices
• Retention of work force
• Retention of key contributors
• Wage/salary levels and movement
• Wage/salary delivery charges
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o Compensation Philosophy and Objectives
• How much emphasis should be placed on rewards to
drive organization
• What issues are to be driven by compensation as
opposed to management practices
• Market definition (exempt and non-exempt)
• Method of delivery
• Targeted position in labor market
• Targeted position in product market
• Relationship within total company
• Relationship to selection and retention
• Portion of pay guaranteed and at risk
• Percentage of workforce bonus eligible
--------------------------------------------------------------------
Base Pay Delivery
• Method of delivery — Job-based vs. individual-based
• Number of levels
• Structure of levels
• Pricing strategies
• Adjustment method
• Weighting of individual performance
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o Organization Performance or Variable Pay
• Role in total compensation strategy
• Structure
• Measures
• Targets
• Tolerance for pay at risk
• Risk - reward ratios
• Use of other monetary rewards
• Use of non-monetary rewards
• Individual performance recognition
-------------------------------------------------------------
o Fringe Benefits
• Usually determined at corporate level; limited scope at
other levels
• Tie to business and human resource objectives
• Coverage
• Cost
• Communications (Purpose - Coverage - Value)
--------------------------------------------------------------
o Compensation Administration
• Stakeholder role in compensation administration
• Performance management & evaluation
• Overtime policy (exempt & non-exempt)
• Shift differentials
• Attendance policynce
• Role of seniority
=====================
Compensation
Compensation is not the cut-and-dry subject it used to be. Once you had to worry only about an employee's base salary or, at most, a base salary and commission. Today, you need to think in terms of compensation packages - including salaries, stock options, employee stock ownership plans, pay-for-performance plans, bonuses, profit sharing, commissions, noncash rewards, variable pay, and much more.
Attribute it to what you will - the Silicon Valley effect, a boom economy, unparalleled competition for skilled workers, the increasing value of IPOs and stock options - but there's no question that compensation has become a more complicated and strategic issue for employers. To recruit, retain, and motivate the best employees, you need to understand compensation and reward plans and how they relate to your company's growth.
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CONSIDER THE FOLLOWING
Compensation as Motivation
Paying for Performance
Bonuses are back. Be sure to get the most for your money.
The Power of Base Pay
A compensation expert explains how to improve your compensation strategy by developing an effective, market-driven base pay system.
Pay for Performance -- and Nothing Else
Employment relationships are transactional by nature. Today's transactions are fast moving, short-term and fully exposed, as free agents negotiate with managers for project and contract work.
===============================================================
Compensation: Development of Salary Administration Plan
Develop a program outline.
Set an objective for the program.
Establish target dates for implementation and completion.
Determine a budget.
Designate an individual to oversee designing the compensation program.
Determine whether this position will be permanent or temporary.
Determine who will oversee the program once it is established.
Determine the cost of going outside versus looking inside.
Determine the cost of a consultant's review.
Develop a compensation philosophy.
Form a compensation committee (presumably consisting of officers or at least including one officer of the company).
Decide what, if any, differences should exist in pay structures for executives, professional employees, sales employees, and so on (e.g., hourly versus salaried rates, incentive-based versus noncontingent pay).
Determine whether the company should set salaries at, above, or below market.
Decide the extent to which employee benefits should replace or supplement cash compensation.
Conduct a job analysis of all positions.
Conduct a general task analysis by major departments. What tasks must be accomplished by whom?
Get input from senior vice presidents of marketing, finance, sales, administration, production, and other appropriate departments to determine the organizational structure and primary functions of each.
Interview department managers and key employees, as necessary, to determine their specific job functions.
Decide which job classifications should be exempt and which should be nonexempt.
Develop model job descriptions for exempt and nonexempt positions and distribute the models to incumbents for review and comment; adjust job descriptions if necessary.
Develop a final draft of job descriptions.
Meet with department managers, as necessary, to review job descriptions.
Finalize and document all job descriptions.
Evaluate jobs.
Rank the jobs within each senior vice president's and manager's department, and then rank jobs between and among departments.
Verify ranking by comparing it to industry market data concerning the ranking, and adjust if necessary.
Prepare a matrix organizational review.
On the basis of required tasks and forecasted business plans, develop a matrix of jobs crossing lines and departments.
Compare the matrix with data from both the company structure and the industrywide market.
Prepare flow charts of all ranks for each department for ease of interpretation and assessment.
Present data and charts to the compensation committee for review and adjustment.
Determine grades.
Establish the number of levels - senior, junior, intermediate, and beginner - for each job family and assign a grade to each level.
Determine the number of pay grades, or monetary range of a position at a particular level, within each department.
Establish grade pricing and salary range.
Establish benchmark (key) jobs.
Review the market price of benchmark jobs within the industry.
Establish a trend line in accordance with company philosophy (i.e., where the company wants to be in relation to salary ranges in the industry).
Determine an appropriate salary structure.
Determine the difference between each salary step.
Determine a minimum and a maximum percent spread.
Slot the remaining jobs.
Review job descriptions.
Verify the purpose, necessity, or other reasons for maintaining a position.
Meet with the compensation committee for review, adjustments, and approval.
Develop a salary administration policy.
Develop and document the general company policy.
Develop and document specific policies for selected groups.
Develop and document a strategy for merit raises and other pay increases, such as cost-of-living adjustments, bonuses, annual reviews, and promotions.
Develop and document procedures to justify the policy (e.g., performance appraisal forms, a merit raise schedule).
Meet with the compensation committee for review, adjustments, and approval.
Obtain top executives' approval of the basic salary program.
Develop and present cost impact studies that project the expense of bringing the present staff up to the proposed levels.
Present data to the compensation committee for review, adjustment, and approval.
Present data to the executive operating committee (senior managers and officers) for review and approval.
Communicate the final program to employees and managers.
Present the plan to the compensation committee for feedback, adjustments, review, and approval.
Make a presentation to executive staff managers for approval or change, and incorporate necessary changes.
Develop a plan for communicating the new program to employees, using slide shows or movies, literature, handouts, etc.
Make presentations to managers and employees. Implement the program.
Design and develop detailed systems, procedures, and forms.
Work with HR information systems staff to establish effective implementation procedures, to develop appropriate data input forms, and to create effective monitoring reports for senior managers.
Have the necessary forms printed.
Develop and determine format specifications for all reports.
Execute test runs on the human resources information system.
Execute the program.
Monitor the program.
Monitor feedback from managers.
Make changes where necessary.
Find flaws or problems in the program and adjust or modify where necessary.
Compensation Strategy
Toward Achievement of Organizational Goals
WE continually improve employee productivity and performance, consistent with budgetary parameters.
Having an effective compensation strategy enables you to:
• Attract & keep valuable employees
• Assure fair & internally equitable pay levels.
• Utilize financial incentives to motivate performance improvement
• Optimally manage compensation costs
• Comply with applicable statutory requirements
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