Compensation Management

Before reading the compensation management topic, one should know the impact of compensation system on the organisation and its gravity if it is not managed effectively. First and last word on compensation management is that, it is core and direct influencing factor on employee motivation and other factors succeeds.

Employees, in exchange of their work, generally expect some appreciation. Money is considered as the most important motivating factor for employees, though non-financial incentives work efficiently. The goals of compensation management are to design the lowest-cost pay structure that will attract, motivate and retain competent employees. Here the term compensation and salary of employee are one and same.

Before knowing about Compensation management one must know the labor laws of the country which are governing employees compensation or remuneration system. International Labour Organisation (ILO) made conventions on labour welfare especially on regularly in payment of wages & salaries with minimum pay for stipulated working hours. In accordance with the conventions & recommendations of ILO every country has established labour laws and enforced, who ever contravene them shall be liable for penalty or punishment under serious cases both may be awarded. Naturally judiciary of the concern country is watchdog for dealing labour issues.

India is one of the countries with very high population and stands second in place followed by china. In the India, parliament has enforced four key laws on payments and compensation to workers, first one is The Payment Wages Act was enacted in the year 1936 for the purpose of payment of wages regularly to the workers within time limit not exceeding wage period of one month with out any deduction by his employer. Deduction form salary or wages can be done in case of absence, loss or damage, fines and advances etc. Deductions shouldn't exceed 50% from wage.

Second is Minimum wages act 1948 for the purpose of ensuring minimum payment for particular type of jobs in different sectors and industries according to stipulated working hours prescribed by the law.

Normally eight hours is stipulated working time in almost all countries, above stipulated time if any worker is made to work, his employers has to compulsory pay overtime, if not it shall be treated as unlawful by the court of law for which it may impose penalty. Other side of coin it may create serious dissatisfaction among workers and make them feel that they are being exploited which may lead to agitations eventually may lead strikes which is ultimate weapon in hands of workers, ultimately organisations may chose for lockout which is the weapon in hands of employers, altogether may create industrial disputes. On this type of issues sometimes law may support worker agitation for not complying payment of wages by their employer in accordance with wage laws and in some cases law may support employer if workers agitation causes serious damages to organisation.

The third key law is workmen's compensation act 1923, the primary objective of this law is to have any compensation by an employee from his employer if any accident occurs, which make permanent are partial disablement. This law defines under schedules various types of accidents certain to happen to worker and percentage of compensation paid to him in accordance with his age.

The fourth key law is Equal Remuneration Act, 1976, according to the section 4 it is the DUTY OF EMPLOYER TO PAY EQUAL REMUNERATION TO MEN AND WOMEN WORKERS FOR SAME WORK OR WORK OF A SIMILAR NATURE. According to Section 3, a settlement arrived at between the management and the employees cannot be a valid ground for effecting discrimination in payment of remuneration between male and female employees performing the same work or work of a similar nature; Mackinnon Mackenzie and Co. v. Audrey D’ Costa, (1987) 2 SCC 469.


The Adamson Act was signed by President Woodrow Wilson in 1916. The law established for railroad workers an eight-hour workday with additional pay for overtime work. This was the first federal law that regulated the hours of workers in private companies in the U.S. The 1938 Fair Labor Standards Act made the eight-hour work day a "legal work day" work throughout the nation.

The Fair Labor Standards Act was passed in June 1938. The main objective of the law was to establish minimum standards of living necessary for health, efficiency, and well being of workers. A major provision of the act was the establishment of a minimum wage, initially 25 cents an hour, along with a maximum workweek of 44 hours.

"The most important thing is to note that compensation plays a major role in attracting talent from the market and compensation system of the organisation is Key factor for creating employer brand, which is most important factor for attracting talent people. Having talent people for the organisation is a major asset for the organisation development"

Supreme Court - case laws

State of Mysore Vs P. Narasingh Rao, AIR 168 Sc 349

Markandeya Vs State of Andhra Pradesh, AIR 1989 SC 1308

Educational qualifications can be made the basis for classification of employees in the matters of pay scales, promotions, et cetera. Higher pay scale can be prescribed for employees possessing higher qualifications.

Importance of employees compensation or reward system

    • Compensation or reward system of the organisation is most influencing factor for employee motivation, must remember.

    • If we observe history of causes of industrial disputes, employee compensation a reward system issues were the main reason in most cases.

    • good compensation system of rewards system in the organisation will minimise industrial disputes and helps in maintaining peace and harmony within the organisation.

    • Compensation system plays a key role in employee attrition.

    • Compensation system mostly influences retention of employee in the organisation.

    • Most of employee satisfaction depends upon compensation a reward system of organisation.

    • Effective compensation system builds employer brand, which plays a key role in attracting talent.

    • Effective compensation system makes employee to put his full efforts for achievement of organisation's goals and objectives.

    • Effective compensation system builds initiative towards work, which in turn enhances the productivity of organisation.

    • Effective compensation makes employees feel belongingness towards the organisation.

The HR Compensation Analyst assists with producing the organization's compensation program. Their primary responsibility is the research and study to determine appropriate employee compensation. In addition, they evaluate predicted market trends, recommend revisions to company compensation plans, review job descriptions, and assist the Compensation Manager.

The HR Compensation Manager directs the organization's compensation program. Their responsibilities include developing job descriptions, analyzing jobs, conducting salary surveys and job evaluations, and establishing a salary structure. They suggest revisions to the compensation plan and procedures, administer bonus and incentive programs, and manage the performance appraisal system.

Compensation: an overview

Compensation management is one of the most challenging human resource areas because it contains many elements and has a far-reaching effect on the organisation's goals. The purpose of providing compensation is to attract, retain and motivate employees. There are two main types of financial compensation.

    1. Direct financial compensation - the pay that a worker receives as wages, salaries, commissions and bonuses, and

    2. Indirect financial compensation - all financial rewards that are not included in direct compensation (i.e. benefits).

An example of direct financial compensation is the money the worker receives as wages at the end of the week, or as a salary paid at the end of the month. Many companies pay salaries straight into the employee's bank account.

An example of indirect financial compensation is when the company contributes to an employee's housing subsidy or a pension plan.

Not all compensation is financial. A worker can get great satisfaction from his work and enjoy the environment in which he works. This is called non-financial compensation and cannot be counted in terms of money. For example, a veterinarian might enjoy working outside, going to farms to treat animals and deliver calves. A publisher might enjoy the challenge of producing books that will enrich people's lives.

It is not always possible to provide a perfect pay package (the agreement between the organisation and the employee about how much money and other benefits the employee will receive). Because of this, some companies allow their employees to work out their own compensation packages.

India: Central government employees draw more salary along with benefits than state government employees, compared with private sector employees. There is a particular pay structure fixed for every government employee in India which is not in private companies. The pay structure of government employees in India is as follows

Employee salary : Basic pay + Grade pay + Dearness Allowance (DA) + House Rent Allowance (HRA) + City Compensatory Allowance (CCA)

The details of above said components of salary of government employees are as follows.

    • Basic pay: The primary component of employee salary which is bases for calculation of other components in the employee salary.

    • Grade pay: An amount which is fixed by the government on the range of employee in government hierarchy. (for example; Group A officers have high grade pay than Group B officers.)

    • Dearness Allowance: Certain percentage of the amount on basic pay. This percentage varies from state government to Central government employees. An allowance paid to employees on the basis of consumer Price index. Consumer price index denotes the cost of the products which influences by the inflation. (in simple terms cost of living) At present, 41% is for state government employees and 72 % is for Central government employees as dearness allowance on their basic pay.

    • House Rent Allowance (HRA): Certain percentage of the amount on basic pay. This percentage varies from state government to Central government employees. This allowance is paid to employees are meeting house rent expenditure.

    • City Compensatory Allowance (CCA): An allowance paid according to the city or town where employee do the job and the purpose of this allowance is to compensate high cost of living especially in cities like Mumbai, Delhi, Calcutta and Hyderabad et cetera . Government decides the amount of allowance to be paid to employees on basis of city or town.

Employee compensation / Remuneration – Influencing Factors

Objective of Compensation

The objective of the compensation function is to create a system of rewards that is equitable to the employer and employee alike. The desired outcome is an employee who is attracted to the work and motivated to do a good job for the employer. Patton suggests that in compensation policy there are seven criteria for effective­ness. Compensation should be:

    1. Adequate Minimal governmental, union, and managerial levels should be met.

    2. Equitable Each person should be paid fairly, in line with his or her effort, abilities, and training.

    3. Balanced Pay, benefits, and other rewards should provide a reasonable total reward package.

    4. Cost-effective Pay should not be excessive, considering what the organization can afford to pay.

    5. Secure Pay should be enough to help an employee feel secure and aid him or her in satisfying basic needs.

    6. Incentive-providing Pay should motivate effective and productive work.

    7. Acceptable to the employee The employee should understand the pay system and feel it is a reasonable system for the enterprise and himself or herself.

Principle Of 'No Work No Pay' Applies When Employee Was Not Kept Away From Work By Any Order Of Employer: Supreme Court of India

[Read Judgment below]

Chief Regional Manager, United India Insurance Company Limited vs. Siraj Uddin Khan

"Nobody could be directed to claim wages for the period that he remained absent without leave or without justification."

The Supreme Court has observed that the principle of 'No Work No Pay' can be applied when the employee was not kept away from work by any order of the employer.

The bench comprising Justice Ashok Bhushan and Justice Navin Sinha, reiterated the settled principle that nobody could be directed to claim wages for the period that he remained absent without leave or without justification.

In this case, disciplinary authority on 14.5.2009, held the employee guilty of charge of unauthorised absence and awarded punishment of "reduction of basic pay by two steps” under Rule 23(a) of the General Insurance (Conduct, Discipline & Appeal)

Rules, 1975. Later, a second charge sheet was issued and by order dated 26.06.2012 he was terminated from his services. Apparently, he attained the age of superannuation on the same day. Later, the High Court set aside both the orders and held that he is entitled to back-wages till 26.06.2012.

In its appeal before the Apex Court (Chief Regional Manager, United India Insurance Company Limited vs. Siraj Uddin Khan), the contention of the employer was that the High Court committed error in directing for payment of salary after 14.05.2009 to

20.06.2012, whereas the employee absented from work during the period and was clearly not entitled for payment of salary on the principle of "No Work No Pay". Taking note of the submissions, the bench observed:

In the present case, as noted above, the respondent was not kept away from work by any order of the appellant. The order of termination of his services/dismissal was passed on 26.06.2012, after his retirement on 20.06.2012, which in no manner prohibited the respondent from working.

The court also noted that, with regard to entitlement of salary after 14.05.2009 to 20.06.2012, there has been no adjudication by the High Court. It said:

"The respondent during submission has submitted that he was illegally transferred to Branch Office, Jaunpur from Allahabad. He was suffering from a disability of more than 40% and he could not have been transferred to another place. There is nothing on record to indicate that transfer of respondent from Branch Office, Allahabad to Branch Office, Jaunpur was at any time set aside or withdrawn."

Setting aside the High Court order, the bench directed the employer to consider the claim of the employee for back wages after 14.05.2009 to 20.06.2012 and pass appropriate orders giving reasons within three months.

Principle Of No Work No Pay Applies When Employee Was Not Kept Away From Work By Any Order Of Employer- Supreme Court of India.pdf

Reinstatement with full back wages is not automatic in every case, where termination / dismissal is found to be not in accordance with procedure prescribed under law - Supreme Court of India

Read judgment below

C.A. No.-005808-005808 / 2021

Respondent was a Clerk-cum-Cashier in the appellant – Allahabad Bank on 23.09.1985 and his service was confirmed on 24.03.1986. During the year 1989, he was posted in Aurangabad Branch, District Lakhimpur Kheri, Uttar Pradesh. On 08.02.1989, there was fire accident in the Bank and an FIR was registered with regard to burning incident of Bank records by unknown persons. Suspecting the complicity of the respondent, he was placed under suspension by order dated 13.02.1989 and disciplinary proceedings were initiated against him. Ultimately, on completion of enquiry, the respondent was dismissed from service vide Order dated 22.08.1991. Including the suspension period, he was in Bank service for about six years before dismissal.

During the pendency of these proceedings, the respondent – workman had attained age of superannuation. Though, there was strong suspicion, there was no acceptable evidence on record for dismissal of the workman. However, as the workman has worked only for a period of about six years and he has already attained the age of superannuation,.

Court held that

"The reinstatement with full back wages is not automatic in every case, where termination / dismissal is found to be not in accordance with procedure prescribed under law. Considering that the respondent was in effective service of the Bank only for about six years and he is out of service since 1991, and in the meantime, respondent had attained age of superannuation, we deem it appropriate that ends of justice would be met by awarding lump sum monetary compensation. We accordingly direct payment of lump sum compensation of Rs.15 lakhs to the respondent, within a period of eight weeks from today. Failing to pay the same within the aforesaid period, the respondent is entitled for interest @ 6% per annum, till payment. "

C.A. No.-005808-005808 2021 The reinstatement with full back wages is not automatic in every case where termination - dismissal is found to be not in accordance with procedure prescribed under law..pdf


A recent WorldatWork survey of more than 6,000 managers and employees in 26 organizations in North America found that many employees and managers do not understand why they get paid what they do. 40% reported as knowing what to do to increase their base pay. Only 38% percent reported knowing how to increase the size of their cash bonus.

The 2011 Nielsen survey also showed that the top five dimensions students considered when it comes to seeking employment were high degree of independence at work, salary package, learning on the job, growth prospects and standing of the company in the market respectively.

Mercer Human Resource Consulting, a subsidiary of Marsh and McLennan, is a global leader in HR and financial services. Mercer Human Resource Consulting provides expertise in human resource areas, ranging from compensation and benefits to operational effectiveness and employee performance and engagement. Mercer has over 15,000 employees serving clients in 41 countries.

An estimated twenty-five million American employees without bank accounts are unable to be paid via direct deposit. Increasing numbers of organizations are offering employees without bank accounts payroll cards, similar to debit cards. Electronically transferring funds to employees is estimated to be up to 75% cheaper than issuing traditional paychecks.

"Red-circling" refers to freezing a highly tenured or highly skilled employee's base pay in the event that the pay rate is above the established range maximum assigned to the job grade or classification. A red-circled employee is usually not eligible for further base pay increases until the top pay rate for their job grade/classification is increased.

13 tech jobs that pay at least $130,000

There's little doubt that technology-related jobs, whether building software or managing a network, are in demand and pay well.

But it's also a fact that wages differ from state to state. And it is no different in the US. Salaries are higher in places like San Francisco, New York, and Boston than they are in other parts of the US, which skews the data a bit.Tech recruiting specialist Mondo recently published a report on the highest-paid tech jobs with salary ranges, reflecting regional differences in pay, with areas like NYC/San Francisco on the high end and areas like Florida/Dallas on the low end.

Here's are 13 tech jobs according to Mondo's listing which will help you earn at least $130,000.

Chief security officer: Up to $214,000

This person is responsible for protecting an organization from hackers and other security-related breaches. The job includes buying and installing computer security products, ensuring corporate apps don't have holes, doing forensics if a problem occurs, and so on. The professionals are generally paid well, for, millions of dollars can be at stake.

Chief data officer: Up to $200,000

Collecting, storing and analyzing loads of data is rage these days in companies both big and small. This person would lead a team of data scientists that could span across IT, marketing, and business functions.

VP, information technology: Up to $178,000

This person usually heads the internal tech team and may report to a chief information officer, or maybe the top IT exec at the company.

VP, engineering: Up to $177,000

This person would run the teams of software or hardware engineers who develop products. This is a title often used at tech companies, however, many enterprises too develop custom IT projects and this person could also be leading those efforts.

Director, PMO: Up to $177,000

A director of project management/program management is the person in charge of a particular tech project or an ongoing program. This may involve managing an interdisciplinary team of engineers, marketeers and business people.

Scala developer: Up to $177,000

A computer programmer with Scala language skills is a hot commodity these days. Scala is a web development language that is an alternative to the popular (but old) language Java.

Application architect: Up to $175,000

An application architect is someone who helps engineers large, complex software programmes with lots of moving parts.

iOS developer: Up to $174,000

An iOS developer writes mobile apps for Apple devices, the iPhone and iPad.Every company in the world these days is looking to reach iPhone and iPad users.

VP, infrastructure: Up to $173,000

A vice president of infrastructure runs the team of people that handle a company's computer hardware: servers, network, storage, and other data center tech.

Android developer: Up to $173,000

An Android developer writes mobile apps for Android devices. Nearly all companies, from your health club to Fortune 500 companies, are writing their own mobile apps.

UI/UX designer: Up to $172,000

A user interface or user experience designer is the person who designs how a person uses a product. He helps answer questions like: Is the product easy to figure out? Will users be able to find all the features? This designer is also often responsible for the aesthetic look of the product.

BI developer: Up to $171,000

A business intelligence developer is a programmer who specializes in writing database apps that help businesses analyze data. This field has exploded with the Big Data craze. There are now lot of methods to cheaply collect and store vast amount of data. However, these have little use unless there are business intelligence apps that can analyse all that data.

IS security manager: Up to $169,000

An information systems security manager is responsible for making sure that networks, servers and apps remain safe from hackers. This may be the top security position in a small company or, in a large one, this person may report to a chief security officer.

9 highest-paying tech companies in the US


The first technology company on the highest-paying companies in the US list is Netflix . The average median total compensation offered by the California-based internet video service company is $180,000.


The second technology company on the Glassdoor's list is Mozilla at No. 8. Mozilla Corporation is a wholly-owned subsidiary of open-source group Mozilla Foundation. The average median total compensation at Mozilla is $147,556. The average median base salary at the organisation is $112,737.

Good Technology

Good Technology is the third technology company on highest-paying companies in the US' list. The company, offers employees an average median total compensation of $147,500. The average median base salary at the organisation is $136,250.


The next technology company on the list is chipmaker Altera. The maker of programmable custom-designed semiconductors offers employees average median total compensation of $147,200. The average median base salary at Altera is $133,250.


The global leader in virtualization and cloud infrastructure VMWare is the next technology company on the list. The average median total compensation at the company is $145,000, while average median base salary is $121,500.Cadence Design SystemsCadence offers electronic design automation solutions. the company offers employees average median total compensation of $145,000, while average median base salary is $130,000.GoogleAt No. 13 on the Glassdoor's list of highest-paying companies in the US is the internet giant Google. The average median total compensation offered at the world's top search engine is $143,500, while the average median base salary is $116,000.


Next technology company on the Glassdoor's list is Synopsys. The second electronic design automation company on the list after Cadence, Synopsys offers average median total compensation of $143,000, while the average median base salary is $123,000.


Next company on the list is TrueCar Inc, an automotive pricing and information website for new and used car buyers and dealers. The company offers average median total compensation of $141,500, while the average median base salary is $100,000.