Compensation Management

Preparing Salary Matrix

• Salary Matrix is a chart that can be used to determine the annual salary award & rate of salary progression of an individual Employee.

• A Salary Matrix allows 2 variables to be taken into account in deciding the level of award –

• The individual’s performance rating & • The position already attained within the salary range.

• Ex: An individual with a Fully acceptable performance rating could receive a 5% increase when at the Bottom of the range, a 3% increase at the mid-point & 1% above the mid point.

RATING FOR OVERALL CONTRIBUTION

Salary Position in the Market

If salary is currently below market- median range, ASR increase will be in the range…

If salary is currently at market- median range, ASR increase will be in the range…

If salary is currently above market- median range, ASR increase will be in the range…

Outstanding 8% to 10% 7% to 9% 6% to 7.5%

Highly- effective 5% to 7% 4% to 6% 3% to 4.5%

Effective 3% to 4.5% 2.5% to 3.5% 1% to 2.5%

Needs improvement 0% to 2% 0% to 1.5% 0%

Unacceptable 0% 0% 0%

Steps in preparing a Salary Matrix

Develop a matrix that lists each grade, the positions included

in each grade & the no. of levels considered appropriate for

each grade.

Then determine salary ranges for each level.

Each year, salary schedule should be reviewed to see whether

it needs adjustment.

Importance• A salary matrix can provide a relevant structure by which to

assist a human resource department in establishing appropriate

pay for both new hires & tenured employees.

• The employees will know how their pay fits into the schedule

as well as their opportunities for future pay hikes.

• The staff will also see that the manager’s approach to setting

salaries is unbiased.

• A salary schedule provides essential structure for practices that

plan to expand or merge

Government Regulation on compensation

The 3 important laws affecting wages are:

Davis- Bacon act.

Walsh- Healey Public Contracts Act

Fair Labor Standards Act

Davis- Bacon act.• The act was passed in 1931.• It requires contractors & sub- contractors with contracts in excess

of $2000 with the federal government to pay their workers a minimum wage that at least equal to the local prevailing wages & to provide them with the local prevailing benefits

Walsh- Healey Public Contracts act• The act was passed in 1936.• It applies to contracts over $10000 who are involved in either

manufacturing or providing goods & services to the U.S government.

• The firms must pay their workers the federal minimum wage for the first 40 hours they work in a particular week & 1.5 times the minimum wage for any additional hours they work during the week.

FLSA

The objectives of this act involves:• Minimum Wage.• Child Labor• Exempt & Non- Exempt status.• Overtime• Compensatory Time – off• Independent Contractor regulations.• Equal pay & pay Equity,

Fixing Pay

Wages & Salary incomes in India are fixed through several institutions. They are:• Collective Bargaining:

• It relates to those arrangements under which wages & conditions of employments are generally decided by agreements negotiated between the parties.• Unions are concerned with:

a. General level of wage rates

b. Bonus, incentives & fringe benefits, Administration of wages.

• Industrial Wage Boards.• Wage boards are of 2 types

a. Statutory Wage Board: It means a body set up by law or with legal authority to establish minimum wages & other standards of employment which are then legally enforceable in particular trade or industry to which board’s decision relate

b. Tripartite wage Board: It means a voluntary negotiating body set up by discussion between organized employers, workers & government to regulate wages, working hours & related conditions of employment.

Wage board decisions are not final & are subjected to either executive or judicious review.

• Pay commissions:• 1st: 1946- Conditions of service of central govt

employees• 2nd:1957-norms for fixing a need based minimum

wage setup.• 3rd:1973- System in which pay adjustments will

occur automatically upon an upward movement in CPI.

• 4th: 1986-Examine structure of all central govt employees, including those in union territories.

• 5th: 1996-Recommendations regarding restricting of pay scales.

• 6th:2006

• Adjudication by Courts & Tribunal:• Courts & Tribunals were primarily intended to

deal with the settlement of industrial disputes, in practice, wage fixation has become an important element in their work & functioning.

Significant Compensation Issues

• Issue of Equal pay for Comparable worth

• Problem of measuring comparability.

• Issue of low salary budgets.

• Issue of Wage- Rate Compression

Compensation as Retention Strategy

• Salary & Monthly Wage.

• Bonus.

• Economic Benefits.

• Long –term Incentives

• Health Insurance.

• After Retirement.

Thank You