Module 3. Chapter 3: Compensation, Benefits and Rewards

1. Module 3. Chapter 3: Compensation, Benefits and Rewards

of it, that is talent development. Now we will be starting with compensation, rewards, and benefits. So when we say compensation, rewards, and benefits, we need to understand the methodology or what the philosophy and objective are while designing this strategy. Why is this important? There is a gamut of rewards within an organisation so that we can maximise the support in the execution of an organisation deal or strategy. So, whenever we request employee assistance or resources, such as their skill set, we must provide them with the compensation, rewards, and benefits necessary to meet their personal needs. And if we are able to satisfy their personal needs, then we will be able to get the maximum support from them in order to execute our organisational strategy. So what is the objective when you are designing your compensation strategy? The objective is to shape the employee's behaviour or mould the employee's behaviour as per the organization's culture to achieve the desired goals at a desired time. Or you can do that. There are three principles to it. One is a membership behaviour in which employees want to join and stay with your organization. So what are the benefits or what kind of environment and culture are you giving to your employees so that they look forward to joining and are inclined to join and stick to the organization? Then consider task behavior. A task that is assigned to the employee is a task that is assigned to the employee. Does he have the correct skill set, competency knowledge, and aptitude for it and is he doing it wholeheartedly with his full effort and is he able to complete the task as per the desired framework or as per the desired results within the desired time and following the desired process and using the desired resources? So all these steps are met when the employee is doing the task that has been assigned to him, which is known as the correct task behavior. The final and most important aspect is organisational citizenship behavior. So, is your employee motivated enough to support the organization's success, or is he simply someone who is ready to work nine to five and go home without much fuss? Whether the employee is getting ready, the organisation is achieving results at the end of the year or not. He or she is just concerned with the task assigned to him or her and the salary that they are getting at month's end. To get the organisational citizenship behavior, an employee has to be motivated enough to see what he can do to get the results of what he's doing that's adding value to the organization. Is he putting his mind to it, saying, "OK, this is a task that has been assigned to me within the desired framework and within the desired time." But if we follow this process and share it with the manager, the process becomes more effective and more time saving.Is he putting such thoughts into his work, or is he saying, okay, this is a great idea that the organisation has come up with, but I also have this idea, which makes the idea better? So he incorporates those thoughts into his ideas, making him a value contributor, or as I like to call him, an exceptional value contributor in the organization, which leads to organisational citizenship behavior. If you're able to satisfy these three things while designing your compensation strategy, you will be able to attract, retain, and motivate employees. Now there are a few strict rewards and there are few extreme rewards while you're designing the compensation strategy in drinks. Rewards are related to the job itself. That is a job task. What is the job the employer is doing? Is he meeting his personal accomplishments and how you can do that task while doing the whole job? Is he employed doing the whole job or even if he is not doing the whole job, he knows that, okay, I'mdoing this part of the job and this part of the job will contribute to the bigger picture. But if I'm doing a job A, then that will impact job B. What is the job B, and then what is the job C? And in total, what are the total jobs and where does my contribution lie? Then complete tasks with significant future value. So whatever work I am doing in the organization, am I happy with it? Do I feel pride in doing that work? Can I go to my friends, family, and peers and tell them I am the HR manager of this company? This is my role and responsibility. These are the people I work with. This is what my organisation does. So I'm very happy with my job and the work that has been assigned to me. It's very challenging, very diversified, and has a lot of growth opportunities. I'm happy with the work. Then comes the scale variety, utilising many skills. The work that has been assigned to the employee means that we'll be able to utilise the full potential of the employees or employees just working on one skill set, not able to work on different skill sets, allowing them to add more knowledge to his career.So, are we utilising or assisting employees in continuously learning to increase their skill set and proficiency level so that they can work on a variety of tasks that will help them advance in their careers? Then come see the job attorney. That is the freedom of art. Are we providing freedom of art for employees' feelings, making them empowered to do their work? Or are we micromanaging them and telling them, "This is the work you've been assigned, this is the process, and this is the end result." Don't put your whole brain into it. I will check after half an hour what you have done. That's it or I'll be telling them that okay,this is the work assigned to you, please complete it and by this time, that's it. And by the end of the time, you can submit it to me and you can tell me how it is. That's it. So which way do you think employees would feel more about day one or day two of your feedback? Self monitoring?Are we providing that kind of a cultural process for our employees where they can monitor their own progress, identify their feedback areas, and what is working well for them? They can see that they are working on a project, and when they're close to the deadline, they do have this anxiety, and they try to make mistakes, start making mistakes. So this is the area that they need to work on, that they need to be very comfortable working near deadlines, or they have handled a project recently in which there have been a lot of mistakes and they were not able to manage the client. They were able to monitor, "Okay, this is what I did wrong and next time I have to improve on it." So, do we provide that kind of a processor environment for our employees where they can self-monitor their progress for their own career development? Once we are able to provide this, it leads to job enrichment in total because employees feel accomplished with pride and would like to stick to the organization. Then come to see the extremes of one, which is related to job context, to complete the job. These are the benefits you get. So it could be changed to direct pay and indirect pay later. I will discuss direct pay and indirect pay in the following slides in more detail. So let's park this slide over here. Right now, there could be some factors that could affect your compensation strategy. There could be some internal factors within your organization, and then there could be some external factors. So, first, let's talk about the internal environment, sector growth, which sector your organisation is in, and what your organization's growth rate is. I can give an example here at a manufacturing firm that has been in business for 20 to 30 years. They are very stable and their growth rate is now saturated. They do not see any further growth rate.So the employees that they hire are also in a mature market. Now the growth rate has matured. Obviously, the compensation would be the average market data of the salary, the average industry salary, and your growth would be very minimal. It would be because everything is saturated. They are not seeing any big changes. So in this state, your compensation strategy would be very mature. Culture. What is the culture of your organization? If the organisation culture says that they are looking into aggressive sales, then their sales commissions would be very high and their basic salary would be a little less. Everything is based upon how much the sales figures are as a percentage of the sales figures would be the employee's salary. However, if the organisation is into organic sales, not aggressive sales, then the base pay would be high and the incentive based on customer satisfaction and client retention. So what is your organization's culture that decides your compensation strategy? If your organisation has a millennial, then they are looking for more cash on hand and less of what they are getting as a retirement benefit. However, if your demographic is at the age of 40 to 50, then they are looking for less than cash in hand. They're fine with less than cash in hand, but they're looking more forward to retirement funds because, as they're approaching towards it, they would like to see what they're getting at the end of their retirement so that they can work on their savings. Then comes the union. If your organisation has a union, then it means that what you're providing in your compensation plan has to be standard overall and it has to meet what your competitors are paying, because if the competitors are paying more, your union may be unhappy about it and may fight for it. So you have to see what the industry trends are and it has to be standard and it has to be a little variation of your compensation strategy. It will impact a lot on your budget, so it has to be strictly monitored and it has to be strictly negotiated with the union. Then comes the nature of the work. In what kind of environment does the employee work? This will impact your compensation. If employees were working in their minds or in a hard situation, then the compensation of these employees would be very high as compared to the employees who are doing a regular test job. If employees were doing the night shift, their compensation would be higher as compared to someone who was doing a regular morning job. So these factors affect your compensation strategy. Then comes the external factor of the economy What is the growth rate of your country? The country's GDP is improving, which means your organisation would be doing better most properly. If your organisation is doing better, then obviously you would like to reward your employees accordingly. It depends upon the demand and supply chain. If the demand is higher and the supply is less, then you have to pay high to get the labour or to get the right talent. If it's a wiser decision, then you have to pay as per the average market rate. And because the supply is high and the demand is low, you would be able to get a decent talent at a minimal cost. Your competitors are paying to get the talent to attract the talent plays a pivotal role in your compensation strategy. If they're paying high compensation, then your compensation strategy has to be aligned with it to get the right talent. On board, your compensation strategy will be affected by the prevailing loss. If the loss changes, then your composition strategy or the composition plan has to be aligned to it. Then comes the retirement plan. It has to ensure that the employee wants to retire. It has to be in line with the retirement plan based on the government. Or if you have, if you're providing something additional to employees based on their demographic, then you are giving them greater benefits. So all these factors affect your compensation strategy. Now, once you're designing the compensation strategy, you have to show that you're meeting the mass flow hierarchy of needs. I will start from the bottom of the page. It talks about the basic needs of employees. If you're not able to meet the basic needs, the employees will not be looking forward to your organization. That is, the compensation has to meet the basic needs of food, warmth, and a house. Then your job has to be stable enough so that the next day that they come to the office, they know that their job is there. They need not to be insecure about whether their job will last for next month or whether they should start looking for a job. Once you are able to fulfil basic needs, then you have to meet psychological needs. So is the job providing them with the social value of personal accomplishment where they feel yes? I have accomplished something and I can share it with my family and friends or yes.I do have that proper work-life balance, yes. I am able to complete my work on time and go home and spend some time with my family on weekends. Take leave. Go on a vacation. So are we able to provide such a psychological needs?Then comes the self-fulfillment needs in which we are able to leverage one's full potential and give them an environment where they can share their creative ideas. The organization So, in order to consider employees as business partners in the organization's growth, our compensation strategy must be geared toward meeting all of their needs. Now, once you have decided on your compensation strategy philosophy, you have to establish job words for each job in your organization. And how are you going to do it? Let's discuss it. First you have to analyse the job. We can analyse the job in four different ways, which we will be discussing in the following slides in more detail through PAQ critical,incident, competency-based, and functional job analysis. Once we have analysed the job, then we will write the job description in which we will write what the title of the job is,what would be the day-to-day responsibilities, and under what working conditions the employee would be working. The job specification for these roles and responsibilities, what qualifications, experience, and competencies this employee should already have so that they can complete these responsibilities as per the desired results. Then what would be the baseball method? We can get the bestpayment method through three different mechanisms. That is market pricing, job evaluation, or pay for knowledge. In the following slides, we will be discussing job analysis and the baseball method in more detail. So let's start with job analysis. The first one is the position analysis questionnaire, in which we will do all the jobs in the organisation and, on different parameters, rate each job. So, giving an example of information input, let's say that let's take a job or finance. If they have to do their job,what information do they need? Is it that they require a lot of information or complex information, or do they require simple information, and how much information do they require? So this depends. This would be the same parameter we use for the other roles in the organization. The information that they are processing is similar to a mental process; is it simple to process, complex, or average? It's not that easy. It's not that difficult. Then work output. What is the result that we are getting out of their input? Is it easy to do output? not affect much of our overall goal. Also, a very important output which affects the overall goalrelationship with other people is that this person would be dealing with the internal and external stakeholders, customers, clients, board members, or it's just an individual contributor role and would be dealing with the limited people in the organisation job context overall. So overall, how is the job context? Is it complex or is it average that it's a complex job context? It's a simple job context, and if the organisation wants to define any other characteristics, once we've done all of these things for all of the jobs, the parameters for all of the jobs, we can define which job is very important for the organisation and rank them in order. Next comes the critical incident method, in which for each job we specify the task statement that describes the most important activities that they would carry out for the success of the job. So these are the critical incident statements that help us to list out which jobs are important for the organisation and where they stand in the hierarchy of the organization. Then comes the competency-based analysis. This is majorly used in the IT industry in the competency space industry to focus on identifying the key competencies required in performing the job versus the task at work. PAQ and critical incident methods are majorly used in manufacturing sites, but competency-based analysis is majorly used in the US on the service side of the organization. Then comes the functional job analysis. This is being used. I know one organization, Starbucks, who is using it. So, resulting in a task statement comprised of four components: who will perform this task, to whom for what they will be performing this task,what resources are required to perform this task, and what is the ultimate outcome of this task? Based on these four questionnaires, they analyse their age and job in the organization. You have read the job analysis, you have written the job description, and you have tried the job specifications. Then you write the baseball. That is what you will be paying this employee who stands at this road corner. You can get it in three ways at market pricing. So, through third party vendors like aone way tasks whatsoever, you can get salary survey data to determine the pay scale in line with the market competitiveness. So what is your competitors' where you do not get it? This is competitive data, but you get average data. So, based on the average data, you can determine what you will pay your employees for such a position. Then comes pay for knowledge in which you will define your salaries based on the competencies and skills required for that role. If the competencies are not much and the proficiency level is not high, then obviously the basement would be low. However, if the competencies and proficiencies are high, then the salary would go higher. Then comes the job evaluation. So you can evaluate each job in two ways. That is a quantitative and non-quantitative method. If it is a non-quantitative method based on each of the descriptions, you will define the salary range and if it is a quantitative method, then you will assign a factor or a point to each salary to each position on different factors and some of the factors. Based on the sum of the factors, you will pay the salary to the employees. Now let's discuss direct and indirect pay. As I've mentioned in my previous slide, direct pay There would be a first fixed salary basis salary, which I assume that he or she would be getting at the end of every month. Then comes the performance pay plan. This could be the individual's short-term plan or an individual's long-term plan. Your individual short-term plan could be based on your performance and your seniority in the organization. It could be a lump sum, a merit bonus, or an incentive. It could be a commission based on your salary and piece rate in the manufacturing firm based on the standard piece rate. If you manufacture 600 pieces, you will get this as your commission. However, it could be based on the quality. If out of 600, 500 meet a quality standard, then this is what your commission would be. Then, organise short-term incentives. It could be a goal shared that is single or multiple. So, it is that you are doing a project with your team. So, based on your individual performance, you get some commission and then the second bonus is based on your total team performance. Then profit sharing is based on the current deferred and combined. Giving an example, you are a project manager for a construction site. As soon as the organisation gets that construction site project, you will get a certain part of the profit. This is the current profit. Now deferred is it says that once the project is completed and delivered to the client and the client makes a payment, then you will get the commission. So this is deferred in the case of a combination. It would be a combination of the above two. So, if you win the project, you will receive a small commission at the start of the project and the remaining commission once the project is completed. So that is a combination of the above two. Then there's a long-term reward plan. It's based on the employee stock option plans. So there are different stock option plans, such as employee stock bonus plans, employee share purchase plans, employee stock option plans, and phantom shares. These are the plans. These are the plans in which employee salaries is less.However, the shares are being rewarded to the employees to retain them for a longer period of time and to motivate them for the organization's growth. If the organisation grows its shares, which leads to better stock options. In terms of indirect pay, it would have different benefits that would not affect your salary. However, it meets your personal needs. As an example of health and business benefits, So insurance is a safety or a security that, if God forbid, something happens, then the organisation is there to pay my medical bills. The Employee Assistance Program In the case of this anxiety or personal stress, you can speak; you and your family members can speak to the counsellors; you can talk to them in a short time that it's The yoga sessions and fitness competitions ensure that employees are healthy and their productivity increases and absenteeism is reduced. The retirement plan is a different providence fund for NPSand graduate educational development programs. The organisation nowadays pays the tuition fee or the reimbursement fees and employees and enrols them for the partial college fee and then enrols them for this management executive development program. time off for sick leave, vacation, personal leave, public holiday briefing leave, marriage leave,maternity leave, etc., so these are the time off for pay per quizzes and employee services. Giving a free cap facility or subsidised cap facility, giving a free parking facility, or giving a free meal service as precautions to an employee service working condition will enhance I'm looking forward to working from home or with a flexible schedule. Company culture is company culture. Teamwork is very positive, and there is an open door policy. So these are the indirect ways that millennials look forward to and that help them stay with the company. So once you're designing your compensation philosophy,it has to be in line with the organization's overall value and budget. It has to be as per the prevailing laws and be preferable for employees and the organization, both as per the employee needs based on culture, demographic and industry trends. So you have to see what your industry is paying. So it has to be in line with it or greater than that, not less than it, in case you want to attract that to it. So this is all about composition for me.

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