7/27/2019 2_Establishing Strategic Pay Plans

1/13

UNIT 3HR Subsystems III

Establishing strategic pay plansPay for performance & financial incentivesManaging global HR

Managing Strategic organisational Renewal

7/27/2019 2_Establishing Strategic Pay Plans

2/13

Establishing strategic

pay plans

7/27/2019 2_Establishing Strategic Pay Plans

3/13

What is Remuneration

Remuneration is the compensation anemployee receives in return for his or her contribution to the organisation.

7/27/2019 2_Establishing Strategic Pay Plans

4/13

Components of RemunerationFinancial/Monetary

Wages & SalaryIncentivesFringe benefitsPerquisites

Non Financial/Non MonetaryChallenging job responsibilitiesRecognition of merits

Growth prospectsSupervisionWorking conditionsJob sharing

7/27/2019 2_Establishing Strategic Pay Plans

5/13

Theories of Remuneration

Reinforcement & Expectancy TheoriesEquity Theory

Agency Theory

7/27/2019 2_Establishing Strategic Pay Plans

6/13

Importance of IdealRemuneration System

Do you think people work mainly for pay?

Cons equ enc es of pay d iss at i s fac t ion - Desire for more pay

PerformanceStrikesGrievancesSearch for higher paying jobs

AbsenteeismTurnover

7/27/2019 2_Establishing Strategic Pay Plans

7/13

Importance

Pay dissatisfactionLower attractiveness of job

Turnover Job dissatisfaction

Psychological withdrawalVisits to doctors

Poor mental health Absenteeism

7/27/2019 2_Establishing Strategic Pay Plans

8/13

Factors influencing employeeremuneration

External factorsLabur Market

Demand for & supply

of Going rate of payProductivity

Cost of living

Labour unionsLabour lawsSocietyThe economy

Internal factorsBusiness strategyJob evaluationPerformanceappraisalThe employee

7/27/2019 2_Establishing Strategic Pay Plans

9/13

Remuneration plans & businessstrategy

BusinessStrategy

MarketPosition &

Maturity

RemunerationStrategy

Blend of Remuneration

Invest togrow

Merging or growth rapidly

Stimulateentrepreneurship

High cash with averageincentives for individualperformance. Modestbenefits

Manageearnings protect

markets

Normal growthto maturity

Rewardmanagement skill

Average cash withmoderate incentives onindividual, unit, or

corporate performance.Standard benefits

Harvestearnings reinvestelsewhere

No real growthor decline

Stress on costcontrol

Below average cashwith small incentivetied to cost control.Standard benefits

7/27/2019 2_Establishing Strategic Pay Plans

10/13

Devising a remuneration plan

Job descriptionJob evaluation

Job hierarchyPay surveyPricing jobs

Pay levelsDetermining pay grades

7/27/2019 2_Establishing Strategic Pay Plans

11/13

Challenges of remuneration

Skill based payPay reviews

Pay secrecyComparable worthEmployee participation

Eliticism v/s EgalitarianismBelow market v/s above marketMonetarty v/s non monetary

7/27/2019 2_Establishing Strategic Pay Plans

12/13

Concept of Wages

Wages represent hourly rate of payTypes of wages:

Minimum wageProviding sustenance of life + efficiency of worker

Fair wageEqual to the rate prevailing in the same trade or equal to

the predominant rate for similar work.Living wage

Higher than fair wages. Provides for bare essentials pluscomforts.

7/27/2019 2_Establishing Strategic Pay Plans

13/13

Remunerating special groups

Team based payRemunerating professionals

Contract employeesExpatriates & Executives