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Steps in designing Competency-based Pay system:Identify competencies and distinguish between proficiency levels Assess the competency level of job-holders Create pay bands Develop a pay delivery system
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Advantages
Disadvantages
Executive compensation is how top executives of business corporations are paid. The purpose of compensation of an executive is for an individual who is in a management position at highest levels. This category includes presidents vice presidents managing directors and general managers.
Managerial compensation cannot be compared to the wage and salary schemes meant for in other employees in organizations. Secrecy is maintained in respect of executive compensation. Executive pay is not supposed to be based individual performance rather on organizational performance
MEANS OF COMPENSATION
There are four basic tools executive compensation packages in organization. These are: Base salary. Allowances. Incentives. Perquisites.
COMPENSABLE FACTORS
The US compensation institutes Phoenix plan uses compensable factors: Job related experience. Training time required. Frequency of review of work. Utilization of independent choice. Frequency of reference to guidelines. Frequency of work transferred through supervisor Analytical complexity. Time spent in processing information.
INDIAN PRACTICES
Executive compensation in India is built around three important factors. Job complexity. Employers ability to pay. Executive human capital.
Base salary Conveyance Special allowances Gratuity Hra(house rent allowances) Travelling allowances Provident fund Medical claim Bank facility Bonus Providing cars Stocks and share
Basic salary Conveyance Special allowances Gratuity Provident fund H R A( House Rent Allowances) Traveling Allowances Medical claim Bank facility
Two main components of executive compensation package Base salary and Cash Incentive/ Bonus Long-term Incentive Compensation Two main elements drive compensation package Competitive marketplace Complexity of leading IBM
options
employment, promotion, renewal or fully vested.
Bases for Determining Pay Levels Job or Skill Performance or Seniority Individual performance or Group performance Short-term vs. Long-term orientation Risk Aversion or Risk Taking Compensation Level or Market Internal Equity or External Equity Hierarchy or Egalitarianism Fixed Pay or Incentives Quantitative or Qualitative Measures of Performance
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Design of Compensation System Bonuses or Deferred compensation Intrinsic Rewards or Extrinsic Rewards Administrative Framework Centralized pay administration vs. Decentralized Open pay or Secret pay Participation or Non-participation of employees in Pay Decisions Bureaucratic pay or Flexible pay policies
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Individual based compensation Risk sharing Market driven pay Higher discretion Aggregate incentives Time orientation
Base pay/Salary
Benefits Short-term pay incentives Long-term pay incentives
At Start-up stage
At Growth stage At Mature stage At Decline stage
Components of total compensation and rewards strategy:Audit of current programmes Internal business factors External environmental and market factors
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