Description
Compensation or remuneration in general terms means direct wages, salaries, or allowances given to the work force of the business organisation.compensation management or wage and salary administration refer to establishment and implementation of sound policies and practices of employee compensation considering the worth of concerned employee and concerned job.
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
155
COMPENSATION MANAGEMENT: RECENT TREND
Garima Panchal*
Compensation or remuneration in general terms means direct wages, salaries, or allowances
given to the work force of the business organisation.compensation management or wage and
salary administration refer to establishment and implementation of sound policies and practices
of employee compensation considering the worth of concerned employee and concerned job. It
includes such areas as job evaluation, surveys of wage and salaries, analysis of relevant
organisational problems, development and maintenance of wage structure, establishing rules for
administering wages, wage payments, incentives, profit sharing, wage changes and adjustments,
supplementry payments, control of compensation costs and other related items.
* Research Scholar
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
156
Contingent factors in compensation plan:
Internal factors External factors
1. Organisational strategy and attitude 1. Nature of Hr market.
2. Organisational culture. 2. Cost of living
3. Nature and worth of job. 3. Employee union.
4. Capacity to pay. 4. Legal framework
5. Nature of human resource. 5. Socio-economic fators
Both above mentioned factors influence the compensation system in an organisation. Infact
because of such reasons the compensation system is very strategic in nature.Global competition
in hr market infuence the retention of employees with in the organisation. From the employer's
perspective, compensation is an issue of both affordability and employee motivation.
Companies must consider what they can reasonably afford to pay their employees and the
ramifications of their decisions: will they affect employee turnover and productivity? In addition,
some employers and managers believe pay can influence employee work ethic and behavior and
hence link compensation to performance. Moreover social, economic, legal, and political forces
also exert influence on compensation management, making it a complicated yet important part of
managing a business.
More specifically, six primary but interrelated factors can shape a company's pay structure:
1. Social Customs: Beginning in the thirteenth century, employees began demanding a
"just" wage. This idea evolved into the current notion of a federally mandated minimum
wage. Hence, economic forces do not determine wages alone.
2. Economic Conditions: Demand for labor influences employee wages. Employers pay
wages based on the relative contributions employees make to production goals. In
addition, supply and demand for knowledge and skills helps determine wages.
3. Company Factors: Pay structures depend on the kind of technology a company has and
on whether a company uses pay as an incentive to motivate employees to improve job
performance and to accept more responsibilities.
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
157
4. Job Requirements: Some jobs may require greater skills, knowledge, or experience than
others and hence fetch a higher pay rate.
5. Employee Knowledge and Skills: Likewise, employees bring different levels of skills and
knowledge to companies and hence they are qualified to work at different levels of a
company hierarchy and receive different rates of pay as a result.
6. Employee Acceptance: Employees expect fair pay rates and determine if they receive fair
wages by comparing their wages with their coworkers' and supervisors' rates of pay. If
employees consider their pay rates unfair, they may seek employment elsewhere, put
forth little effort in their jobs, or file lawsuits.
After considering the factors now I want to mention that in recent trend the compensation in an
organisation is considered as a cause of grievance because of inequity in payscale and hidden
aspects due to which the employee considered himself cheated and not able to trust on
management regarding their wages and salaries.but recently in most of the organisations pay
transperancy is applied which is giving positive results.lets discuss pay transperancy-
PAY TRANSPERANCY
As in this era of competition the employees are very care ful regarding their pay structure they
don’t want that any body can cheat them so they want a transparent pay system. Infact some
organisations are using transparent pay system.this is helpful for them to retain their employees
with in the organisation.pay transparencyis an important trend in compensation management that
warrants both focussed discussion and targeted actions in most companies. In traditional time the
payment system was not revealed to employees and not to other companies but decisions about
compensationnow occur in the world of information changed forever by internet.people today
have access to unparalleled amountsof information , including information about compensation
which historically has been kept secret.numerous websitesprovide salary survey data freelyand
the explosionof web 2.0 social networksand social media spreadscompensaton data
andconversations without any limits.
Pay transparency influence employees
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
158
• Fosters trust in management
• Increases employees engagement
• Encourages discretionary efforts
• Reduces turnover
• Create competitive advantage
People want to work where they understand their value and feel they can trust their employers. In
such tan environment, they are willing to work harder, offering more of their discretionary effort
towards the organisational goals. Employee trust, then, is not an end in itself but a foundation for
competitive business advantage.
COMPENSATION MANAGEMENT: IN INDIAN SCENARIO
With the technological developments taking place at a higher rate, the salary packages are too
increasing at a much higher rate. Pay packages in India have witnessed an increase of more than
14% in 2006 over last year’s salary packages. The compensation package comprises of
monetary and non-monetary benefits that includes salary, special allowances, house rent
allowance, travel allowance, mobile allowance, employee stock options, club memberships,
accommodations, retirement benefits and other benefits.
Globalization is being considered as the cause for such salary hikes. The establishment of multi
national companies and privatization has led the Indian industry to witness higher salary
package. With the immense competition of attracting and retaining talented human resource,
compensation package is the only motivation factor available with the organizations be it Indian
origin organizations or foreign-owned multinationals.
With the high attrition rate organizations are increasing their salary packages to attract and
retain talented human resource. In the race, India has begged first position followed by
Lithuania and China.
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
159
INDIAN INDUSTRY ANALYSIS
Indian industries are aiming for high growth and are looking for talented human resource. For the
purpose they are offering most competitive compensation packages. Besides the monetary and
non-monetary benefits some organizations also offer development benefits such as online degree
programmes or certification courses. Insurance sector has succeeded in increasing the
compensation packages at highest rate followed by Banking and IT sectors. In Indian industry
rate of salary hike also depends on the job position in the organizational hierarchy. During year
2006 technical and professional skill oriented jobs were offered more salary hikes than the senior
management.
SUMMARY
In this article the basic concept of compensation and recent trends which are applied in
compensation management like pay transperancy has been mentioned.How pay transperancy is
helpful in developing the trust and it is fostering the productivity?
After all the Indian industry analysis and change or increment of compensation level is discussed
with the help of some data.
20%
21%
23%
19%
17%
compensation increase
top /senior management middle management professional/technical clerical others
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
160
REFERENCEhttp://eng.hi138.com/?i280580_Compensation_Management_in_Vocational_Problems_and_SoC
OMPENSATION ADMINISTRATIONhttp://www.referenceforbusiness.com/encyclopedia/Clo-Con/Compensation-Administration.htmlhttp://blogs.payscale.com/compensation/2010/07/integrating-general-business-strategy-with-
compensation.htmlhttp://payroll.naukrihub.com/compensation/indian-industry/
www.indianmba.com/Faculty_Column/FC1003/fc1003.html
Human resource management by Dr. Vineet walia and Pradeep tomar –Compensation
Management – wage and salary administration-356
doc_872293329.pdf
Compensation or remuneration in general terms means direct wages, salaries, or allowances given to the work force of the business organisation.compensation management or wage and salary administration refer to establishment and implementation of sound policies and practices of employee compensation considering the worth of concerned employee and concerned job.
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
155
COMPENSATION MANAGEMENT: RECENT TREND
Garima Panchal*
Compensation or remuneration in general terms means direct wages, salaries, or allowances
given to the work force of the business organisation.compensation management or wage and
salary administration refer to establishment and implementation of sound policies and practices
of employee compensation considering the worth of concerned employee and concerned job. It
includes such areas as job evaluation, surveys of wage and salaries, analysis of relevant
organisational problems, development and maintenance of wage structure, establishing rules for
administering wages, wage payments, incentives, profit sharing, wage changes and adjustments,
supplementry payments, control of compensation costs and other related items.
* Research Scholar
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
156
Contingent factors in compensation plan:
Internal factors External factors
1. Organisational strategy and attitude 1. Nature of Hr market.
2. Organisational culture. 2. Cost of living
3. Nature and worth of job. 3. Employee union.
4. Capacity to pay. 4. Legal framework
5. Nature of human resource. 5. Socio-economic fators
Both above mentioned factors influence the compensation system in an organisation. Infact
because of such reasons the compensation system is very strategic in nature.Global competition
in hr market infuence the retention of employees with in the organisation. From the employer's
perspective, compensation is an issue of both affordability and employee motivation.
Companies must consider what they can reasonably afford to pay their employees and the
ramifications of their decisions: will they affect employee turnover and productivity? In addition,
some employers and managers believe pay can influence employee work ethic and behavior and
hence link compensation to performance. Moreover social, economic, legal, and political forces
also exert influence on compensation management, making it a complicated yet important part of
managing a business.
More specifically, six primary but interrelated factors can shape a company's pay structure:
1. Social Customs: Beginning in the thirteenth century, employees began demanding a
"just" wage. This idea evolved into the current notion of a federally mandated minimum
wage. Hence, economic forces do not determine wages alone.
2. Economic Conditions: Demand for labor influences employee wages. Employers pay
wages based on the relative contributions employees make to production goals. In
addition, supply and demand for knowledge and skills helps determine wages.
3. Company Factors: Pay structures depend on the kind of technology a company has and
on whether a company uses pay as an incentive to motivate employees to improve job
performance and to accept more responsibilities.
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
157
4. Job Requirements: Some jobs may require greater skills, knowledge, or experience than
others and hence fetch a higher pay rate.
5. Employee Knowledge and Skills: Likewise, employees bring different levels of skills and
knowledge to companies and hence they are qualified to work at different levels of a
company hierarchy and receive different rates of pay as a result.
6. Employee Acceptance: Employees expect fair pay rates and determine if they receive fair
wages by comparing their wages with their coworkers' and supervisors' rates of pay. If
employees consider their pay rates unfair, they may seek employment elsewhere, put
forth little effort in their jobs, or file lawsuits.
After considering the factors now I want to mention that in recent trend the compensation in an
organisation is considered as a cause of grievance because of inequity in payscale and hidden
aspects due to which the employee considered himself cheated and not able to trust on
management regarding their wages and salaries.but recently in most of the organisations pay
transperancy is applied which is giving positive results.lets discuss pay transperancy-
PAY TRANSPERANCY
As in this era of competition the employees are very care ful regarding their pay structure they
don’t want that any body can cheat them so they want a transparent pay system. Infact some
organisations are using transparent pay system.this is helpful for them to retain their employees
with in the organisation.pay transparencyis an important trend in compensation management that
warrants both focussed discussion and targeted actions in most companies. In traditional time the
payment system was not revealed to employees and not to other companies but decisions about
compensationnow occur in the world of information changed forever by internet.people today
have access to unparalleled amountsof information , including information about compensation
which historically has been kept secret.numerous websitesprovide salary survey data freelyand
the explosionof web 2.0 social networksand social media spreadscompensaton data
andconversations without any limits.
Pay transparency influence employees
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
158
• Fosters trust in management
• Increases employees engagement
• Encourages discretionary efforts
• Reduces turnover
• Create competitive advantage
People want to work where they understand their value and feel they can trust their employers. In
such tan environment, they are willing to work harder, offering more of their discretionary effort
towards the organisational goals. Employee trust, then, is not an end in itself but a foundation for
competitive business advantage.
COMPENSATION MANAGEMENT: IN INDIAN SCENARIO
With the technological developments taking place at a higher rate, the salary packages are too
increasing at a much higher rate. Pay packages in India have witnessed an increase of more than
14% in 2006 over last year’s salary packages. The compensation package comprises of
monetary and non-monetary benefits that includes salary, special allowances, house rent
allowance, travel allowance, mobile allowance, employee stock options, club memberships,
accommodations, retirement benefits and other benefits.
Globalization is being considered as the cause for such salary hikes. The establishment of multi
national companies and privatization has led the Indian industry to witness higher salary
package. With the immense competition of attracting and retaining talented human resource,
compensation package is the only motivation factor available with the organizations be it Indian
origin organizations or foreign-owned multinationals.
With the high attrition rate organizations are increasing their salary packages to attract and
retain talented human resource. In the race, India has begged first position followed by
Lithuania and China.
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
159
INDIAN INDUSTRY ANALYSIS
Indian industries are aiming for high growth and are looking for talented human resource. For the
purpose they are offering most competitive compensation packages. Besides the monetary and
non-monetary benefits some organizations also offer development benefits such as online degree
programmes or certification courses. Insurance sector has succeeded in increasing the
compensation packages at highest rate followed by Banking and IT sectors. In Indian industry
rate of salary hike also depends on the job position in the organizational hierarchy. During year
2006 technical and professional skill oriented jobs were offered more salary hikes than the senior
management.
SUMMARY
In this article the basic concept of compensation and recent trends which are applied in
compensation management like pay transperancy has been mentioned.How pay transperancy is
helpful in developing the trust and it is fostering the productivity?
After all the Indian industry analysis and change or increment of compensation level is discussed
with the help of some data.
20%
21%
23%
19%
17%
compensation increase
top /senior management middle management professional/technical clerical others
IJRFM Volume 1, Issue 5 (September, 2011) (ISSN 2231-5985)
International Journal of Research in Finance & Marketing
http://www.mairec .org
160
REFERENCEhttp://eng.hi138.com/?i280580_Compensation_Management_in_Vocational_Problems_and_SoC
OMPENSATION ADMINISTRATIONhttp://www.referenceforbusiness.com/encyclopedia/Clo-Con/Compensation-Administration.htmlhttp://blogs.payscale.com/compensation/2010/07/integrating-general-business-strategy-with-
compensation.htmlhttp://payroll.naukrihub.com/compensation/indian-industry/
www.indianmba.com/Faculty_Column/FC1003/fc1003.html
Human resource management by Dr. Vineet walia and Pradeep tomar –Compensation
Management – wage and salary administration-356
doc_872293329.pdf