“ Impact on HR practices – Performance management

training and compensation ”

Compensation
Definition :

Compensation is a systematic approach to providing monetary value

to employees in exchange for work performed.

What is monetary compensation :

Monetary compensation, in the context of employment, is money

paid to an employee in exchange for the use of the employee's labor,
as opposed to non-monetary compensation such as health insurance.
There are several different ways an employer can structure monetary
compensation.

How is compensation used?

Compensation is a tool used by management for a variety of purposes

to further the existence of the company. Compensation may be
adjusted according the the business needs, goals, and available
resources.

Compensation may be used to:

 recruit and retain qualified employees.

 increase or maintain morale/satisfaction.
 reward and encourage peak performance.
 achieve internal and external equity.
  reduce turnover and encourage company loyalty.
 modify (through negotiations) practices of unions.

Compensation may also be used as a reward for exceptional job

performance.

Examples of such plans include:

 bonuses
 Commissions
 Stock
 profit sharing
 gain sharing.

What are different types of compensation?

 Different types of compensation include:

 Direct financial compensation consisting of pay received in

the form of wages, salaries, bonuses and commissions
provided at regular and consistent intervals .

 Indirect financial compensation including all financial

rewards that are not included in direct compensation and
understood to form part of the social contract between the
employer and employee such as benefits, leaves, retirement
plans, education, and employee services.

Top three compensation HR practices practiced in many

organizations:

1. Establishing Market Informed Structure and Defined

Compensation Philosophy :
 When clients establish and administer a solid market informed
compensation structure and define their compensation
philosophy to stay current with pay trends, they signal to their
employees that they value them.
 By having a compensation structure in place that is regularly
aged and updated and considerate of market pay (base and
variable compensation) when designing and updating jobs, the
clients greatly increase their chances of retaining their talent.
 Now that the economy is steadily recovering, companies have
more resources and are using variable pay to compensate all
levels of the organization in an attempt to drive high levels of
performance. Additionally, when a compensation structure is in
place and used consistently throughout the organization,
 Making pay decisions for new hires, promotions and equity
adjustments becomes easier.
With this in place, you then have the tools to educate the
candidates and employees on why you pay what you pay as it
relates to various compensable factors.

2. Well Communicated Compensation Plan/Structure:

 Once the compensation philosophy is established and vetted by

executive management, it is critical that HR, the compensation
partner and the management team communicate it to the
broader employee population.
 It is suggested that employees fully understand the overarching
strategy and approach, how it relates to their jobs and what this
means as they promote up through the organization.
  If the compensation philosophy and structure details are not
communicated in some form, the employer puts at risk
employee engagement, which many time leads to turnover.
 Moreover, we live in the information age where employee can
easily access salary information from a number of online sources
and tap into their peer networks as well to see what their
friends and colleagues are making for similar work.
 Keeping employees in the dark about how they are
compensated and why can lead to distrust.

3. Recognition from Management:

 Over the past couple of years, almost every industry is

rebounding and experiencing stronger demands for product
offerings.

 This means that the workforce is working hard to deliver

products in a faster, more efficient and superior manner to keep
up with business requirements.

 The successful execution of such measures requires employees

to go above and beyond the normal call of duty to work on
special projects or think outside of the box to get a large amount
of work done either early or one time.

 When it’s all said and done, employees are aware of the sweat
equity they put into the work, and greatly appreciate a little
something known as recognition from management.

Current Trends in compensation:

It is interesting to track the changes—some quite radical—in the
Indian compensation scene. The following are true of most
organizations today:
 Compensation is now viewed as the total “cost to company,”
(CTC) rather than an employee’s net pay alone. As the
environment gets competitive, such an approach helps
organizations take a holistic view of what could be the costs
and the operating margins.
 Variable pay based on individual performance is the norm, and
a larger percentage of the Indian salary is based on
performance.
 Organization performance also is factored in while structuring
salary increases.
 Some organizations also have implemented highly evolved
systems, such as the “economic value added” (EVA)
framework, ensuring a performance-oriented culture
throughout the organization applicable to all employees.
 Basic, guaranteed pay has seen a gradual reduction.
 Benchmarking against organizations, both nationally and
internationally, has become common.
 Employee stock options (ESOPs) that were, a few years back,
considered as valuable compensation components have
ceased to be so given the erratic nature of the stock market
and the lock-in periods.
 Non-taxable benefits, which increased the net “take-home” of
an employee, are now subject to the Fringe Benefits Tax (FBT),
and so organizations are forced to take second looks at these
components.
 Retirement benefits are left to what is mandated by the
government. Organizations that were contributing to a
superannuation fund for the employee now have to pay the
FBT.( fringe benefit tax )
  Pension benefits and other similar social security benefits are
not on the radar screen of compensation experts in India
today, but this component could be under significant
discussion and speculation in the coming years.

Performance management training

What is Performance Management Training ?

 Performance management training can be regarded as a

systematic process by which the overall performance of an
organization can be improved ,by improving the performance of
individuals within a team framework.
• It is a means for promoting superior performance by
communicating expectations, defining roles within a required
competence framework and establishing achievable
benchmarks.

Why is Performance management training necessary ?

 Focus on performance planning and communication—instead of

just an annual appraisal
• Set clear expectations that improve performance and
productivity

• Communicate with employees regularly and positively

• Uncover the hidden reasons why employees fail

• Avoid the damage caused by jumping to wrong conclusions

regarding employee performance
 • Utilize effective tools and resources to manage employee
performance on a regular basis

Who will benefit from this training ?

• Managers

• Supervisors

• Team leaders

What are the objectives Of PMT ?

• To enable the employees towards achievement of superior

standards of work performance.

• To help the employees in identifying the knowledge and skills

required for performing the job efficiently as , this would drive
their focus towards performing the right task in the right way.

• Boosting the performance of the employees by encouraging

employee empowerment, motivation and implementation of an
effective reward mechanism

• Promoting a two way system of communication between the

supervisors and the employees for providing a regular and a
transparent feedback for improving employee performance and
continuous coaching.

• Identifying the barriers to effective performance and resolving

those barriers through constant monitoring, coaching and
development interventions.
 • Creating a basis for several administrative decisions strategic
planning, succession planning, promotions and performance
based payment.

Top HR practices in PMT :

 Train managers and employees on giving and receiving positive

and negative feedback on an ongoing basis.

 Hold managers accountable for having ongoing conversations

around work and goals.

 Actively seek to align individual goals with organizational goals.

 Encourage employee participation and ownership in the

performance appraisal process.

 Create an environment where together the manager and

employee can question, challenge and discuss goals and
objectives to gain clarity.

 Link the performance management system with retention,

development, and succession planning initiatives. This linkage
explains why specific people advance.
Conclusion :

• Increased focus on driving business results..

• An empowered and engaged workforce

• Foundational knowledge of talent