Compensation & Benefits Manager

Description
This Project work is submitted for partial fulfillment of my Fellowship from AHRB / CAMI

Project Report On Certified Compensation & Benefits Manager
This document was created on 29th June 2012 as part of my project work, contains Assignments and it is prepared and submitted for the purpose of partial fulfillment for Fellowship from ASIAN HR BOARD – AHRB / CAMI – USA. During the month of June 2012. This template is a draft document that has been as a working template for a Product Development IT Organization based in HYD.

Submitted by Puli. Srinivas Rao AHRBHYD0211010

Table of Contents
1 2 3 4 Acknowledgement Declaration Executive Summary Compensation Basics, Strategy, Policy, Motivation. (i) What is Compensation? (ii) How is Compensation Used? (iii) What are the Components of a Compensation System (iv) What are the different types of Compensation? (v) Need of Compensation Management? Scope of the Project (i) Organization Chart: IT Company. (ii) Positions Evaluated and their Job Descriptions (JDs) Job Evaluation (i) Job Grading Method Calculating Salaries based on Market Compensation Factors Components of a Salary Structure Conclusion

5 6 7 8 9

Acknowledgement
Its great pleasure to have worked on a Project work on Compensation & Benefits for An IT organization as part of my AHRB – Fellowship Program, Certified Compensation Benefits Manager – CCBM. This project work has been carefully carried out taking the courseware, workshop conducted by experts, on the job work experience of the aspirant & books referred which were recommended in the courseware – CCBM. I would like to express my sincere thanks to the entire team of AHRB, CAMI & MEC for conducting such a value based program & designed a well structured, informative courseware to all participants. I take this opportunity to express my profound gratitude and respect to my Faculty Mr. Nitin Shankar, He introduced me to this topic of Compensation & Benefits Manager, which has created lot of interest, his support and guidance has inspired me to put in the right efforts for this assignment. Thank you Srinivas Rao Puli. CCMB - AHRB. (Fellow Aspirant)
Submitted by Puli. Srinivas Rao AHRBHYD0211010

Declaration
I hereby declare that the matter included in this project report entitled “DESIGNING & DEVELOPING SALARY STRUCTURE USING JOB GRADING METHOD AT “IT Company”, is the result of study and research carried out by me. I further declare that this is my original work and not been published anywhere before. This project work has been carried out for the sole purpose of submission towards the requirement of Overall Certification Process towards the AHRB Fellowship Program in Certified Compensation and Benefits Manager (CCBM) by the Carlton Advanced Management Institute (CAMI). The above is true to the best of my knowledge and Information

Srinivas Rao Puli Fellowship (Aspirant)

Executive Summary
The Compensation and Benefits is the part of Human Resources, which is about numbers, market monitoring and money. Everything starts in Compensation and Benefits and HR Compensation and Benefits specialists are usually much respected in the organization. Compensation and Benefits is about setting the Compensation Strategy, monitoring other organizations on the market and a lot of internal analysis to ensure, the organization does not pay too much to its employees and it stays competitive on the job market. Compensation and Benefits can have a significant influence on the motivation, loyalty and satisfaction of managers and employees and it is about a lot of work from Human Resources. The compensation policy defines several main compensation components to keep the organization competitive in the area of the total cash of employees and to define several above standard compensation components, which play important role in the recruitment, career development and retention of key Emp. Some compensation components are defined by the law, some are common in many organizations and they are taken as the industry standard and some compensation components are unique in some organizations and they are the basis for the competitive advantage. Project began with a detailed discussion with the Compensation & Benefits specialist regarding the various components of compensation system as well as the compensable factors being applicable for various positions in the organization for which the salary structure had to be designed and developed. This also helped in order to understand the nuances involved in fixing the salaries of different people based on market compensation factors and using the job grading method. This project has been a learning curve for me and has helped to streamline my thought process on the entire Compensation & Benefits System and various processes involved. I now have a better understanding of both the Job Grading process as well as calculating the salaries of different people based on the analysis of market trends from appropriate sources of market information.

Compensation Basics
Compensation is the total reward received by an employee in exchange for services performed for an organization. It can include both direct pay (salary and wages) and indirect pay (benefits programs). The field of compensation management provides management with the ideal combination of the different remuneration types. The purpose of this type of program is to retain and motivate good employees. The compensation and benefits processes belong to most important HR Processes, which are critical for the organization and modern HR organization. The compensation and benefits is about managing the personnel expenses budget, setting the performance standards, setting the transparent compensation policies and introducing the competitive benefits for employees. The organization with effective compensation and benefits drives its personnel costs, manages the performance of employees and rewards the extraordinary performance.

Compensation and Benefits Role

The compensation and benefits processes introduce the transparency into human resources and rewarding employees for the achieved performance. The compensation and benefits provides the managers with the compensation tools to build a difference among employees as the high performance corporate culture can be built in the organization.

The compensation and benefits department monitors the external job market and optimizes the personnel expenses budget of the organization. The compensation and benefits defines the compensation strategy, sets the transparent and simple compensation policy and defines the general rules for the extraordinary payments, bonus schemes applied in the organization and introduces general other compensation policies like the Relocation Policy, Short-Term Assignment Policies, Benefit Car Policies and other.

The Compensation and Benefits
The compensation and benefits department is usually responsible for the transparency in the compensation tools in the organization and keeping the internal fairness of the total cash. The compensation and benefits has to supervise the development of new compensation components and keeping the general rules for the design of the compensation component. The compensation and benefits department is responsible for the personnel expenses budget of the organization. The compensation and benefits department sets the standards for the individual salary increase, the mass salary review and the rules for the bonus payout as the organization keeps the financial stability and the planned personnel expenses budget is kept. The compensation and benefits department has special processes to monitor the external job market as it can set the right compensation policy which is compliant with the approved compensation strategy. The compensation and benefits department is responsible for the extensive monitoring of the market and designing the new compensation components inspired by the HR Best Practices in the compensation area. The compensation and benefits department is always closely attached to the development of the new compensation components which support the performance and effectively of the organization. It co-operates with the different business units and it aligns their requests into the general rules for the compensation components, which are transparent and fair. The compensation and benefits designs new adjustments to the Compensation Strategy and the compensation policy as the organization does not lose its competitive advantage on the job market.

Compensation System

Indirect

Direct

Base Pay

Merit Pay

Salary

Wage

Protection Programs

Pay for time not worked

Services & perquisites

Incentive Pay

Deferred Pay

Bonus Medical Life Insurance Vacation Recreational facilities Commission Holiday Pension Car Piece rate

Saving Plan

Stock purchase

Sick Leave Social Security

Financial Planning

Annuity Profit Sharing

Compensation Strategy free meals
The Compensation strategy is extremely important as the right compensation strategy helps to build the effective and competitive organization and the wrong setting of the compensation strategy, which does not fit with the needs of the organization and with the HR and Business Strategies, can destroy the organization within several years and the organization suffers from decreased performance and not utilizing the full potential of employees.
Shift differential

Low cost or

Stock option

What is compensation strategy
The Compensation strategy is derived from the HR Strategy and it defines the position of the organization on the job market, the level of the total cash, the main bonus principles in the organization and rules for the base salary setting. The compensation strategy is the strategy, which is approved by the Board of the organization as the owner of the compensation strategy is always the top executive management of the organization. The compensation strategy has a huge impact on the costs of the organization and that is the main reason for the top management approval. The rest of managers are the users if the compensation strategy. The compensation strategy defines the pay market, the organization follows, the desired position on the pay market and the way, how the desired level and position on the pay market will be achieved. The compensation strategy defines the basic compensation components used in the organization and the standard rules applied to each compensation component. The compensation strategy has to be in line with the business and HR Strategies as the compensation of employees is aligned with the expectation of the top management from them. The compensation strategy does not change often as the compensation principles cannot be changed within few days.

Compensation Strategy and HR Strategy
The compensation strategy is one of the main supporting documents for the HR Strategy. The compensation strategy is closely monitored by the management of the organization and they ask for the progress of the implementation of compensation strategy on the regular basis. The HR Strategy has to be always designed and developed with having the respect to the situation in the compensation area in the organization. The HR Strategy cannot set the ambition, which is not suitable for the company. The HR Strategy always defines the basic principles for the compensation scheme in the organization and the compensation strategy defines the details for the components and when and how they will be introduced or redesigned.

The compensation strategy should be updated, when Human Resources make significant changes to the HR Strategy or the organization changes its business strategy. The compensation strategy has always support the business and its selling capabilities.

Compensation Strategy Importance
The compensation strategy helps the organization to manage the personal expense of the organization and it sets clear limits for the managers and employees. It provides the top management with the certainty, the personnel expenses are under the control and the costs will not boom. The compensation strategy gives the certainty to the HR employees and HR managers as they can promise the stability in the compensation, the stability and the managed development of the compensation components and they can explain the basic role of the individual compensation components. The compensation strategy acts as the basic document driving the compensation and benefits processes and defines clear priorities for the development or redesign of the compensation components.

Compensation Strategy Importance for managers
The managers should be always informed about the existence of the compensation strategy and they should know the implementation plan. The managers should not be allowed to comment and decide about the strategy as they would tend to make their lives easier and they would make the personnel expenses of the organization to boom. The managers are the users of the compensation policy and they should understand, it is based on the approved principles from the strategy. The compensation policy can change on the regular (usually yearly) basis, but the strategy is consistent over a longer period of time and the managers can plan the career of the subordinates.

Compensation Strategy Importance for employees
The compensation strategy is not intended to be read by the employees. The employees are the users of the compensation policy and they should not be informed about the general position of the organization on the pay market and the compensation components to be used to motivate the employees. The employees can read the compensation policy, which describes the details about their compensation as they recalculate the salaries, but they should not read about the strategic compensation components, which help to build the competitive advantage of the organization.

Compensation Strategy Key Content
The compensation strategy is the underlying strategy for the general HR Strategy and its main role is to support the implementation of the HR Strategy and building the competitive and effective organization with the high performance corporate culture. The compensation strategy does not explain the detail of the compensation scheme and the details of the individual compensation components, but it sets the general guidelines for the compensation components and sets the priorities to be implemented over the period of the HR Strategy implementation The high performance corporate culture and the high performance Human Resources organization have to be supported by the compensation strategy, which is designed to be business driven strategy and with the right compensation tools, which motivate employees to go the extra mile and rewarding the real successes.

Main Compensation Goals
The compensation strategy has to set the main compensation goal of the organization and they have to be kept as the main target for Human Resources to be achieved. The compensation goals have to be set in accordance with the business strategy and they have to visible in the HR Strategy. The top management and Human Resources have to decide, what the goals are of the compensation schemes in the organization. The compensation goals should be aligned with the corporate culture and the general long-term expectations of the employees, when the organization does not implement a huge change in the corporate culture.

Main compensation goal is about the role of the compensation in the organization. Each organization pay salaries, but the role of the compensation has to be balanced with the other aspects of the overall motivation scheme applied in the organization. The organization has to choose to pay higher salaries and offer less development or career opportunities or it can offer lower salaries and better career opportunities to keep the motivation system balanced. When the organization defines its basic compensation goals, it can continue with structuring the main compensation decisions formulated in the compensation strategy.

Main Strategic Compensation Decisions
The compensation strategy allows smooth and efficient operation of other HR Processes like the recruitment and staffing, performance management, proper KPI and goal setting process, performance appraisals. As the other HR Processes can run smoothly and they are not blocked by the wrongly set compensation strategy, the main compensation decisions have to be included in the compensation strategy and the top management and Human Resources have to be aligned in the understanding to the main compensation decisions.

Role of Compensation in Human Resources
The compensation is a part of the complex HR processes, policies and procedures. The top management and Human Resources have to decide, what will be the primary role of compensation in the organization. Some organizations prefer the supplementary role of the compensation and other organizations prefer the dominant role of the compensation. This compensation decision is extremely important as it sets the general framework for the compensation components, if they will exist in the organization or they will be the part of the other HR policy. The compensation strategy has definitely included the description of the role of the compensation in the organization.

Competitiveness
The competitiveness of the compensation is another important compensation decision. The organization can decide to be aggressive with the compensation strategy and it can set the aggressive position on the pay market, but this strategy is extremely expensive for the organization and it has to balance it with high margin on the products and services. On the other hand, the organization can choose to offer the career and development opportunities, it can increase the responsibilities of the individual employees and it can balance aim to the lower level of the compensation on the pay market. The decision about the competitiveness of the compensation strategy is extremely important as it has a huge impact on the costs of the organization and it requests the right setting of other HR Processes.

Pay Market Strategic Position Setting
The right position on the pay market is a key to successful compensation and benefits function in the organization. Setting the right position enables other HR Processes with value added to work and it supports the recruitment, staffing, retention and talent management. The right position on the pay market allows the organization to allocate the personnel costs efficiently and to keep the organization competitive. When the organization sets the strategic position on the pay market it has to evaluate several basic questions, which help to set the target position correctly. The decision is not formal as it forms other compensation and benefits processes, has a huge impact on the allocation of the personnel costs and limits the potential for quick changes in the compensation schemes used in the organization. The main questions to be answered are:
1. 2. 3. 4. 5. What do we want to achieve by setting the strategic position on the pay market? Who are my competitors? What reactions will we see to follow from the competitors? How many strategic positions do we need? What are the costs of the setting the strategic position on the pay market?

Why to set the strategic position on the pay market?
The modern organizations and modern and effective Human Resources Management are based on setting the competitive advantages. The right and efficient compensation strategy is a definitely the competitive advantage and it cannot work without the strategic position on the pay market. The modern organizations are based on the talent management, offering the career opportunities and having other HR Processes to prolong the length of employment of the key employees and key job positions. The strategic positioning on the pay market allows the other processes to function properly and keeps the organization healthy. The recruitment strategy cannot work without the adequate compensation strategy as it can easily miss the goals. The company can target the best potentials on the job market, but the salary offered has to be adequate to the qualities of the candidates.

Knowing your competitors on the pay market
The organization always knows its competitors in products and services. But the organization has to know and understand the competitors in Human Resources as well. They can be different. But employees can see the competition on the job market differently. Knowing the competitors on the job market is extremely important for Human Resources. HR Recruiters have to analyze, which companies are sourcing the organization and the HR Front Office has to monitor, what companies hire new employees from the organization. The compensation strategy has to be set as the organization can compete with the competitors on the pay market and the compensation strategy has to be inspired by their compensation strategies. The employees from the competitors working for the organization are usually open to help and they can provide the excellent information, which can save many discussions in determining the right compensation strategy.

Predicting the reaction of the competitors
It is extremely important to have several scenarios describing the reactions of the competitors. When you are the market maker and you change your compensation strategy, you can expect all the competitors will react and you can start costly war on the job market. When you are a niche player and you hire several employees per year from your competitors, they will not react. In case, you hire just the experts, you can expect, the initiatives to protect the experts and key employees will evolve at your competitors and the price of hiring the expert from the competitor will rise.

One or more pay market strategic positions
Human Resources has to decide, whether it will use just one strategic pay position for the whole organization or it will identify groups of specific job positions, which will be evaluated and positioned on the pay market differently. The general pay market position is simple, it is easy to explain, the organization uses just one, but the organization loses the flexibility in the setting of the compensation strategy and this can lead to many exceptions in the compensation policy as the key groups of employees are not protected by the compensation policy in general and the managers will ask for the increased protection by using the exceptions. The general pay market position can be more expensive than more pay market positions as the system tends to set the system to protect the key employees and the key job positions and the rest of the population’s benefits from it.

The costs of setting the strategic pay market position
Money is driving the compensation strategy each proposal for setting the strategic pay market position has to be carefully calculated, analyzed and Human Resources has to prepare the predictions and forecasts of the future development. Setting the strategic pay market position without the proper analysis and calculation is just a hazard with the future of Human Resources in the organization as the top management can be amazed, how expensive the strategic pay market position is.

Compensation Consultants and Compensation Strategy
The compensation design and strategy is too difficult to accomplish purely internally. The compensation and benefits team is usually asked for the external benchmarks and the common practice on the market and the compensation consultant can be a huge help, when the HR team is able to manage their deliverables.

The compensation consultants are expensive and HR has to have a clear goal for the compensation consultant to be achieved. The compensation consultant is always able to bring the creative & innovative compensation solutions, when the goal is not given. The organization has to pay for the services, which are not utilized. With the clear goal, the compensation consultant has a clear navigation tool and forces the effort to reach the defined vision.

Compensation Consultants Benefits or Value Added
The compensation consultants bring the huge external know how in the compensation and benefits area, the previous experience and the experience with different solutions of the issues in the compensation schemes. The compensation consultant should provide the advice on the strategic position of the compensation strategy on the pay market and to provide the information about the best practices in the compensation and benefits area. The compensation consultant should never decide about the final compensation strategy, but can provide the useful feedback and advice in the process of designing the compensation strategy. The excellent compensation consultant always asks the clients about the feedback and how the solutions work in practice to have the experience to build on. The compensation consultant can see a new creative solution in one company, which can help to build the HR competitive advantage in another organization. The compensation consultant can help to design the state of the art compensation strategy and can save huge costs to the organization in the future.

How to use Compensation Consultants
The organization should invite the external compensation consultant at the right moment. The organization cannot leave the compensation consultant to set the whole compensation strategy.

The organization has to set the clear goals for the compensation consultant and it should use the deliverables of the compensation consultant in the following decision process. Without strict goals, the organization cannot manage the compensation consultant and it cannot use the best know how of the compensation consultant. The consultant has a deep knowledge of the compensation pay market and has know how about the compensation best practices and these should be used for building the competitive advantage, but the organization has to keep the final decision about the design of the compensation strategy.

Compensation Consultants Deliverables
The organization has to define the deliverables, which support the organization in its decision process. The deliverable of the compensation consultant can be easily the content of the discussions with the executive top management as the consultant has a broad knowledge of the pay market and the top executives likes the discussions about the general market and the best pay practices in the industry. The common deliverables of the compensation consultant are about the comparison of the proposal from Human Resources with the best practices available and the comparison with the real pay data. The consultant usually has the access to the detailed salary data and is able to make a comparison and to point out the key components and key jobs to be included in the compensation strategy as the jobs building the competitive advantage.

Compensation Strategy building Competitive Advantage
The competitive advantage is a necessary component for the modern organization. The competitive advantage has to be in products, services, internal and external processes and in Human Resources Management. The employees are the assets of the organization and the competitive advantage in Human Resources Policies can generate a huge impact into the net profits and overall performance and profitability of the organization. The competitative advantage in compensation strategy area usually generates a huge portion of the overall competitive advantage in HR Management.

What is competitive advantage in compensation?
The competitive advantage in compensation strategy is not about beating the pay market by paying higher salaries and bonuses to all employees. The managers tend to think, the better the pay of employees, the more competitive the organization is. It is not true, the organization has to carry the higher personnel expenses and during the crisis or the recession, it can be a huge competitive disadvantage in the compensation and the compensation strategy has to be redesigned quickly as the organization can continue in its operation and it has a destroying influence on the overall employee satisfaction. The competitive advantage can be built by using two general approaches: 1. General competitive position on the pay market 2. Competitive pay market position for key job positions

General competitive position on the pay market
Setting the higher position then the median on the pay market is quite common competitive advantage setting in smaller companies, who have to fight for the best talents with the big organizations in the same industry. It is quite dangerous to set the pay market position too high as the organization has to carry the increased costs and eats more from the margins on the products and services. The organization cannot make quick changes and the recession can be deadly dangerous for the organization as it carries higher costs to keep the processes operating and functional. The competitors have a better and bigger space to decrease the personnel costs in bad times. The higher competitive position on the pay market can be used in the time, the organization grows dramatically and it needs the best talents from the job market and there is no time to decide about the key job positions in the organization and all employees are treated to be of the same importance. Keeping the long term higher pay market position is suitable just for the companies in the modern industries, with high margins and the companies with the excellent brand name being known for employing the best of the best.

Competitive advance through strategic pay market position for key job positions
The competitive advantage in compensation can be set just for the key job positions in the organization. This solution is cheaper as the rest of the population can be kept in line with the median of the pay market or it can be below the median as the whole organization keeps the median in general. But, the organization has to be able to reach the consensus about the key job positions in the organization. Setting the key job positions is the painful procedure for Human Resources getting the consensus from the top management is a bit mission impossible, but HR has to accomplish this procedure successfully as the key job positions are identified and Human Resources can set the right compensation strategy for the key job positions. The differentiation in the compensation strategy and setting the different pay level for the key job positions is quite usual for the larger organizations as they save the personnel expenses and they are able to protect the key employees. It does not protect the key employees automatically, but it support the managers and other HR Processes as the employees feel pretty satisfied with their salaries. The competitive advantage for the key job positions is usually the best pay strategy for the mature organizations, which does not grow aggressively and are purely focused on the product innovations. The key employees bring the innovations and the rest is paid fair enough for their job content.

Why is compensation strategy important?
The current competitive conditions in the business world make it difficult to acquire and retain the top talents. Once the organization is able to identify, it can be unable to offer the right pay and to manage the pay increases to retain top talents. The compensation strategy is the extremely important piece of the overall HR Strategy to keep the company competitive and successful. On the other hand, the compensation strategy is important to keep the personnel budget under the control and to manage the jobs in the right salary (pay) brackets.

The compensation strategy differentiates the organization on the job market and builds the attractiveness of compensation for top talents. They love to be hired by the attractive organization, they do not like to be hired by the average company offering the same conditions as any other average organization in the industry.

Competitive Advantage and Compensation Strategy
Today, the products are similar. It is difficult to distinguish the cars from different car makers. The employees are in the same situation as the consumers. They have the problem to distinguish the employers and they are not able to recognize the excellent organization, when it is not different from the rest. The competitive advantage is the essential part of the mix for the success. The organization has to present itself differently, not just by the presentation, but it should differentiate itself by the different approach toward its employees. The compensation strategy is one of the most successful differentiators. The excellent compensation strategy does not just differentiate the organization from the other organizations on the job market, it brings the differentiation into the organization as well as the successful employees and top talents feel the success in their pockets. The effective compensation strategy makes people feel the success and they speak about their successes with their friends. It build the extremely excellent competitive advantage among the competitors as the people feel, the organization really values the success and it can pay the successful employees. The effective compensation strategy manages the personnel expenses of the organization, but it supports the performance management and differentiates the employees as the successful ones are not motivated to search for a new job opportunity. The good compensation strategy does not provoke employees to search the web job boards during the working hours, it makes them to focus on delivering the results as they can be highlighted and they feel the highlight in their salaries. The successful compensation strategy gains the competitive advantage and can speed up the innovation processes and improve the performance management practices in the organization.

For what HR Processes is Compensation Strategy important?
The compensation strategy is not important just for the competitive advantage, but it supports the other HR Processes and helps them to become highly efficient HR Processes and being on the top in the industry (when measured and benchmarked). The compensation strategy has a strong influence on the performance of the whole Human Resources, which is a good vehicle to manage the performance of Human Resources, but has to be managed carefully as it does not destroy the performance of the whole organization. Smart compensation strategy supports the HR Processes and helps to bring the top talents from the job market to the organization and helps to retain the best talents in the organization as they do not feel the need to find a new job opportunity elsewhere.

Recruitment and Compensation Strategy
The effective Recruitment and Staffing cannot exist without the effective Compensation Strategy. The recruitment can be based on the excellent HR Marketing Policies, but the HR Recruiters have to be able to offer the competitive salary packages, which are competitive externally and fully aligned with the policies and the compensation strategy internally. The recruitment of the best top talents from the job market cannot be based on exceptions from the compensation policy. The recruitment and staffing processes have to be supported and backed by the excellent compensation strategy as the HR Recruiters can offer the competitive conditions to the right talents from the job market and they are able to identify the key job positions, where the compensation strategy allows to be more aggressive against the pay market.

The job candidates are extremely sensitive to the salary package offered in the Job Offer letter and the compensation and benefits department should measure the number of failures in the job offer acceptations. It is the extremely important sign of the wrongly set compensation strategy, when the job candidates do not accept the job offers made by the organization.

Motivation and Compensation Strategy
The salaries or bonuses are extremely important for the motivation of employees and managers. Generally, the motivation is not about the compensations, but the compensation should support the general motivation framework in the organization. Even the best managers in the world are not able to keep highly motivated teams, when the compensation strategy is not in line with the job market. The employees usually know the common levels of salaries in the industry and when the organization is below the median or the average, it has to compensate the difference in other area. But, when the difference is too high, the compensation by a different motivation tool does not work and the employees start to feel demotivated as they receive no equal value for their effort.

Talent Development and Compensation Strategy
The compensation strategy provides the key support to the talent management support in the organization. The talents have to be clearly supported by the compensation strategy as the talents usually expect higher salary increases than the average employees and the compensation strategy has to allow the limited freedom to managers to do so. The successful top talents management cannot survive without the adequate support from the compensation and benefits side. The talents have to feel the different approach of the organization and the compensation is extremely important in this. The top talents cannot live on the promises for a long time. They have to see the real improvements and advances. They deliver, they expect the organization the same. The compensation specialists have to co-operate closely with the career advisors and career development specialist to introduce the right mix of the career opportunities and the compensation strategies for the top talents.

Compensation Policy
The compensation policy is the basic document, which drives the detail of the compensation practices in the organization. As the compensation strategy sets the high level compensation goals of the organization, the compensation policy describes the details of the individual compensation components, their behavior and their role in the compensation scheme of the organization.

What is the compensation policy?
The compensation policy describes the details of the compensation components in the organization, how they are used and the conditions for the employees as the compensation component can be applied in their specific situation. Each organization uses many compensation components and they have to be described. The compensation policy provides the basic explanation of the compensation component, how it is calculated, who is eligible for the usage and the approval procedure. The compensation policy belongs to most read and discussed internal policies of the organization as it drives the salaries of the individual employees. Each employee is interested in the structure of the salary and the potential total cash achievable in the organization. The compensation policy is the main tool to find out the details about the compensation components and the way, how to achieve the highest total cash. The compensation policy drives the effort and performance of employees as the employees will find the smart and easiest way how to achieve the highest possible income with the smallest possible individual performance. The compensation policy has to be set the smart way as it avoids the potential work-around and abuse. What is important in the compensation policy? The compensation policy has to be transparent and it has to provide just the only way of the interpretation. It is extremely important, the employees and managers are not unsure about the compensation component and they understand clearly, what conditions are applied for the approval of the specific compensation component. The transparent compensation policy supports the high performance corporate culture organization as the employees understand, what behavior and performance levels are expected

to be eligible for the specific compensation component and it drives the behavior and performance specifically the right way for the organization. The policy has to cover all the compensation components, which are used in the organization and affects large populations. The exceptional managerial component tools can be referenced from the general compensation policy, but they should not stay hidden. The employees cannot trust the compensation policy, which does not mention all the compensation components. Executive Compensation The top executive compensation is a special and specific area of compensation and benefits, which is usually confidential and it is not open to all employees in the organization. The top executives hold the responsibility for the organization, they lead the development of the organization and they have a tremendous impact on the results of the organization. The compensation scheme for top executive has to reflect the responsibility and it has to provide the security to the top executives to use the personal responsibility and to take courageous decisions. The executive pay is about the focus on the short-term performance and the long-term sustainability of the organizational development. The top executives are motivated to search for the cost-cutting potential and focusing on the sales and performance growth in the long-term perspective as the shareholders can realize the benefits of being involved in the organization. Executive Compensation Principles The executive pay has to reflect the role of the executive top management in the organization. The executive management drives the development of the organization and the executive compensation has to be aligned. The executive compensation changed dramatically over the last two years as the financial crisis showed several issues with the executive pay, which was too focused on the growth of the organization while ignoring the sustainability of the organization. The executive compensation consists usually from two main parts:
o o

Short Term Pay Long Term Pay

The short term pay of the executives is about the base salary and short term bonuses, which are paid on the basis of the immediate performance of the organization. The bonuses are usually deferred over a period of time. The short term pay is usually fully cash based executive compensation component. The long term pay is about the stock options, shares, restricted stocks and pay based on the performance against the index. The shareholders use these long term compensation components to protect the value of the organization and betting of the top executives on the growing value of the organization on the market. The long term compensation components can be realized just in case, the stock price of the organization grows. The long term pay component is usually noncash based. In the modern organizations the short term pay is just a small part of the total cash of the top executives. Executive Compensation Risks The executive compensation is sensitive to the right setting as the short term and long term components of the pay have to be in balance as the organization does not suffer from the imbalances in the managerial decisions. The organization should always focus to balance the short term remuneration (which is valued more) with the potential to get more in the future. It is always difficult to find the right balance and the shareholders have to be in the agreement with the top management. Excessive compensation The excessive compensation is always more the issue of trust and confidence of employees and shareholders. The executive compensation scheme has to include the holdbacks and claw-backs and safety brakes for the case, the organization outperforms hugely the market. Each executive compensation scheme needs caps and floor as it is manageable in all situations, which can happen on the market Executive Compensation Plans Top management needs an outstanding compensation plans. The executive management is responsible for the delivery of the business results to shareholders. They represent the company to the outside world. They handle the strategic initiatives. They are in a risky position. Their job contract can be cancelled within minutes. They want the protection. The executive

compensation plan has a highly motivating component, and it guarantees the income protection in case of the job cancellation. Executive Compensation Plan Principles The shareholders buy the shares of the company to keep the value of money. They expect even more. They expect to earn the extra from the increased value of shares. The top management is paid for the constant increases in the valuation of the company. It is an absolute rule of the business. The shareholders define the executive compensation Plans.. They usually cooperate with the CEO, who engages Human Resources in the process of designing the executive compensation. The shareholders define targets; shareholders expect the executive management to reach targets. The executive managers are not paid for developing the warm and friendly environment in the organization. They are not paid for the sympathetic and people oriented corporate culture, when it does not bring benefits of increased profits for shareholders. The company exists to make profits, it does not exist to employ satisfied employees. The principles of the executive compensation are:
o o o o o o

Clear focus on profits generation Long-term orientation of the compensation scheme Motivation of manager by high bonuses Non-cash focus of the compensation (stock options, shares, share phantom schemes) Risk Management Balanced Scorecard implemented into the Compensation Scheme

The executive compensation scheme has to support goals given by shareholders. The executives take risks of failing. They have to be over-compensated for meeting goals. They should receive an enormous extra bonus for exceeding the expectations (goals given by shareholders). The balance in the compensation has to be in favor of exceeding goals. The HR Professionals have to support the CEO in setting the executive compensation scheme, which support the top management in pushing the organization. The top managers have to make tough decisions. They have to be compensated for overcoming the stress, the pressure of

the line management and employees’ complaints about constant changes in the business operation. Human Resources have to understand the main business goals. HR has to help in setting the executive compensation and alignment with the performance based compensation for the rest of the organization. Salary Surveys The salary survey is extremely powerful compensation and benefits benchmarking tools. They are important for the setting right compensation strategy and for following and monitoring the desired pay market. The salary survey is provided by the external compensation consultant, who gather the compensation information and salary details about the individuals, match the information and provides feedback about the pay market and pay structures back to the participating organizations.

The salary surveys are always based on the proper job evaluation tools , which is standardized across the industry as the compensation consultant can compare the jobs with the same job size as the job titles are not the suitable for the salary comparisons. The company has to choose the right and suitable job evaluation methodology and this know how is usually provided by the compensation consultants for free.

How is compensation used?
Compensation is a tool used by management for a variety of purposes to further the existence of the company. Compensation may be adjusted according the business needs, goals, and available resources. Compensation may be used to: ? ? ? ? ? ? Recruit and retain qualified employees. Increase or maintain morale/satisfaction. Reward and encourage peak performance. Achieve internal and external equity. Reduce turnover and encourage company loyalty. Modify (through negotiations) practices of unions.

Recruitment and retention of qualified employees is a common goal shared by many employers. To some extent, the availability and cost of qualified applicants for open positions is determined by market factors beyond the control of the employer. While an employer may set compensation levels for new hires and advertise those salary ranges, it does so in the context of other employers seeking to hire from the same applicant pool. Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that must be reached between the monetary value theemployer is willing to pay and the sentiments of worth felt by the employee. In an attempt to save money, employers may opt to freeze salaries or

salary levels at the expense of satisfaction and morale. Conversely, an employer wishing to reduce employee turnover may seek to increase salaries and salary levels. Compensation may also be used as a reward for exceptional job performance. Examples of such plans include: ? ? ? ? ? Bonuses. Commissions. Stock. Profit sharing. Gain sharing.

What are the components of a Compensation System
Compensation is a tool used by management for a variety of purposes to further the existence of the company. Compensation may be adjusted according the business needs, goals, and available resources. The compensation policy defines several main compensation components to keep the organization competitive in the area of the total cash of employees and to define several above standard compensation components, which play important role in the recruitment, career development and retention of key employees. Some compensation components are defined by the law, some are common in many organizations and they are taken as the industry standard and some compensation components are unique in some organizations and they are the basis for the competitive advantage. Compensation will be perceived by employees as fair if based on systematic components. Various compensation systems have developed to determine the value of positions. These systems utilize many similar components including job descriptions, salary ranges/structures, and written procedures. The components of a compensation system include: Job Descriptions: A critical component of both compensation and selection systems, job descriptions define in writing the responsibilities, requirements, functions, duties, location, environment, conditions, and other aspects of jobs. Descriptions may be developed for jobs individually or for entire job families. Job Analysis: The process of analyzing jobs from which job descriptions are developed. Job analysis techniques include the use of interviews, questionnaires, and observation. Job Evaluation: A system for comparing jobs for the purpose of determining appropriate compensation levels for individual jobs or job elements. There are four main techniques: (i)Ranking (ii) Job Grading or Classification (iii) Factor Comparison (iv) Point Method. Pay Structures: Useful for standardizing compensation practices. Most pay structures include several grades with each grade containing a minimum salary/wage and either step increments or grade range. Step increments are common with union positions where the pay for each job is predetermined Through collective bargaining. Salary Surveys: Collections of salary and market data. May include average salaries, inflation indicators, cost of living indicators, salary budget averages. Companies may purchase results of surveys conducted by survey vendors or may conduct their own salary surveys. When purchasing the results of salary surveys conducted by other vendors, note that surveys may be conducted within a specific industry or across industries as well as within one geographical region or across different geographical regions. Know which industry or geographic location the salary results pertain to before comparing the results to your company.

What are the different types of compensation?
There are two different types of compensation: Direct and Indirect. Compensation provided to employees can be direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as protection programs, perks, time off, etc. Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity.

Need of compensation management:
1. 2. 3. 4. A good compensation package is important to motivate the employees to increase the organizational productivity. Unless compensation is provided no one will come and work for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals. Salary is just a part of the compensation system, the employees have other psychological and selfactualization needs to fulfill. Thus, compensation serves the purpose. The most competitive compensation will help the organization to attract and sustain the best talent. The compensation package should be as per industry standards.

Scope of the Project:
The project presents designing and developing a Salary Structure for 09 positions for a various division & department of the organization. It involves – • Identifying and finalizing the basic components of a Salary Structure, and • Designing an equitable compensation system keeping in mind Internal, External and Individual Equity The industry chosen is an IT Organization and the departments chosen for fixing the salaries of Department Heads as part of this project. IT Organization is a Product development company Head quartered in Singapore & Hyderabad the primary Objective of the Organization is developing Solution free Software for various clients across the globe in different verticals like BSFI, Health care, Animation, Infrastructure.

Job grading system helped to understand & measure jobs according to the job group content and to establish comparative worth between each job groups/grades & effective functioning a company must determine how many grades are required, choosing a reasonable number based on how many employees work in the organization today and the variety of jobs at the organization. A company should also give each grade a spread, so that people can move within their grade as they progress in their jobs.

Organization Chart of a IT Company
President

CEO Secretary Deliver y

Vice President I T - Projects

Vice President HR

Vice President Finance

Vice president Operations

Vice president Mkt & Sales

AVP - Projects

AVP - HR

AVP - Finance

AVP – Admin

AVP Mkt & sales

Sr. Manager Technology

Sr. Manager Human Resource Manager - HR

Sr.Manager Finance

Sr .Manager Operations Manager Ops

Sr. Manager Mkt & Sales

Mgr Technology

Manager Finance

Mgr - Sales

Team Lead

Ast. Mgr - HR

A M - Finance

AM - Ops

Ast. Sales & Mkt

System Analyst

Sr. Executive

Finance Analyst

Sr.Exe - Ops

Se.Exe – Sales

Sr. Software Eng

Executive - HR

Sr. Accountant

Executive - Ops

Executive - Sales

Software Eng

Trainee - HR

Accountant

Trainee – Admin

Trainee – Mkt

Positions Evaluated and their Job Descriptions (JD’s)
1. 2. 3. 4. 5. 6. 7. 8. 9. Vice President - Human Resources. Vice President - Marketing & Sales. Vice President - Finance. Vice President - Information Technology. Sr. Manager - Human Resources. Sr. Manager - Operations & Administration. Sr. Manager - Marketing & Sales. Manager – Finance. Manager – Human Resource (L & D).

Job Description for: Senior Manager - Marketing & Sales.
Job Code : WSMKTSales Reporting to VP Mkt & Sales Approved by VP Mkt & Sales Job Summary: Responsible for ? ? Responsible for Corporate Sales –Projects, Web designing , Hosting Plans , Product on various Verticals like BSFI, Insurance, Inventory Skills, Recruitments, eAPPS. Responsible in getting into new corporate accounts in order to acquire Maintenance Projects for long terms on Niche skills and managing profitable relationships with existing accounts. This includes providing intelligent coverage to accounts, managing consistent productivity and achieving preferred partner status in most of the acquired accounts. Directly responsible for achieving sales target, account penetration & acquisition, customer satisfaction and retention in corporate sales of Developed Products. Responsible for handling and Managing of Major/Key Accounts. Achieving monthly sales target. Ensure business growth, profitability and increase market penetration. Keep abreast of market development /Competition by gathering market and competitor's information on products and make sales strategies accordingly. Job Title : Sr.Mgr – Mkt & Sales Function : Marketing JD defined on : Template Band : 07 Department : Sales & Marketing Location : Hyderabad

? ? ? ? ?

Key Responsibilities ? ? ? ? ? ? ? ? ? ? ? ? Responsible for achieving sales targets assigned & executing the Group Business plan. Responsible for Corporate sales – Fund Products namely , Inventory Skills, Recruitments, eAPPS. Assist in launching latest products i.e. Groups. Presenting these products to the Corporate Prospects, Employers, Establishments Institutions, and Organization. Must be motivated enough to work individually and as part of a team. Update the Sales process through sales reports and maintain the database of the prospects visited in the assigned City/Territory/State. Develop the alternate channels to penetrate into market through partnership clients. Build, maintain and manage relationships with key decision makers CXOs and among the hierarchy of Corporate Customers/prospects. Lead generation, Account Mapping and Account farming/cross selling from existing accounts. Generate MIS/Reports on a daily/weekly /fortnightly/monthly basis. Collect competitor information on group business. Generate 15 new proposals for existing products & Group Business every month. Develop and build relationships with brokers and agents. Help these channel partners in generating proposals and supporting them for any meeting activity.

Measures Success ? ? ? ? ? Actual sales generated vs. plan Accuracy and timeliness of sales reports Actual activity vs. targeted activity Accuracy of competitor information; up to date data Identification of potential contacts and conversion to channel partner/customer

Minimum Education Graduate / MBA / Post graduate Minimum Specific Experience ? ? ? Five years of experience of which minimum 6 years in sales. Experience in Product sales preferred Minimum 24 months with Managerial role in the current position

Knowledge / Skill / Abilities Competency Result Orientation Working With & Through Others Innovation Customer Centricity Technical Expertise Problem Solving & Decision Making Business Acumen Impact & Influence Role Modeling Core Values Strategic Planning & Execution Level 4 3 3 5 3 3 5 5 3 5

Job Description for: Manager – Human Resource (Learning & Development)

Job Code : WSTrg0123 Reporting to Sr. Mgr - HR Approved by : VP HR Job Summary: ?

Job Title: Manager – L & D Function : L & D JD defined on : Template

Band 06 Department : HR Location : Hyderabad

Responsible for ? Resource Training initiatives in the Branch ? Recruitment & Development of Training Managers ? Planning & Execution of Management Training in the Branch ? Contribute to the Business by Training ? Training Administration and Quality of Training ? Building the future pipeline for the Training Department

Key Responsibilities ? Business Support ? Ownership of all training supported business parameters such as PLS, CSA, CPA, Case Rate, MDRT count etc. ? Administrative – Training ? Planning, scheduling, and executing all regular training programs for Software Engineers Operation Staff and front line & vertical leads. ? Proactive planning for any special training programs, interventions and management development programs. ? Coordinating with the Corp Offices’ and regional leadership for regular performance reviews meetings and sharing of expectations and deliverables between the business managers and the trainers. ? Ensuring time and duration adherence; internal and regulatory compliances

Team Development ? ? ? ? ? ? Ensuring the sourcing, interviewing and short-listing candidates happens in time by the RSDMs Retention of the trainers. Proactively managing talent pool. Development of trainers; regular performance reviews and feedback for continuous improvements in knowledge and skills Setting Goals and carrying out the annual performance reviews in conjunction with the respective location heads. Motivating, traction of the KRAs and R&R for the trainers and providing continuous encouragement for the trainers. Course correcting any gaps in knowledge, skills or attitudes of the trainers through training, coaching and counseling. Managing disciplinary issues.

Quality Assurance ? Ensuring adherence to curricula, contents and sessions plan by the trainers.

? ? ?

While encouraging different styles of deliveries, ensuring the overall adherence to methodologies as specified in the trainers/facilitators guides. Ensuring that each program achieves the business objectives it was targeting to achieve. Assisting the home office team in training needs identification & measurement of training effectiveness.

Master Trainer ? Be the first choice trainer for all the ‘high’ level MDPs and HR-lead company-wide initiatives. ? MEASURES OF SUCCESS: ? ? ? ? ? ? ? ? ? Achieving CSA, CPA and PLS targets for the region Ensuring adherence to the training process for new agent launch and existing agents productivity Attaining the required pass percentage in the region Standardized training schedule & delivery for region Retention and development of trainers Alignment of training with region business objectives Compliance ATM/TM retention Planning & execution of Management Training Calendar in the Zone

MINIMUM EDUCATION: ? Should be an MBA

Minimum Specific Experience ? ? At least 5-7 years in sales and 12-13 years in conducting sales training Competence in knowledge about products, processes, etc. and training skills

Knowledge / Skill / Abilities Competency Result Orientation Working With & Through Others Innovation Customer Centricity Technical Expertise Problem Solving & Decision Making Business Acumen Impact & Influence Role Modeling Core Values Strategic Planning & Execution Level 5 5 5 4 5 5 5 5 5 5

Job Evaluation
A HR manager can use two basic approaches to compare several jobs. First, he can take an intuitive approach. He might decide that one job is more important than another and not dig any deeper into the logic. As an alternative, he can also compare the jobs by focusing on certain basic factors the jobs have in common. Compensation management specialists call these compensable factors. They are the factors that established how the jobs compare to one another and that determine the pay for each job. Some employers develop their own compensable factors. However, most use factors popularized by packaged job evaluation systems or by federal legislation. For example, the Equal Pay Act focuses on four Compensable factors skills, effort, responsibility, and working conditions. Identifying compensable factors plays a central role in job evaluation. A job is usually compared with all comparable jobs using the same compensable factors. However, the compensable factors used depend on the job and the job evaluation method. For example, the HR manager might choose to include ‘decision making’ for a manager’s job, though it might be inappropriate for cleaner’s job. Two major objectives of job evaluation are to develop internal standards of comparison and to measure relative job values within the organization. There are several methods an organization might choose for internal job evaluation. Organizations select the compensable factors for determining the internal job worth hierarchy. Compensable Factors when conducting a quantitative (or factor) internal job evaluation, first select the compensable factors. Compensable factors are: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Criteria used to provide a basis for judging job value Element used to measure job worth Intrinsic elements in jobs that add value to the organization. To select compensable factors: Identify the organization’s internal values. Review the job content of the work group. Identify 1 to 09 potential factors that reflect the company’s internal value for consideration by the management team. Obtain key management’s support and stakeholder acceptance. Determine the factors to be used. To develop compensable factors: Identify the highest and lowest levels/degrees of each factor. Create intermediate levels by identifying a logical progression that reflects reasonable differences. Create a job-worth hierarchy consistent with management’s perception of relative job worth. Establish the proper number of levels. To weight compensable factors: Consider the nature of the work performed. Rank factors selected in order of priority for the organization. Review with key management and other stakeholders.

JOB GRADING METHOD
? In this Job Evaluation method, jobs are classified into an existing grade/category structure or hierarchy. It determines the weight and relative importance of each job within the organization. Job Grading method is used to ensure Internal Equity. Each level in the grade/category structure has a description and associated job titles. Each job is assigned to the grade/category providing the closest match to the job. The classification of a position is decided by comparing the whole job with the appropriate job grading standard. To ensure equity in job grading and wage rates, a common set of job grading standards and instructions are used. ? Standards identify and describe those key characteristics of occupations which are significant for distinguishing different levels of work. They define these key characteristics in such a way as to provide a basis for assigning the appropriate grade level to all positions in the occupation to which the standards apply. Compensable Factors selected for the positions mentioned above 1. Qualification 2. Experience (in years) 3. Product Knowledge 4. Span of control 5. Revenue Generation (in crores) 6. Budget Management (in crores) 7. Level of Management 8. Team Handling Definition of Compensable Factors Qualification - This factor measures the minimum level of formal education, specialized training, and professional licensing and certification required to perform the work. Experience - This factor measures the minimum amount of job-related experience, whether gained inside or outside, in order to be hired or promoted into the position. Product Knowledge - This factor measures the minimum amount of knowledge of the product / industry, familiarity with local markets etc. Span of Control - This factor measures the minimum number of people reporting directly and indirectly under him, capacity to manage people Revenue Generation - This factor measures the total business volume in crores Budget Management - This factor measures the operating expenses budget in crores, how much budget can a person handle Level of Management - This factor measures the seniority level from the CEO in the organizational hierarchy Team Handling - This factor measures the person’s ability of being an Individual Contributor or a People Manager, can he handle a team or is good without a team

Calculating salaries based on market Compensation Factors
FACTORS Here the market pricing analysis is done. Organizations formulate their compensation strategies by assessing the competitors’ or industry standards. Organizations set the compensation packages of their employees aligned with the prevailing compensation packages in the market. This entails for fair treatment to the employees. At times, organizations offer higher compensation packages to attract and retain the best talent in their organizations. The Salary Survey data is considered to build a competitive salary range for the team so that there is a competitive edge while hiring the new people to the team as well there is a scope for rewarding the best performers as per the industry standards. Market salary survey results are mapped to the grade structure to review the teams market positioning. The midpoint of the market salary is considered to build the salary ranges for the team. Keeping all this in mind, an external market study was done basis which the salary ranges for each position was collected through various sources. And then with the help of a scatter diagram, cluster analysis was done which further helped in calculating the salary.

Components of Salary Structure
Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required. Compensation is based on: Market research about the worth of similar jobs in the marketplace. Employee contributions and accomplishments, The availability of employees with like skills in the marketplace, The desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and ? The profitability of the company or the funds available in a non-profit or public sector setting, and thus, the ability of an employer to pay marketable compensation. ? ? ? ? Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity. There are many components in a salary structure that form one’ salary – some components are monthly, whereas some are yearly. Let’s understand some of the more popular components of salary at IT Organization – Product Development Company. Components of a Salary Structure at Product Development Company. All employees at IT Company are assigned a particular TEC / CTC (Total Employee Cost / Cost to Company) amount depending upon the profile they are being hired for. There are 4 major components of salary• Basic • House Rent Allowance (HRA) • Conveyance Allowance • Special Allowance / Business Related Expense (BRE)

Basic : As the name suggests, this forms the very basis of one’s salary. This is the core of your salary, and many other components may be calculated based on this amount. Basic usually depends on your grade within the company’s salary structure. Many deductions are also dependent on the basic – for example, your contribution (and the matching component by your employer) to provident fund is 12% of your basic. Basic is paid out every month, and is a taxable component of your salary. House Rent Allowance (HRA) House Rent Allowance (HRA) is paid out to meet full or part of your expenditure on renting a house. HRA may be expressed as a percentage of your basic and is paid out every month. HRA can be tax-free, subject to certain conditions. Conveyance Allowance Conveyance allowance is paid out to meet your expenses on commute related transportation. Conveyance allowance is paid out every month and up to Rs. 800 per month (Rs. 9,600 per year) is taxfree. Any amount over it is taxable. Special Allowance / Business Related Expense (BRE) Special Allowance / BRE can be given out to pay money that doesn’t fit into any other head. Such allowances are paid out monthly, and are taxable. Incentive / Bonus Incentives or bonuses are paid out depending on your performance (and, at times, depending on the company’s / division’s performance as well). This is to reward employees for their better performance. Incentive is usually paid out on a monthly, quarterly or yearly basis depending upon the profile of the employee. Bonus will be payable on a yearly basis. Incentive and bonus are fully taxable.

Break-up for Different Bands at IT Organization. • Employees in Grade A, B and 1 and 2 do not have any HRA component if they are covered under the company lease accommodation. • Employees with TEC < 1,60,000 or TEC < 4,00,000, the conveyance allowance is Rs. 9600 which is fixed. • Employees in Grade C and above have no Conveyance component at all as they are covered under the company car lease policy. • Employees in Grade C and above have their HRA related to their respective work location. A Salary Slip of an employee comprises of 2 sections:Earnings and Deductions Earnings include Basic, HRA, Conveyance and Spl Allow/BRE components. Basic and HRA are further calculated in three categories1. If TEC < 1, 60,000 p.a. then Basic = Rs. 4000, and HRA = Rs. 3000 (this is Fixed). The rest of the TEC is being paid under the “Special Allowance” component. 2 If TEC >1, 60,000 but TEC< 4, 00,000 p.a. then Basic = 30% of TEC, and HRA = 50% of Basic. The rest of the TEC is being paid under the “Special Allowance” component. If TEC> 4, 00,000 p.a. then Basic = 30% of TEC, and HRA = 50% of Basic. Also there is BRE component allocated in this category. The conveyance allowance is Rs. 9600 which is fixed.

3.

BRE component is further divided into 2 parts – Salary Part Here, the employee decides how much part from his / her allocated BRE amount does he / she wants to take within the salary and how much against his /her reimbursements

Claim Part The reimbursements can be made against bills for the following1. Communication related expenses such as mobile, landline, broadband 2. Medical Reimbursements against submission of medical bills – Per year Rs. 15,000 is non-taxable and above Rs. 15000 is taxable. Medical allowance is paid out to help you with the amount that you spend on medical treatment and medicines. Medical allowance can be paid out monthly or yearly. 3. LTA (Leave Travel Allowance) – Leave Travel Allowance is paid out twice in 4 years and is nontaxable, provided certain conditions are met. No boarding / lodging are reimbursed, however, reimbursement of only travel tickets within India. 4. Car related expenses such as petrol, driver’s salary, maintenance charges which can be claimed only if employee has taken a car under the company lease or through company’s asset scheme 5. Expenses incurred while pursuing some professional development course. Deductions section include (i)PF - It is a part of your salary which is deposited with the Govt. or the PF Trust. The benefit of the same will be availed in the form of pension after the employee retires. (ii)Gratuity - It is also part of employee’s salary and its benefit is provided after completion of 5 years with IT Company.

Conclusion
To summarize, while developing salary bands in an IT organization the following things need to be kept in mind: • Position for which the salary band is being developed • Department for which the salary band is being developed • Marketing positioning of the role • Budgets of the organization. For my study I had chosen departments with large headcount and therefore, I could look at 09 different profiles. It became evident that by identifying and finalizing the basic components of salary structure, an equitable compensation system can be designed of course by keeping in mind internal, external and individual equity. The Job Grading method helped classify all the job profiles into grades. I also learnt how important it is to do a market pricing analysis basis which salary bands are calculated for each grade considering the market compensation factors. Most organizations use this data as the promotion criteria, wherein they decide to pay their employees higher than the average salary being paid in the market. Their main aim is to ensure employee satisfaction as well as employee retention. And then considering factors like Total Revenue, Total Budget and Market Data is how salary bands get fixed internally. *****************************XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX***********************************



doc_748205297.pdf