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Components of Compensation Management

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Fixed Compensation
Base

Pay Allowance Rent allowance Benefits Compensation Pay

Dearness House Fixed

Period Employment Contracts

Fringe

International Performance Retirement

funds

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Variable Compensation
Short-Term Long-Term Share

Incentives Incentives Wide Incentives

Schemes

Organization

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Base Pay
Standard

pay that an employee receives for doing a job irrespective of performance. pay is recurring ie employees continue to receive base pay as long as they remain I their job. disburse base pay to employees in one of the two forms: hourly pay or wage, or as salary. factors: skill, effort, responsibility and working conditions. for adjustment of base pay: cost of living adjustment, seniority pay, merit pay,

Base

Companies

Compensable

Factor

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How Base Pay is Adjusted over Time

Cost

of living adjustments (COLA): It represents basic pay increase that are founded on changes in prices as recorded by consumer price index (CPI). pay: Periodic addition to base pay according to employees length of service in performing their job. pay: Employees receive permanent increase to their base pay according to their performance. pay: Rewards employees partially or completely attaining predetermined work objective. for a

Seniority

Merit

Incentive

 Dearness

Allowance: An amount declared by govt. from time to time for neutralizing increase in cost of living. Rent allowance: An amount for meeting house rental. Period Employment Contracts: Employment contracts that are for a fixed period of time with performance goals attached. Compensation: Any remuneration that is received overseas.

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House

Fixed

International

Fringe Benefits
Benefits

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received in addition to base pay (eg company cars, housing)

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Retirement funds
Provident

funds, pension funds, deferred compensation.

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952

The

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Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is enacted to provide a kind of social security to the industrial workers. Employees' Provident Funds and Miscellaneous Provisions Act mainly provides retirement or old age benefits, such as Provident Fund, Superannuation Pension, Invalidation Pension, Family Pension and Deposit Linked Insurance.

It

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Eligibility
Every

employee employed in or in connection with the work of a factory or other establishment covered by the schemes other than an excluded employee is entitled and required to become a member of the fund from the date of joining the factory or establishment.

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Excluded Employee
An employee who, having been a member of the fund, has withdrawn the full amount of his contribution in the fund (a) on retirement from service after attaining the age of 55 years or (b) before migration from India for permanent settlement abroad; or for taking employment abroad
An

employee whose pay at the time he is otherwise entitled to become a member of the Fund, exceeds Rs. 6,500/- per month.
A

person who, is an apprentice, or who is declared to be an apprentice by the authority specified in this behalf by the appropriate Government.

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Applicability
Establishment

which is factory engaged in any industry specified in Schedule 1 and in which 20 or more persons are employed. other establishment employing 20 or more persons which Central Government may, by notification, specify in this behalf. establishment employing even less than 20 persons can be covered voluntarily under section 1(4) of the Act.

Any

Any

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Rate of Contribution
Scheme Rate of Contribution Employee's Employer's Central Govt.

Provident Fund Scheme

12%

3.67%

NIL

Insurance Scheme Pension Scheme

NIL NIL

0.5% 8.33%(Diverted out of Provident Fund)

NIL 1.16%

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Benefits
Employees

covered enjoy a benefit of

Social Security in the form of nonwithdrawable (except in severely

restricted circumstances like buying house, marriage/education, etc.)

financial nest to which employees and employers throughout contribute the covered equally persons

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The

employer also will pay administrative charges @ 0.01% on maximum limit of Rs.6500 whereas an exempted establishment will pay inspection charges @ 0.005% on the total wages paid.

Note:
The

above clarification is given by taking wages upto a maximum of Rs.6500 towards wage (basic+DA). an excluded employee i.e. drawing wages more than Rs.6500 can also become member of the Fund and the Schemes on joint request and if, for instance, such an employee is getting Rs.10, 000 per month, his share towards provident fund contribution will be Rs.1200 e.g. 12% and

Since

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Long-Term Incentives

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References
Strategic

Compensation: A Human Resource Management Approach Joseph J. Martocchio, Martocchio Joe

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