Page 164 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Unit 10: Compensation and Benefits

3. Pay levels are determined by combining job evaluation results with survey wage rates. Notes
4. Jobs with similar value are combined into pay ranges.
5. The predominant approach to employee compensation in India is still the skill-based
system.
6. Pay secrecy does not give freedom to mangers in compensation management.
7. Fringe benefits, nowadays, are the most insignificant components of compensation.
8. Subjective evaluations are a problem with merit pay systems.

10.3 Importance

1. Job Satisfaction: An employees would be happy with their jobs and would love to work
for an organization motive, if they get fair rewards in exchange of their services.
2. Motivation: We all have different kinds of needs. Some of us want money so they work
for the company which gives them higher pay. Some value achievement more than money,
they would associate themselves with firms which offer greater chances of promotion,
learning and development. A compensation plan that hits workers' needs is more likely
to motivate them to act in the desired way.

3. Low Absenteeism: Why would anyone want to skip the day and watch not-so-favorite TV
program at home, if they enjoy the office environment and are happy with their salaries
and get what they need and want?
4. Peace of Mind: Offering of several types of insurances to your workers relieves them from
certain fears. As a result they work with relaxed mind.
5. Increases self-confidence: Every human being wants his/her efforts to get acknowledgment.
Employees gain more and more confidence in them and in their abilities if they receive
just rewards. As a result, their performance level shoot up.

10.4 Factors Influencing Employee Remuneration

1. Job needs: Simple, routine tasks that can be done by many people with minimal skills
receive relatively low pay. On the other hand, complex, challenging tasks that can be done
by few people with high skill levels generally receive high pay.
2. Ability to pay: High profit levels enable companies to pay higher wages. This partly
explains why computer software industry pays better salaries than commodity based
industries (steel, cement, aluminum, etc.). Likewise multinational companies also pay
relatively high salaries due to their earnings power.
3. Cost of living: Inflation reduces the purchasing power of employees. To overcome this,
unions and workers prefer to link wages to the cost of living index. When the index rises
due to rising prices, wages follow suit.
4. Prevailing wage rates: Prevailing wage rates in competing firms within an industry are
taken into account while fixing wages. A company that does not pay comparable wages
may find it difficult to attract and retain talent.

5. Unions: Highly unionized sectors generally have higher wages because well organized
unions can exert presence on management and obtain all sorts of benefits and concessions
to workers.

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