Pages: 32

Compensation and reward management is concerned with the design, development, implementation, maintenance, communication and evaluation of compensation processes which deal with working out the relative worth of all the jobs in an organization, designing and monitoring pay structures, paying for skills, competence or performance, performance management, employee benefits, reward management procedures and the like. The overall aim is to improve individual, group and organizational performance by compensating and rewarding people fairly, equitably and consistently in proportion to their worth to the enterprise. Having explained the meaning and defining compensation management, the chapter deals with the total compensation/reward and its components, types, importance and approach. Thereafter, the terms like wages/salaries and some other related terms have been defined. The various theories falling under the categories of economic and behavioural have been discussed in detail. Compensation philosophy, compensation strategy, compensation policy, psychological contract, legal issues in compensation management and factors affecting wage rates, structures and levels of pay have been discussed at length, followed by a chapter review,discussion questions, individual and group activities and case study.

Pages: 40

Having defined compensation management, the main objectives have been enumerated under three categories, followed by a discussion on principles of compensation management which have also been categorized under three headings, viz. external relativities, internal relativities and individual worth. Then, methods of wage payment which have been divided into three categories, i.e. time rate methods/time wages, piece rate system/payment by results, and incentive plans or bonus (premium) schemes, have been discussed at length, followed by a discussion on combination plan, profit sharing, ownership plans/stock options and supplementary compensation. Thereafter, the national wage policy in India has been given fairly good treatment in chronological order. It is followed by a brief discussion on wage policy at the organizational level and wage policy in India. Components/functions of compensation management/wage and salary (W&S) administration which includes formulations and revision of compensation policies and recommending the same to the top management for its approval, determining pay/salary levels, designing and monitoring pay/ grade structures, etc. Thus, compensation management/W&S administration helps an organization in accomplishing its goals by formulating such compensation strategies and policies that may ensure that employees are rewarded fairly, equitably and consistently according to their worth to the organization. Compensation management is also concerned with the design, implementation and maintenance of compensation processes and practices that ultimately lead to the improvement of the performance of the organization. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.

Pages: 47

It is always desirable to have an idea about the current practices with regard to wage fixation in Indian organizations because, in case, wages are not fixed appropriately, workers are likely to suffer not only economically but also emotionally, socially and psychologically. Hence, this chapter deals with wage determination in Indian organizations. So far as wage fixation in the ‘organized sectors’ is concerned, it is done unilaterally usually by employers through the process of job evaluation and job pricing (for which the exercise of job analysis is a must which has also been discussed at length). Both the methods of job evaluation, viz. non-analytical and analytical, have been discussed. Various methods of job pricing have been discussed. In the ‘unorganized sector’ also, wage fixation is done by the employers unilaterally as trade unions are usually missing, which is generally on the lower side. Bipartite wage fixation is common in a good number of organizations and is done through the process of collective bargaining whereas tripartite wage fixation is prevalent in industries where ‘wage boards’ are constituted. Statutory wage/salary fixation is implemented through ‘legislative steps’ and also by constituting ‘pay commissions’. Third-party wage fixation involves the role of ‘adjudication’ and ‘arbitration’ machinery. The base pay, fixed through job evaluation and so on, is also supplemented through contingency pay, i.e. paying for performance, competence, skills, etc. It has been suggested that keeping in view the sensitive nature of wage fixation, the management should formulate such a strategy in this regard to protect not only its own interest but also the workers and the community. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.

Pages: 48

It has been pointed out that the rationale for contingent pay is based on considerations of equity, motivation and sending a strong message across the organization that it attaches great importance to performance. Hence, the chapter deals with only performance-related pay (PRP) and related issues. After discussing the definition and types of ‘contingency pay’, the chapter moves on to discuss ‘performance related pay’, its objectives, growth, criticism, pre-requisites for its success, developing a PRP programme, and operating and evaluating PRP. Then, the issue of ‘performance appraisal’ has been dealt with in detail. The meaning and definition of performance appraisal and potential appraisal, performance appraisal's objectives, process, appraisal interview, its methods—casual appraisal, traditional and highly systematic appraisal and modern methods—have been discussed, followed by some practices of performance appraisal in Indian industries, feedback about performance reviews, how to introduce and execute performance programme, uses of performance appraisal, constraints of appraisal systems, how to give negative feedback to employees, etc. Thereafter, follows a discussion on ‘potential appraisal’, its meaning and need, and its methods, viz. Philips Hi-Lo Matrix, Philips NV Holland Model, Psychometric Tests, Review Appraisal and best practices of potential appraisal used by some organizations. The chapter comes to an end after writing the chapter review,discussion questions, individual and group activities and case study.

Pages: 44

Having explained the terms ‘competence’, ‘competency’ and ‘competency-based pay’, and the rationale of competency-based pay, the chapter deals with the prerequisites for competency-based pay and further moves on to ‘skill-based pay’ (SBP) and explains the concept, purpose of the SBP structure, main features and working of SBP, its application, types of SBP systems, establishing SBP and implementation of SBP. Then the chapter takes care of team-based pay (TBP). Having explained the purpose and benefits and acceptance of team-based rewards, demerits, different approaches, factors affecting TBP, the maturity and types of ‘Teams’, characteristics of an effective team and team reward processes, the team-based pay has been introduced, followed by highlighting the requirement for TBP. Then comes ‘Gainsharing’, the meaning and definition of which have been explained. The primary components of gainsharing as well as its history, goals, fundamental principles, formulas, developing a gainsharing formula, how to introduce and implement it and key elements in designing a gainsharing plan have been discussed in detail. The next in line, ‘Profit-sharing’ gets its due space and contains a discussion on its meaning, characteristics, objectives, benefits and types of profit-sharing plans. Then, next in line is ‘Profit-related pay and beyond’. Its meaning and definition, approaches, objectives, merits and demerits, etc. have been discussed in brief. Finally, the chapter contains a detailed discussion on ‘Other Cash Payments and Allowances’, which many companies pay to their employees. Such cash payments and allowances have been divided into two categories: (i) payments in response to market pressures, like golden hellos, golden handcuffs and large city allowances, and (ii) payments to reward for special circumstances, like voluntary retirement schemes (VRS), etc. Besides, ‘overtime payments’, ‘attendance bonuses’, ‘shift pay’, ‘clothing allowances’, ‘Christmas bonus’, ‘honoraria’, ‘payment for qualifications’, ‘pay for person‘, ‘pay for excellence’, ‘managerial compensation and rewards’, ‘sales force incentive programmes’, etc. have also been discussed. Thus, paying for competence and performance plays a significant role in making an organization a success. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.

Pages: 23

Since the success of an organization depends, to a very large extent, on how well it administers and controls its salary costs and conducts salary reviews, the present chapter discusses the concept, meaning and various categories of ‘salary costs’, followed by a brief discussion on ‘salary budget’. Then comes a discussion on ‘salary control’ which includes controlling employment, i.e. number of people to be employed, controlling salary levels, taking care of embedded controls, etc. Then comes ‘salary reviews’ which are also very important as such reviews not only have a consistent approach towards salary increases/decreases but also retain and motivate employees. Hence, having defined ‘salary reviews’, lots of guidelines for the salary review process, ‘how to respond to negative salary review?’, etc. Thereafter, there is a brief discussion on the manager's guide to annual salary review in which five key steps, viz., job's worth, performance of the employee, comparing the job to similar jobs, current and future expectations from the employees and how it all stacks up, have been explained. Next, the discussion on ‘fixing of salary’ which deals with determining the upper and lower limits, takes place. Thereafter, the other related issues, like ‘methods of paying salary’, ‘flexibility’ and ‘process of wage and salary fixation’, have been discussed. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.

Pages: 33

Since employee benefits and services constitute a significant part of total compensation, the present chapter defines the concept, philosophy, definition, objectives and significance of fringe benefits, in detail. Besides, intangible benefits, factors responsible for the need and growth of benefits, benefits policies and practises, planning, designing and administration of fringe benefits, current approaches, factors influencing the choice of the benefit package, reviewing and modifying benefit package, informing the employees about benefit package, factors affecting fringe benefits and services, coverage and classification and types of fringe benefits, etc., have been discussed at length. This is followed by a lengthy discussion on fringe benefits and current practices (Part 2) which have been divided into three categories version, viz., social security, labour welfare and bonus. While this chapter takes care of ‘social security’, the remaining two constituents, i.e., ‘labour welfare’ and ‘bonus’ have been dealt with in Chapter 8. Coming to ‘social security’, first of all, the term has been differentiated with social insurance and social assistance, and then the forms of social security, its scope, social security in India – present status in Indian industries which deals with various Acts passed by the government and recent developments and other developments, and recent biggest labour reforms since 2014 and onwards including various labour codes passed by the Government of India and expansion activities as also management strategy – have been discussed. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.

Pages: 39

While the first category of fringe benefits viz., ‘social security’ has already been taken care of in Chapter 7, the remaining two categories, viz., ‘labour welfare’, and ‘bonus’ are dealt with in the present chapter, which also contains discussions on internal audit of compensation and benefits towards the end of the chapter. Coming to the second category of fringe benefits, i.e. ‘labour welfare’, first of all, its meaning and definition, objectives, significance, principles, etc., have been discussed. Labour welfare work has been divided into three categories viz., (i) statutory welfare, i.e. which is mandatory to be undertaken by organizations because of various directives and acts passed by the Central and State governments, (ii) mutual labour welfare work which is taken care of by trade unions of workers, and (iii) voluntary labour work which is undertaken by employers at their own without any compulsion by the government etc. A detailed discussion on labour welfare work undertaken by various Indian organizations is found in the chapter. Thereafter, recent trends/developments regarding labour welfare work, with lots of examples, have been discussed. The third category of fringe benefits viz., ‘bonus’ has been dealt with in the context of the Payment of Bonus Act, 1965 has also been discussed. The last part of the chapter discusses the internal audit of compensation and benefits. After explaining the planning and definition of auditing, it has been pointed out as to ‘what is done in internal auditing’ and ‘why internal auditing of compensation and auditing processes’. Compensation and benefits structure and internal audit tasks involved, methods of conducting the audit, risks involved in compensation and benefits internal auditing, etc., have been discussed. The chapter ends with the drafting of management strategy in this regard, followed by the chapter review, discussion questions, individual and group activities and case study.

Pages: 37

Both financial or transactional or extrinsic rewards and non-financial or relational or intrinsic rewards are instrumental in motivating employees and are, therefore, important in their own place. But, of late, especially since the 1990s, there has been a shift from sheer economics to behavioural sensitivities. It is because money cannot buy engagement and loyalty, and that non-financial benefits cost organizations little or no money. It is especially for this reason that the present chapter deals with the non-financial benefits. Having discussed, in detail, the role of non-financial benefits/rewards on employee motivation, the various types of non-financial benefits/rewards have been spelled out, followed by a brief note on the planning of non-financial benefits and detailing the most effective non-financial benefits affecting the motivation of employees. Then, there is a discussion on Heineken's refreshing approach to rewards and Hay group findings. Thereafter, non-financial metrics which are the realm of compensation and benefits have been discussed under the sub-heads like dashboards and scorecards and in-performance. The following discussion on intellectual capital assessment and market implications of human capital includes its meaning, motivation to study knowledge and intellectual capital models. Next in line is the discussion on recognition including defining its concept, theoretical background, types of recognition schemes, advantages, designing a recognition scheme, problems involved in the non-financial recognition schemes, etc. Next in line are discussions on praise, learning and development, achievement, value, addition in personality, etc. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.

Pages: 33

Reward management refers to the formulation and implementation of policies, processes and strategies that aim at rewarding employees of an organization fairly, equitably and consistently, keeping in view their value to the organization. The chapter contains a detailed discussion on reward policy under its sub-heads like its objectives, reward policy and levels of awards, reward policy and market rates and equity, reward policy for attracting manpower, reward and retention of employees, reward policy and business performance rewards, reward policy and talent management, reward policy and contingent rewards, reward policy and total rewards, reward policy and assimilation of current employees in revised pay structure, reward policy and transparency, reward policy and flexibility, reward policy and line managers, reward policy and culture of success, intending and preparing for growth, involving investors and auditors, reward policies for new start-ups and high growth organizations, reward policy and joint ventures, etc. The next detailed discussion is on reward management processes, which deals with developing and introducing rewards processes, choosing consultants, help to be rendered by consultants and how to use consultants. Then comes the discussion on reward management procedures which includes under its purview discussion on monitoring the implementation of pay policies and practices. The next discussion in line is on pay reviews, planning and implementing pay reviews, programmes for grading jobs and pay rate fixation, controlling payroll costs, evaluation of reward processes, recent and future trends, reward management, etc. Some other trends have also been discussed. Besides, boardroom pay which includes guiding principles for boardroom remuneration, individual remuneration packages, ensuring stay for the full term, share option plans, performance share schemes, deferred bonus schemes, and corporate governance and boardroom pay. The chapter comes to an end after writing the chapter review,discussion questions, individual and group activities and case study.

Pages: 22

Having explained the concept of tax planning, in general, the chapter discusses the meaning and definition, objectives, needs and types of tax planning, the latter being short-range tax planning, long-range tax planning, permissive tax planning and purposive tax planning. The next issue under discussion comprises the Income Tax Act, 1961 (ITA) in which a taxpayer finds many options to minimize his tax liability like Sections 80C, 80D, 80E, 80G, etc. Similarly, many options (legal) have been incorporated for ‘tax avoidance’. The difference between tax planning and tax management has also been clarified. Several other related terms have also been explained. Such terms and issues also include advance tax, assessment year, territorial jurisdiction, previous year, person, assessee, non-resident, fringe benefits, refunds, appeals, tax to be paid, penalties, offences and prosecution, etc., which are in abridged forms, as per IT provisions. Certain income tax changes have been approved for the assessment year 2023–2024 like the two systems, viz., ‘Old’ and ‘New’, an example of income tax calculation under the new systems has also been mentioned in Appendix 11.1. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.

Pages: 30

Understanding how to develop and optimize the design of total compensation and reward within global organizations is a much sought-after skill in the arena of HRM, as it is a complicated issue. The first issue is that of ‘Staffing’ the international organizations operating overseas in any one or more than one of the three methods, viz., (i) Home-country or parent-country nationals (PCNs/expatriates), (ii) Host-country nationals (HCNs) and (iii) Third-country nationals (TCNs). All three types have been explained in detail. Then the four types of international organizations, viz., international corporations, multinational corporations (MNCs), global corporations (GCs), and transnational corporations (TNCs), have been explained. Thereafter, follows the discussion on the aims and objectives and a brief note on factors of international remuneration and then a discussion on factors affecting the design of international remuneration. Approaches to international remuneration also find a space in a brief discussion followed by a lengthy discussion on expatriate compensation which deals with the concept and definition, constituents, like base pay, variable pay, bonuses, allowances, etc., of compensation of expatriates. The issue of payment of taxes by expatriates on their compensation, like tax, protection, tax equalization, net payments, purchasing power of money, fringe benefits, pay for time not worked, etc., has also been discussed. Approaches to determine an expatriate's pay, like the balance sheet approach, flexible compensation approach, localization approach, and lump summing approach, have been discussed. Then, the TCNs’ compensation has been undertaken and discussed at length. Thereafter, the issue of compensation determination during various stages of growth of a company finally becoming a global company has been discussed. Finally, LCNs’ pay has been discussed. The chapter comes to an end after writing the chapter review, discussion questions, individual and group activities and case study.