CHAPTER 11 : Establishing strategy pay plans

The chapter talks about rewarding employees in terms of Compensation. The main factors in determining pay rates are : a. Direct financial payments i.e. Salaries etc. b. Indirect financial payments i.e. Medical insurance etc.. There after the chapter talks about Establishing Pay rates which comprises of 5 steps as follows : a) Salary surveys that includes phone surveys, internet surveys, formal surveys or utilizing commercial, professional, government job salary surveys. b) Job evaluation which is a systematic comparison done in order to determine the worth of one job relative to another based on compensable factors. Various job evaluation methods are available for example, ranking, job classification etc. c) Compensable elements of a hob such as skills, efforts, etc.

d) Assigning pay rates: First, jobs are grouped into pay grades to streamline the process and those groups are assigned pay rates according to the effort required, skill-set required, etc. e) Price each grade and fine tune wages: Each job is different, even if they are in same pay grade group, so each of the job is assigned a special grade with the help of wage curves, and then we fine tune the pay rates. Then we talked about pricing managerial and professional jobs where we understand that managerial pay consists of base pay, short term incentives, long term incentives, executive benefits and particularly at the top levels job complexity becomes a thing to focus upon. Then comes the topic of paying jobs based on competencies. Most of the employers now days are focusing more on paying an employee based on the competency the job requires. Broad banding : Consolidating several rates and ranges into a few levels or bands, each of which contains a wide range of jobs in salary levels. It encourages employees to move freely from job to job and facilitates implementing team based high performance management systems. There after chapter talked about comparable worth which refers to the method of paying the employees the same amount of money only if their work is comparable and competencies are just about the same, not just because their role in the company is same. Board of directors need to oversight the executive pays as now a days excessive remuneration is given to top executive jobs, which is an unhealthy practice if the persons competency level and job requirements are not worth it.

Chapter 12: Pay for performance and financial incentives

1. Money and motivation: In order to learn how to make effective financial incentive plans we need to learn the relationship between money and motivation: a) Maslows hierarchy of needs: It explains the five types of needs that people exhibit and we tend to fulfill the basic needs first and the niche (high end) needs later, only if we are satisfied with our basic needs. b) Hertzbergs principle: Best way to motivate someone is to organize the job so that it provides the feedback and challenge that helps satisfy the persons higher level needs. c) Vrooms expectancy theory: A persons motivation depends upon expectancy, instrumentality and valence. 2. Individual employee incentives and recognition programs: a) Piecework: It is an incentive plan in which a person is paid a sum for each item he or she makes.

b) Merit pay: It refers to any salary increase awarded to an employee base on his or her individual performance c) Non financial and recognition based awards: These are very important and include awards in the form of employee recognition, gift certificates, individual travel, etc. 3. Incentives for salespeople: Salespeoples incentives are different from normal employees as it depends upon the sales commissions that they earn. The percentage in the form of commissions can vary from 0% to 100%. On average, salespeople at high performing companies receive 38% of their total cash compensation in the form of sales related variable pay. 4. Incentives for managers and executives: a) Short term performance incentives: The bonus plans aimed at motivating managers short term performances. There is always a combination of individual performance and organizational performance. b) Long term performance incentives: Stock options, golden parachutes and stock appreciation rights.

5. Team and organization wide plans: It has always been a haunting question that team members should be rewarded based on individual and team performance. Organization wide plans are those plans in which all or most of the employees can participate. These include profit sharing plans, gain sharing plans, Scanlon plan, etc. 6. Designing effective incentive programs: Five important building blocks include: a) b) c) d) e) Determining whether using incentives makes sense Linking the incentive with your strategy Making sure the program is motivational Setting complete standards Being scientific in analyzing the effects of the incentive plan

Chapter 13: Benefits and services

1. Managers should understand the benefits picture today: Benefits are a very important part of the employees incentive plan. The health care costs now days are plummeting and the benefits in general should take into consideration the inflation in the country.

2. Pay for time, not worked benefits: Common benefits provided in India are long-term social security, compensation in case of disablement and health care. The common laws for this matter do not usually include officers/ managerial employees. There are various laws like Employee Provident Fund Act, ESI act, payment and gratuity act, etc.

3. Insurance benefits: Workers compensation laws aim to provide sure, prompt medical benefits to work related accident victims or their dependents regardless of fault. Hospitalization, health and disability insurance costs are rising fast, and most employer health plan provide at least basic hospitalization and medical and surgical insurance for eligible employees. Many employers provide these plans via preferred provider organizations or health management organizations. 4. Retirement benefits: With the rising rate of inflation, everybody needs to secure the future income and thats why retirement benefits are very necessary now days.

5. Personal services and family friends benefits: These include credit unions, employee assistant programs and subsidized child care and elder care.

6. Flexible benefits programs: Flexible benefits are also known as cafeteria benefits. One example of Infosys Ltd. Can be given here as employees are presented with a choice of benefits and they can even choose what percentage of what benefit they want more or less. This is called a basket of allowance and it can be customized on employees wish.