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Presented By Presented By Sujata Mhatre Sujata Mhatre

Roll No 23Roll No 23Specialization {HR}Specialization {HR}

Content1. Chapter 9:- Pay for Performance: The Evidence2. Chapter10:- Pay-for-Performance

Plans 3. Chapter 12:-The Benefits

Determination Process4. Chapter 13:- Statutory Benefit

including Health Care, Employee Welfare And Retirement Benefits

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Employers want employees to perform in ways that lead to better organizational performance

Organizational strategy is the guiding force that determines what kinds of employee behaviors are needed

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Behaviors that compensation needs to reinforce Compensation should be sufficiently attractive

to make recruiting and hiring good potential employees possible (attraction)

Need to make sure the good employees stay with the company (retention)

Need to find ways to motivate employees to perform well on their jobs—to take their knowledge and abilities and apply them in ways that contribute to organizational performance

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Performance measurementNeed to accurately measure performance to tell if compensation efforts are working

Performance management05/03/2305/03/23 55

How do we get good employment prospects to join our company?

How do we retain these good employees once they join?

How do we get employees to develop skills for current and future jobs?

How do we get employees to perform well on their current job?

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In the simplest sense, motivation involves three elements:1. What is important to a person?2. Offering it in exchange for some 3. Desired behavior

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Employees learned what behaviors were important as part of the socialization process

Compensation is designed to support this risk-taking behavior

Total Reward System Compensation is but one of many rewards that influence employee behavior

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Key factors affecting a person’s decision to join a firm Level of pay Pay system characteristics

Job candidates look for organizations that “fit” their personalities

Reward systems should be designed to attract people with desired

Personalities Values

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Factors impacting turnoverPay based on individual performance

Group incentive plansLevel of employee satisfaction with pay

Type of pay system05/03/2305/03/23 1111

Other rewards affect the decision to stayWork variety and challengeDevelopment opportunitySocialStatus recognitionWork importanceBenefits

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Evidence is unclear

Relevance of skill-based pay

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Not clear if performance of individuals can be increased by tying it to pay If the incentive depends on individual performance, applicants find the company more attractive Team-based incentives, in contrast, are less attractive A number of recent studies provide strong evidence that pay for performance has a direct and, at times, substantial impact on firm performance05/03/2305/03/23 1414

EfficiencyStrategyStructureStandardsObjectivesMeasuresEligibilityFunding

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Chpt:10 Pay-Chpt:10 Pay-for-for-

Performance Performance Plans Plans

Pay for performance plans signal a movement away from entitlements

Pay will vary with some measure of individual, team, or organizational performance

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Types of plans Use of Different Variable- Pay-Plan

Types Base vs. Variable Pay

Increasing interest in variable pay Competition from foreign competitors Fast-paced business environment

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Merit Pay Lump-Sum Bonuses Individual Spot Awards Individual Incentive Plans

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A merit pay system links increases in base pay to how highly employees are rated on a subjective performance evaluation

IssuesExpensiveDoesn’t achieve the desired goal:

improving employee and corporate performance

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Improve accuracy of performance ratings

Allocate enough money to truly reward performance

Make sure size of merit increase differentiates across performance levels

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Increasingly used substitute for merit pay Not built into base pay Viewed as less of an entitlement than

merit pay Less expensive than merit pay over the

long run

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Viewed as highly or moderately effective

Typically awarded for exceptional performance

Special projects

Exceptional performance05/03/2305/03/23 2323

Offer a promise of pay for some objective, pre-established level of performance

Common feature - An established standard against which employee performance is compared to determine magnitude of incentive pay

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Dimension on which incentive systems vary Method of rate determinationSpecified relationship between

production level and wages

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Substantial contribution to:Productivity raiseLower production costsWorkers earnings

Reduces direct supervision to maintain reasonable output levels

Enables labor costs to be estimated more accurately than under payment by timeHelps costing and budgetary control

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Conflicts may emerge between employees managers

Introduction of new technology may be resisted by employees

Reduced willingness of employees to suggest new production methods

Increased complaints of poor maintenance, hindering employee efforts to earn larger incentives

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Improve organizational performance Use organizational measures Measured periodically

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Uses a collection of measuresPinpoints areas of successIndicates areas to improve

Categories of measuresFinancial resultsProcess improvementsCustomer serviceInnovation

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Many varieties of teams

“Level problem”

Complexity

Control

Communication05/03/2305/03/23 3030

Employees earn bonuses tied to unit-wide performance as measured by a predetermined, gain sharing formula

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Strength of reinforcement Productivity standards Sharing the gains Scope of the formula Perceived fairness of the formula Ease of administration Production variability

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Predetermined index of profitability Employees may not feel their jobs

directly impact profits The trend in recent variable-pay design is

to combine the best of gain-sharing and profit-sharing plans The plan must be self funding Along with having the financial

incentive, employees feel they have a measure of control

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Success sharing planEmployee base pay is constant

Variable pay increases in successful years No reduction in base pay and no variable pay in poorly-performing years

Risk sharing planEmployee base pay varies

Base pay often reduced in poor performance years Shifts part of risk of doing business from company to employee

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Long-term incentives (LTIs) focus on performance beyond the one-year time line used as the cutoff for short-term incentive plans

Recent explosive growth in long term plans is spurred in part by a desire to motivate longer-term value creation

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Employee Stock Employee Stock Ownership Plans (ESOPs)Ownership Plans (ESOPs)

Performance Plans Performance Plans (Performance Share and (Performance Share and Performance Unit)Performance Unit)

Broad-Based Option Broad-Based Option Plans (BBOPs)Plans (BBOPs)

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Chapter:-12The Chapter:-12The Benefits Benefits

Determination Determination ProcessProcess

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Employee Benefits are the Employee Benefits are the part of the total compensation part of the total compensation package, other than pay for package, other than pay for time worked, provided to time worked, provided to employees in whole or in part employees in whole or in part by employer payments, e.g. by employer payments, e.g. life insurance, pension, life insurance, pension, workers’ compensation, workers’ compensation, vacation vacation

Employees: Expect benefits as part of their total compensation Do not understand true value of benefits Often undervalue their benefits Often take benefits for granted Often cannot list all benefits received Have preferences regarding types of benefits they

want

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Benefits Planning and Design IssuesHow to attract good employeesHow to deal with undesirable

turnoverIntegrating benefits with other

compensation components05/03/2305/03/23 4040

Who should be protected or benefited? Series of questions need to be addressed

How much choice should employees have among an array of benefits? Concerns choice (flexibility) in plan coverage Standard benefit package Cafeteria-style,” or flexible, benefit plans

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How issues associated with flexibility should benefits be financed? Noncontributory Contributory Employee financed

Are your benefits legally defensible?

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Demographic differencesAgeSexMarital statusNumber of dependentsBlue collar vs. white collar

Employee survey via questionnaire

Flexible benefit plan05/03/2305/03/23 4343

11 Communicating about the benefits Communicating about the benefits programprogram

22 Claims processingClaims processing

33 Cost containmentCost containment

Three Administrative IssuesThree Administrative Issues

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Three elements of effective communications Company must spell out its benefit objectives and

ensure communications achieve the objectives Match the message with the appropriate medium

Use of intranet – an internal organizational online Web through which all forms of communication within the organization can be streamlined

Streamlined call center operation Content of communications package must be complete,

clear, and free of complex jargon

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Methods of communicationEmployee handbookPersonalized benefit statementsMeetings with employeesMulti-media presentationsIntranetStreamlined call center operation

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Company Company BenefitsBenefits

Claims processor must:Determine whether the act has, in fact, occurred

Determine if the employee is eligible for the benefit

Calculate the payment level

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11 Probationary periodsProbationary periods

22 Benefits limitationsBenefits limitations

33 Co-payCo-pay

44 Administrative cost containmentAdministrative cost containment

Prevalent PracticesPrevalent Practices

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Probationary periods Benefit limitations Co-pay Administrative cost containment Retaining strategic function internally Significant movement to outsourcing

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Chapter 13 Statutory Benefit

including Health Care,

Employee Welfare And Retirement

Benefits

India has enacted various legislation and an ordinance to provide for social security for industrial workers:Workmen Compensation Act 1923Workmen Compensation Act 1923

Provides for workers or their survivors in case of industrial accidents and occupational diseases, resulting in disablement or death. The Employees’ State Insurance (ESI) The Employees’ State Insurance (ESI)

Act,1948Act,1948 Provides for health care and cash benefit for

in case of maternity, sickness and employment injury of workers.

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The Employees’ Provident Fund and The Employees’ Provident Fund and Miscellaneous Provisions Act , 1952Miscellaneous Provisions Act , 1952

It was enacted to provide a kind of social security after retirement it mainly provides old age benefits The Maternity Benefit Act, 1961The Maternity Benefit Act, 1961

It regulates employment of women before and after childbirth and provides for 12 weeks’ maternity leave and the act is not applicable to employees covered under the ESI Act 1948

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The Industrial Disputes ActThe Industrial Disputes Act Provides for job and income security for workers

covered under the Act- any retrenchment, closure or lay-off requires notice, consultation and prior administrative clearance from the competent authority

The Minimum wage Act and Payment of Wages The Minimum wage Act and Payment of Wages Act Act

The Minimum wage Act guarantees minimum wages and the Payment of Wages Act guarantees that wages are paid as stipulated and in accordance with the norms on time limits for payment, payment for extra work, permissible deductions, etc

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The Payment of Gratuity Act, The Payment of Gratuity Act, 19721972

Provides for payment of Gratuity at the rate of half month’s wages for every completed year of service or part thereof, in case of seven months

Pension Pension Employees Pension Scheme(EPS) was introduces in

1995 8.33% of covered earning upto Rs. 6,500 per month

are diverted from employer’s contribution of 12% to EPS

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Medical Care and Health Benefits:-

Medical Care and Health Benefits for employees should provide for sickness, maternity, employment injury and occupational health/disease.

This benefits are non statutory except in case of maternity, employment injury and occupational health/disease.

The ESI Act provides for health care and cash benefits for employees covered by it in cases of employment injury, sickness and maternity

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Occupational Health:-Occupational Health:- The important legislation in the area of

occupational safety and health are the Factories Act1948,the Mines Act 1972 and The Dock Workers Act 1986

Welfare Funds:-Welfare Funds:- Statutory welfare funds have been set up

in the coal, mica, iron ore, manganese ore, limestone and mine sectors and in beedi and cine industries to supplement the efforts of employment and the government

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Accident Insurance Scheme Sick Leave Educational allowances House Building Advances Employment of dependent Death Relief/Benevolent fund

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Thank You

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