MU0015- COMPENSATION AND BENEFITS
1 Write about “compensation management(CM)”?
(ii) ‘C’ & ‘non-C’ dimensions(D).
Ans:-a)As per Stephen P. Robbins, Davis A DeCenzo, Robin Stuart-Kotze & Eileen B. Stewart, authors of “Fundamentals of Management”,CM determines cost-effective pay structure designed to attract and retain e, provide an incentive to work hard”.
As per I. Kessler, a renowned C- manager(mgr), “it is payment system which determines e-wage or salary, direct or indirect rewards”.C acts as a binding agent between the employer and the employee. Firm’s internal environment has C policy that includes financial and non-financial benefits.
b)Firms design out C- packages based on 2 dimensions(D) as:
i)C-D are as:
1. Pay for work performance are made on weekly, monthly & annual periods in form of awards or bonuses .For past 40 years, e have taken advantage of with-pay leaves, paid for time-off for personal reasons & for longer vacations, etc.
2.Pay for time not worked: It has been seen from past experience that number of days worked per year & number of hours worked per week have decreased.
3. Disability income continuation: E becomes unable to do his normal duties when he incurs some disabilities. Medical, surgical and hospital bills creates an additional burden for him in addition to his ongoing self & family expenditure.e.gSocial security, sick leave, workmen compensation, etc.
4. Deferred income:Plans(P) savings P ,social security, employer-provided pension P , annuities, and supplemental income P provide after retirement income to e. These are considered lucrative by them due to tax benefits like immediate tax deduction and deferment of tax obligation, etc. and help them to earn tax-free interest.e.gStock purchase, option, and grant P are used to achieve estate building, tax-deduction & deferral goals.
5. Spouse (family) income continuation: In C, there are some P , which are designed to provide dependents of e with income in case of disabilities
. E.gLife Insurance P, social security, pension P , e's compensation.
6. Health, accident, & liability protection: At time of health problems, e’s main focus is not only concerned with income continuation but also associated with payments for medicinal treatments to overcome disability or illness. So they can buy insurance P .
Example: Statistics show that in comparison to any other type of product or services the demand for health related product and services have highly increased.
7. Income equivalent payments: In addition to basic pay and allowances, e are provided with some additional benefits. These are attached to their designation either in form of monetary or non-monetary incentives & also called perquisites or simply perks. Some perks are tax-free, in hands of e & tax-deductible for employers.
8. Organisations develop c-policy:c-system centres on sound principles of
C administration.
Non-monetary C can equal 20 – 60% of value of cash C that e gets. For
current job seeker, starting salaries have barely increased, frozen or actually dropped. So, finding non-monetary C can be key when e evaluates it. These added perks can sweeten (& seal) deal. Beyond e getting material value from their benefits, there are non-material perks, as well.Firms who offer benefits, as rich retirement plan, send a message that they value their e
&want to promote long-term relationships with their e . These employers are becoming more and more sought after.
Firms offer below as
Flex-time schedules On-site childcare Free or discounted parking Free or discounted food & drinks Gym membership discounts In-office massage or yoga Casual Fridays
Mentoring programs for career advancement Free or discounted educational &
training Work opportunities in multiple locations Cross-training in other areas of the business Annual or quarterly company parties
2 Write about a) concept of Wage b)List down the pre-requisites of effective Incentive schemes(IS)
Ans:- a)Wage(W) means kind of economic C got by e.It covers concepts as W rate, gross average hourly earnings, straight time average hourly earnings, weekly earnings, weekly take home pay, annual earnings, etc. W levels are as :
1. Minimum w:As per , w must be as per Minimum W Act 1948
2. Need based Minimum W :These are set as per W boards, W committees &
Adjudicators based on e.g, Net intake of 2700 calories,
Per capita consumption etc
3. Fair w is equal to W got by e performing work which needs use of equal skills, difficultly levels, unpleasantness, etc.It lies between minimum & living W.
4. Living w: It can meet normal needs of e on an average.
It must be capable of paying for satisfactory basic budget.
5. Money & realw is determined & regulated as per inflation etc.
b)Pre-requisites of effective ISare that E must cooperate in its implementation. It is needed in below:
i) in measuring results or output upon which payment is based.ii)in setting wage rates for different classes of work.iii) in safeguarding earnings, job security & settlement of disputes over piece & time rates.
2.BaseIS on scientific work measurement & realistic standards .IS must motivate e to put in better performance. They must be provided with necessary tools to enable them reach their standards.
3. IS must cover supervisors, foremen, charge hands, helpers, crane operators, canteen staff, store keepers, & clerk also.
4. There should be management commitment to the cost & time necessary to administer IS properly & these must be carefully assessed before embarking on IS . There are many situations in where potential gains are just not worth cost &effort involved.
5. There is greater need for planning. Many Incentive Scheme , started hurriedly, planned carelessly,& implemented indifferently have failed & have created more problems than they have tried to solve.
6. Other safeguards are:
(i) IS should be appropriate to type of work carried out& workers employed.
(ii)Reward should be closely linked to individual or group.
3 What do you understand by VRS (Voluntary Retirement Scheme? Also list
down its reasons, merits demerits of?
VRS is the most common method to reduce excess manpower. It helps employer not only to compete and survive current business scenario but also improve his/her performance.
This scheme also becomes the prominent means of downsizing of
e. It is also known by names as Voluntary Separation Scheme, Golden Handshake
& Early Separation Scheme.Though criteria of eligibility of VRS may differ from firm to firm
it is given only to those ewho have either served 10 years of working or attained 40 years of age. Thus, e who opt for this scheme are permitted to get 45 days of benefits for each completed year of working or monthly benefits during retirement time which is multiplied with service months that are left before the date of working whichever is less.
Reasons for adopting VRS by firms are as:
1. Due to mergers and takeovers.
2. Due to decline in the company.
3. Due to obsolescence of technology/product.
4. Due to intense competition.
5. Due to joint ventures with the foreign collaborations.
Merits of VRS are as:
1. It offers an attractive financial package to their e that is more than what is permitted under
law of retrenchment.
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2. It precludes the need for enforcement which may become the reason for disputes
& conflicts in firm.
3. It is flexible in nature as it is applicable to certain departments and divisions where there is excessive manpower.
4. It lowers the overall cost and allows overall saving in the employee cost.
Demerits of VRS are as:
1. Sometimes the severance costs are heavy & become cause of embarrassment to the top as sometimes separation is applied by competent, good and capable e.
2. It may create a sense of uncertainty and fear among e.
3. It may cause disturbance in the normal operations due to the protests of trade unions against it.
4. Due to it efficient e leave firm while the inefficient may stay back.
4 Discuss the Organizational and External Factors Affecting Compensation
strategies?
Designing Compensation Strategy(CS) involves determination of hierarchy of grades, formulating C structure, & finalising C packages with aim to attract
& retain talented e.External & internal Factors that affect CS
are:
1. Individual factors: Firms while designing CS consider e’ concern about
C worth. In designing CS individual skill, knowledge, expertise, attitude, sex, work environment and experience play key role in fixing level of job. Personality of e should fit job description. Similarly, creativity, innovation, imitation desired in specific jobs also matter.
2. Organisational factors: Firm’s learning depends on productivity of
e & their efficiency which marks designing of CS . This measures firm's ability to pay. Besides this, size & technology required to perform any task & span of control depending upon the size and nature of firm are also key factors. Capacity to pay also relies on
financial strength of Co, size, nature, & number of levels & cost of technology being used in
firm.
3. Competitive factors:CS also depends on mission & vision of
firm. That means whether firm is willing to lead, develop competitiveness or meet the changing environments.
4. Product cost factors: These convert job price into a monetary award to
e performing or going to perform that job. It, thus, covers job analysis, job pricing, considerations of W/S survey &laws, organisational capacity to pay
& developing pay packages to different levels of e forming an integral part of CS .
Other factors affecting Care:
- Company's objective & mission: Every firm irrespective of its size, nature
technology has its own objectives & HR policy & may have varying numbers of grades or structures to accomplish its mission.
2. Marketing rates & trends: With changing business environments, market rates and expectations ofe keep on changing. So, to design a most acceptable CS, employer needs to understand the prevailing market conditions and trends.
3.Firm’s ability to pay : Though every employer is bound to pay at par with the market rates, some may have their own constraints to pay higher or at par due to
size, technology & numbers of e .Capacity to pay, so, is key
factor in designingCS.
4. Supply & demand elasticity : The supply and demand varies
& operates at regional/state or national levels. In designing
CS , the impact of both elasticity of the region/state or the nation cannot be overlooked as
rates are bound to vary as per these ratio. It influences wage and salary fixation.
5. Cost of living : The cost of living also varies from place to place which is to be considered in designing the variable component of C to provide an adequate cushion for increasing cost of living.
5 Explain the elements of Managerial remuneration?
Ans:-
MR are associated with the people who have attained top level managerial positions as Directors, Presidents, General Manager, Vice President etc.
Main elements of MR are as follows:
1. Base salaries: It is first element of MR which is analysed with
help of JE & also serves as incentives also. While evaluating salary, JE is just a part of it. An executive is compensated on the basis of his competencies & also
performance of his/her work. CEO’s base salary is determined with help of benchmarking which is based on the Industry Salary Surveys. Size is usually calculated with the help of revenues of firm. MR may varies from –
industry type job type region of the country
organisation size
2. Special package: Managers also enjoy all kinds of perquisites & benefits
which firms offer to their e.So, in order to maximise availability of time to key managers from purpose of business perspective, various other facilities are also offered to them as connection of internet, connection of cell phone and so on.
3. Profit sharing bonus(PSB): In today’s global competitive scenario, in
Program of executive payments,PSB is also play role. PSB is usually based on
profit sharing or performance.
4. Short term bonuses: These ranges from 50% of base salary to 10 or more times of the base salary are offered when firm a very good year had by recognising the financial indicators.
5. Long term performance bonus: Here payment of cash to corporate managers is similar to that of short term bonuses. The only difference is in time period for receipt is 2 years or more into the future and the award size is based on the multiyear achievement of established performance related objectives.
6. Stock options: Now a day many firms offer “stock equivalences” in the form of share appreciation rights/phantom shares. Here recipients are compensated with a stock increased value that is further determined by the base valuation which is prepared when share appreciation rights/phantom shares are given.
7. Severance packages or Golden Handshake: These are financial remuneration
& incentive packages which if given to those e in firms who are retired or laid off. This package includes:
life & health insurance retirement benefits
stock options remuneration for vacation days or unused sick
Assistance for job placement
e.g,Executive Compensation at Infosys Technologies” are very high.
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6 Who are ‘Expatriates(expat)’? What are objectives of ‘
expat -C? Differentiate between Financial (extrinsic) C &
Non-financial (intrinsic)C.
i)Expat are e who move from one country to another for employment
& are assigned long-term assignments ranging for a period of more than one year.
ii)C for expat enables them to:
(a) feel secured that their C policy offers them financial guard in provisions of cost of living, social security and other benefits
(b) expect that foreign assignments are offering them opportunities for financial advancement through earnings and savings
(c) ensuring that concerns like children education, housing and recreation are correctly addressed in C policy
(d) to feel satisfied regarding career advancement and repatriation
iii)Expat-C package has 2 main elements:
a)Financial (extrinsic)-C has financial element of Total C
Package & has 2 types as:
i)Direct C includes fixed and variable pay like salary & bonuses
ii)Indirect C consists of deferred incomes in form of pensions
&other benefits.
b) Non-financial (intrinsic) C is directly related to nature of work including opportunities for personal development & career progress.
Expat must be compensated for the cost incurred by him Due to his expatriation to enable him to retain matching standard of living that he had in his home nation(N)
.
Moreover, his C should motivate him to be successful in his assignment.His motivation includes self motivation, their career perspective, etc. including opportunities for personal and technical development for making him more competent in the market.
The cost of expatriate C has been a major area of concern for firms. Firms are forced to decrease the cost related to expat-C in view of their high financial constraints.
Such financial pressures aimed at reducing expat-C cost may result in alteration in the perception of overseas C in general making recruitment an arduous task for firms. Thus firms need to strike a balance between need of expat & their high cost.
Example: Recent survey shows that net take home salary got by
an expat in Japan is highest in comparison to its other Asian N.
On an average a middle manager takes home $98,000 in Japan whereas
same manager if deployed in Hong Kong will get $ 80,000.
A study found that 77% of expat are disappointed with their salaries, benefits and international packages in general. Another study found that high rate of failure among expat is a consequence of many factors including firm’s poor C package for them. So in designing an effective expat-C package, firm must consider the cost of living in host N, heath care, housing & children education facilities available to them & foreign tax rates, etc.