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Session 27&28 Compensation

The document provides an overview of compensation and benefits, detailing the types of financial and nonfinancial compensation employees receive for their services. It highlights the components of total compensation programs, the determinants of direct financial compensation, and the specifics of executive compensation packages designed to attract and retain top talent. Additionally, it discusses the objectives and classifications of employee benefits aimed at enhancing job satisfaction and productivity.

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rageinvaders72
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18 views13 pages

Session 27&28 Compensation

The document provides an overview of compensation and benefits, detailing the types of financial and nonfinancial compensation employees receive for their services. It highlights the components of total compensation programs, the determinants of direct financial compensation, and the specifics of executive compensation packages designed to attract and retain top talent. Additionally, it discusses the objectives and classifications of employee benefits aimed at enhancing job satisfaction and productivity.

Uploaded by

rageinvaders72
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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COMPENSATION &

BENEFITS
Compensation: An Overview
• Compensation - Total of all rewards provided
employees in return for services

9-2
Bases of Compensation
1. Financial Compensation: can be of two
types
• Direct financial compensation - Pay
received in form of wages, salaries,
bonuses, and commissions
• Indirect financial compensation (benefits)
- All financial rewards not included in
direct compensation
2. Nonfinancial compensation -
Satisfaction person receives from job itself
or from psychological and/or physical
environment in which person works
Components of Total Compensation Program External
Environment
Internal Environment
Compensation
Financial Nonfinancial
Direct Indirect (Benefits) The Job Job Environment
Sound Policies
Wages Social Security Skill Variety
Capable Managers
Salaries
Payment for Time Not Worked Task Identify Competent Employees
Commissions
Health Care Congenial Coworkers
Bonuses Task Significance
Life Insurance Autonomy Working Conditions
Retirement Plans Feedback Workplace Flexibility
Flextime
Employee Stock Option Plans Compressed Workweek
Educational Assistance Programs Job Sharing
Customized Benefit Plans
Telecommuting
Part-time Work
More Work, Fewer Hours

9-4
Primary Determinants of Direct Financial
Compensation
Organization
Compensation Policies
Organizational Level
Ability to Pay

Employee Job Labor Market


Job Performance Compensation Surveys
Skills Direct Financial Cost of Living
Seniority Labor Unions
Compensation
Experience Economy
Legislation
Potential
Pricing
Political Influence
Luck
Job
Job Analysis
Job Descriptions
Job Evaluation

9-7
Executive Compensation

Executive compensation, also known as executive pay, refers


to remuneration packages specifically designed for business
leaders, senior management and executive-level employees
of a company. Executive compensation includes benefits
such as salaries, perks, incentives, insurances etc.

The primary purpose of executive compensation


is to attract, retain, and motivate top talent to
drive company performance, align executives'
interests with those of shareholders, and foster
long-term value creation.
Components of Executive Compensation

Base Salary
The base salary is a fixed annual amount paid to executives for their services, typically
determined by role, experience, and market competitiveness factors.
Short-Term Incentives
• Annual Bonuses - Annual bonuses are cash rewards paid to executives based on the
achievement of predetermined financial or operational targets, designed to
incentivize short-term performance.
• Profit-Sharing Plans - Profit-sharing plans distribute a portion of a company's profits to
executives, linking their compensation directly to the company's financial success.
Long-Term Incentives
• Stock Options - Stock options grant executives the right to purchase company shares at a
predetermined price, providing them with potential upside as the
company's stock price appreciates over time.
• Restricted Stock - Restricted stock refers to company shares awarded to executives with
certain vesting conditions, often tied to performance or tenure, promoting long-term
commitment and value creation.
• Performance Shares - Performance shares are company shares awarded to executives
based on the achievement of specific performance targets over a multi-year
period, aligning executive pay with long-term success.
Components of Executive Compensation

Retirement plans

Health & Insurance benefits

Fringe benefits

Golden Parachute
Employee Benefits
• Employee benefits refers to the indirect
financial and non-financial payments the
employees receive; they could be part of
the employees compensation too.
Objectives of Employee Benefit Plan
• To help in recruitment and retention of employees.
• To enhance the commitment of employees.
• To provide support and balance between the personal
and professional life by recognizing the employee
needs.
• To enhance job satisfaction
• To motivate employees to achieve high levels of
productivity
Classification of Employee Benefits

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