COMPENSATION MANAGEMENT

Compensation Management is an integral part of the management of the

organization. Compensation Management contributes to the overall success
of the organization in several ways. To be effective, the managers must
appreciate the value of competitive pay, their human resources, and have an
investment view of payroll costs. It is of prime importance for an
organization to maintain pay levels that attract and retain quality employees
while recognizing the need to manage payroll costs .

ABOUT COMPENSATION MANAGEMENT

The compensation management policy and the reward system of an
organization are viewed by the employees as indicators of the management
attitude and concern for them. A good compensation management system
should be able to attract and retain employee , give them a fair deal ,keep the
organization competitive and motivate employees to perform their best.

SCOPE OF COMPENSATION MANAGEMENT

IN todays world organizations tries more to asses the worth of an individual

in terms of his performance and contribution to the organizations. With the
growing demand of workforce and constant challenges in the business
environment, organizations have to evolve and accurate system for
evaluating jobs and assessing their worth. Compensation management helps
to determine the relative worth of a job in an organization in a systematic,
consistent and accurate manner. It also helps in estimating the basic pay for
each job in accordance with the importance of the job in the organizational
hierarchy .once a basic pay is determined , the rewards , incentives and
benefits attached worth the pay, positions and performance are also
determined . The basic wage, incentives and rewards and benefits, together
form the compensation package of an employee
 A
generalized
compensation
package across
the industries.
BASE PAY
Base pay is the fixed compensation paid to an employee for performing specific job
responsibilities. It is typically paid as a salary, hourly or piece rate.

In the State, employee base pay is first determined when hired. Changes to an
employee's base pay can be made as he/she go through his/her career in these ways:

CHANGE IN JOB
When an employee changes job responsibilities, he/she may receive a:

Promotion - a change in duty assignment of an agency employee in one job class

to another job class in a salary group with a higher minimum salary rate. A promotion to
a higher level job class requires higher qualifications such as greater skills or more
experience and involves more responsibility. Employees promoted to positions in Salary
Schedules A or B will receive at least a one increment increase in salary (or 3.4 percent)
or the minimum salary rate of their new salary group, whichever is higher.

Demotion - a change in duty assignment of an agency employee in one job class

to another job class that is in a salary group with a lower minimum salary rate. The
salary of a demoted employee in Schedule A or B must be reduced at least one step (or
3.4 percent) below the employee's salary prior to the demotion. However, an agency is
not required to reduce an employee's salary if the employee accepts a demotion in lieu
of a layoff or is selected for a position in a lower salary group because of applying for the
position.

Lateral transfer - a change in duty assignment of an agency employee that moves

to another job class in the same salary group.

PAY FOR PERFORMANCE

An employee may also receive a change in base pay for their performance in the same
job:

Merit increase - a movement in a Schedule A or B employee's salary to a higher rate

in his/her same salary group. The employee must demonstrate job performance and
productivity that are consistently above what is normally expected or required. To
receive a merit, employees must have been with the agency for six continuous months
and six months must have elapsed since their last promotion, merit, or one-time merit.
One time merit increase - a lump sum payment to an employee in a classified position.
The same rules for merit increases apply to these increases.

Salary reduction - an employee's salary can be reduced based on poor performance.

The disciplinary reduction in pay can go no lower than the minimum rate of the
employee's current salary group. Employees may have their pay restored to any rate in
the same salary group, up to and including their prior rate, as their performance
improves.

DIFFERENTIAL PAY
Differential pay is non-performance based pay usually given to accommodate a specific
working condition. The State offers several types of differential pay to employees.

There are both state and federal requirements on how to address employee overtime.
The Overtime Management Guide addresses most questions regarding this subject.

I. FLSA Overtime - federal guidelines for paying employees who work overtime.

II. State Comp Time - state guidelines for paying employees who work overtime.

III. Longevity Pay - state guidelines for paying employees based on state service time.

IV. Shift Differential - state guidelines for paying employees that work shifts different
than a normal schedule.

V. Hazardous Duty Pay - state guidelines for paying employees based on performing
work that could be hazardous to their health.

VI. On-Call Pay - state guidelines for paying employees for being on-call.

VII. Benefits Replacement Pay - state guidelines for paying employees the employer's
portion of Social Security taxes.

VARIABLE PAY
Variable pay is compensation that is contingent on discretion, performance or results. It
may be referred to as "pay at risk."

Enhanced Compensation Award - Agencies that meet certain performance criteria

may grant awards to employees who directly contribute to these performance
successes.
Retention Bonus - Bonuses paid in order to retain employees in state government.

Employee Recognition Award - Awards given to employees for recognition.

INDIRECT COMPENSATION

PAY FOR TIME AT WORK

Breaks - Rest periods of short duration, running from 5 minutes to about 20 minutes.
They are used to promote the efficiency of the employee and are customarily paid for as
working time. They must be counted as hours worked. Within the State of Texas, these
benefits are a matter of agreement between the employer and the employee.

Agency Events - Special events or programs planned by an agency to foster and

develop an agency’s culture planned during an agency’s work hours.

Training Hours - The time that employees are allowed for training activities and for
which they receive pay.

NOT AT WORK

Sick leave
State employees are entitled eight hours of sick leave per month. Sick leave with pay
may be taken when an employee is prevented from performing duties because of
sickness, injury, or pregnancy and confinement. Sick leave may also be taken if an
employee needs to care for a member of his or her immediate family who is actually ill.
Sick leave may be taken to care for members of an employee's family who do not reside
in the same household only if the time taken is necessary to provide care to a spouse,
child, or parent of the employee who needs such care as a direct result of a documented
medical condition.
To be eligible for accumulated sick leave with pay for a continuous period of more than
three working days, an employee must send the administrative head of his or her agency
a doctor's certification, or an acceptable written statement of facts, showing the nature of
the illness.

Agency heads may grant employees extended sick leave if they believe it is warranted.

Each agency may establish a sick leave pool where employees donate hours to the pool
to be used by other employees who experience a catastrophic illness or injury that
forces an employee to use all of their sick leave time.

Holiday
State agency employees are entitled to a paid day off from work on national and state
holidays observed by the state. These holidays are specified by the Legislature each
session. A state agency must have enough state employees on duty during a state
holiday to conduct the public business of the agency except for those state holidays that
fall on a Saturday or Sunday, the Friday after Thanksgiving Day, December 24th, or
December 26th.

Employees who actually work on a national holiday or a state holiday will be allowed
compensatory time off during the 12-month period following the date of the holiday
worked.

Admin leave
Agency heads are allowed to grant 32 hours of administrative leave per fiscal year to
employees for outstanding performance.

Vacation
Employees receive vacation leave based on length of their service.

Jury Service

An state employee is entitled to serve on a jury without any deduction from wages.
Officers or employees of the Senate, the House of Representatives, or any organization in
the legislative branch of state government establish exemption from state jury service.
Emergency leave

State employees are entitled to time off with pay for a death in the family. An employee's
family is defined as the employee's spouse, the employee's and the spouse's parents,
and children, brothers, sisters, grandparents, and grandchildren of the employee. An
agency head may also grant emergency leave for other reasons determined to be for
good cause.

Income protection program.

MANDATED INCOME PROTECTION PROGRAMS

There are some federally mandated income protection programs.

Workers' Compensation - A benefit paid to an employee who suffers a work-related

injury or illness.

Unemployment Insurance - A program designed to provide a financial safety net for

individuals who become unemployed through no fault of their own.

Social Security and Medicare Taxes (FICA) - Taxes intended to help the elderly with
retirement and health care costs.

VOLUNTARY INCOME PROTECTION PROGRAMS

The State of Texas also offers some income protection programs for state employees:

Health Insurance - insurance against loss by illness or bodily injury.

Life Insurance - insurance to be paid to a beneficiary when the insured dies.

Retirement - program designed to provide an income for your retirement and other
future financial needs.

Deferred Compensation Plans - employer deduction from pay where employee does
not pay tax until they receive the distributions at a later date.
NON-FINANCIAL COMPENSATION
Non-financial compensation is different incentives given to employees that are not in the
form of direct pay.

Alternative Work Schedules - there are many alternatives to a traditional 5 day, 8-hour
work schedule.

On-the-Job Training- showing workers how to perform tasks by observing others.

Work/Life Balance - when an employer understands the needs employees have to

juggle in their lives.

Developmental Opportunities - training and other opportunities for employees to

expand their knowledge and improve their skills.

Casual Dress - allowing employees to relax their dress code at work.

RETAIL
Types of incentive compensation
Two types of incentives are commissions and bonuses. A commission is a
compensation based on a fixed formula such as 2 percent of sales. For
example many retail salees people compensation is based on a fic
percentatgeof the merchandise they sale . A bonus is additional
compenestaion awareded periodically baes on an evaluation of the
emploeyess performance . for example store managers often recien\ve
bopnuse aat the end of the year based on their stores performance relative to
its budgeted sales and profit.
Besides incentives based on individual performanece , retail managers often
recive additional income based on their perofmanmnce, these profit sharing
arrancgmenmts can be offered as cash bnonus based on firms f\profit or as a
grant of stock option that link additional income to performance of the frims
stock
A number of retailer such as walmart and home depot use stock incentives to
motivate and reward all employees, including sales associates. Employees
are encouraged to buy shares in their companies at discounted price through
pay role deduction plans. This stock incentives align employees interest with
those of companies and can be very rewarding when company does well.
however if growth of the company stock price declines , employees morale
declines too, corporate culture is threatened , and demand for higher wages
and more benefit develops .