Saturday, 14 January 2017

Compensation process

Compensation Plans

Develop a program outline.
  • Set an objective for the program.
  • Establish target dates for implementation and completion.
  • Determine a budget.
Designate an individual to oversee designing the compensation program.
  • Determine whether this position will be permanent or temporary.
  • Determine who will oversee the program once it is established.
  • Determine the cost of going outside versus looking inside.
  • Determine the cost of a consultant's review.
Develop a compensation philosophy.
  • Form a compensation committee (presumably consisting of officers or at least including one officer of the company).
  • Decide what, if any, differences should exist in pay structures for executives, professional employees, sales employees, and so on (e.g., hourly versus salaried rates, incentive-based versus noncontingent pay).
  • Determine whether the company should set salaries at, above, or below market.
  • Decide the extent to which employee benefits should replace or supplement cash compensation.
Conduct a job analysis of all positions.
  • Conduct a general task analysis by major departments. What tasks must be accomplished by whom?
  • Get input from senior vice presidents of marketing, finance, sales, administration, production, and other appropriate departments to determine the organizational structure and primary functions of each.
  • Interview department managers and key employees, as necessary, to determine their specific job functions.
  • Decide which job classifications should be exempt and which should be nonexempt.
  • Develop model job descriptions for exempt and nonexempt positions and distribute the models to incumbents for review and comment; adjust job descriptions if necessary.
  • Develop a final draft of job descriptions.
  • Meet with department managers, as necessary, to review job descriptions.
  • Finalize and document all job descriptions.
Evaluate jobs.
  • Rank the jobs within each senior vice president's and manager's department, and then rank jobs between and among departments.
  • Verify ranking by comparing it to industry market data concerning the ranking, and adjust if necessary.
  • Prepare a matrix organizational review.
  • On the basis of required tasks and forecasted business plans, develop a matrix of jobs crossing lines and departments.
  • Compare the matrix with data from both the company structure and the industrywide market.
  • Prepare flow charts of all ranks for each department for ease of interpretation and assessment.
  • Present data and charts to the compensation committee for review and adjustment.
Determine grades.
  • Establish the number of levels - senior, junior, intermediate, and beginner - for each job family and assign a grade to each level.
  • Determine the number of pay grades, or monetary range of a position at a particular level, within each department.
Establish grade pricing and salary range.
  • Establish benchmark (key) jobs.
  • Review the market price of benchmark jobs within the industry.
  • Establish a trend line in accordance with company philosophy (i.e., where the company wants to be in relation to salary ranges in the industry).
Determine an appropriate salary structure.
  • Determine the difference between each salary step.
  • Determine a minimum and a maximum percent spread.
  • Slot the remaining jobs.
  • Review job descriptions.
  • Verify the purpose, necessity, or other reasons for maintaining a position.
  • Meet with the compensation committee for review, adjustments, and approval.
Develop a salary administration policy.
  • Develop and document the general company policy.
  • Develop and document specific policies for selected groups.
  • Develop and document a strategy for merit raises and other pay increases, such as cost-of-living adjustments, bonuses, annual reviews, and promotions.
  • Develop and document procedures to justify the policy (e.g., performance appraisal forms, a merit raise schedule).
  • Meet with the compensation committee for review, adjustments, and approval.
Obtain top executives' approval of the basic salary program.
  • Develop and present cost impact studies that project the expense of bringing the present staff up to the proposed levels.
  • Present data to the compensation committee for review, adjustment, and approval.
  • Present data to the executive operating committee (senior managers and officers) for review and approval.
Communicate the final program to employees and managers.
  • Present the plan to the compensation committee for feedback, adjustments, review, and approval.
  • Make a presentation to executive staff managers for approval or change, and incorporate necessary changes.
  • Develop a plan for communicating the new program to employees, using slide shows or movies, literature, handouts, etc.
  • Make presentations to managers and employees. Implement the program.
  • Design and develop detailed systems, procedures, and forms.
  • Work with HR information systems staff to establish effective implementation procedures, to develop appropriate data input forms, and to create effective monitoring reports for senior managers.
  • Have the necessary forms printed.
  • Develop and determine format specifications for all reports.
  • Execute test runs on the human resources information system.
  • Execute the program.
Monitor the program.
  • Monitor feedback from managers.
  • Make changes where necessary.

Compensation Management- Process of determining wages

How is compensation used?

Compensation is a tool used by management for a variety of purposes to further the existance 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.
Recruitment and retention of qualified employees is a common goal shared by many employers. To some extent, the availability and cost of qualified applicants for open positions is determined by market factors beyond the control of the employer. While an employer may set compensation levels for new hires and advertize those salary ranges, it does so in the context of other employers seeking to hire from the same applicant pool. 

Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that must be reached between the monetary value the employer is willing to pay and the sentiments of worth felt be the employee. In an attempt to save money, employers may opt to freeze salaries or salary levels at the expence of satisfaction and morale. Conversely, an employer wishing to reduce employee turnover may seek to increase salaries and salary levels. 

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 the components of a compensation system?

Compensation will be perceived by employees as fair if based on systematic components. Various compensation systems have developed to determine the value of positions. These systems utilize many similar components including job descriptions, salary ranges/structures, and written procedures.
The components of a compensation system include
  • Job Descriptions A critical component of both compensation and selection systems, job descriptions define in writing the responsibilities, requirements, functions, duties, location, environment, conditions, and other aspects of jobs. Descriptions may be developed for jobs individually or for entire job families.
  • Job Analysis The process of analyzing jobs from which job descriptions are developed. Job analysis techniques include the use of interviews, questionnaires, and observation.
  • Pay Structures Useful for standardizing compensation practices. Most pay structures include several grades with each grade containing a minimum salary/wage and either step increments or grade range. Step increments are common with union positions where the pay for each job is pre-determined through collective bargaining.
  • Salary Surveys Collections of salary and market data. May include average salaries, inflation indicators, cost of living indicators, salary budget averages. Companies may purchase results of surveys conducted by survey vendors or may conduct their own salary surveys. When purchasing the results of salary surveys conducted by other vendors, note that surveys may be conducted within a specific industry or across industries as well as within one geographical region or across different geographical regions. Know which industry or geographic location the salary results pertain to before comparing the results to your company.
  • Policies and Regulations

What are different types of compensation?

Different types of compensation include:

  • Base Pay
  • Commissions
  • Overtime Pay
  • Bonuses, Profit Sharing, Merit Pay
  • Stock Options
  • Travel/Meal/Housing Allowance
  • Benefits including: dental, insurance, medical, vacation, leaves, retirement, taxes...

Impact of globalisation on HR

Globalization is a term in business that refers to the integration of an organization's operations, processes and strategies into diverse cultures, products, services and ideas. Because of its emphasis on diversity, globalization also has a deep impact on the way companies manage their employees. Understanding the effects of globalization on human resources can help managers to better equip their organizations for the increasingly global business environment.

Diversity Recruitment

With the rise of globalization, companies of all sizes are now interacting with customers and stakeholders from diverse cultures, languages and social backgrounds. In response, many human resources managers seek to hire employees from equally diverse backgrounds. Companies engaging in this diversity recruitment recognize the value of having people on staff that their customers can relate to, and they know that having a team of diverse people contributes to the range of ideas and influences within the organization.

Push for Professional Development

A further effect of globalization on HR management is a push for professional development. Professional development is concerned with providing employees opportunities to achieve their career-related goals. Some organizations provide resources for their employees to earn a university degree, others send their employees to conferences or networking events and training days. Professional development is important to globalization because it creates a win-win situation. The employees feel as though the organization is concerned with providing a range of skills and competencies for their employees. Likewise, the organization benefits from the added skills and connections that the employees who take advantage of professional development programs acquire.

Greater Emphasis on Training

Similar to professional development, a greater emphasis on training has resulted because of globalization in human resources management. Training, however, tends to be focused on the needs and professional competencies of groups of employees within the organization. The company might, for instance, host language classes to give its call center staff an edge in telephone sales. It might also teach its employees how to use a new global software platform. This emphasis on training seeks to give the company a competitive edge in the global marketplace by honing the employees' diversity emphasis.

Management of Laws Across Jurisdictions

A final effect of globalization on human resources management is the need for businesses to understand and apply the laws of many different jurisdictions to the particular business. The government sets out a number of tax and labor laws that businesses operating in the country must comply with, but there may also be local and regional laws that apply to companies that operate in different states or different countries. Selling products in India, for example, might mean that a company has to impose a Value-Added Tax on its goods. Hiring employees at branch locations in different locations might change the requirements. Understanding these laws is vitally essential to the organization because any breach of them will have a serious impact not only on the business's financial well-being but also on its reputation.

International Recruitment and Hiring

Globalization allows businesses to recruit and hire employees from all around the world. This is particularly attract to smaller businesses who, while may not be able to have more than a few employees, can fill their available positions with the very best talent, even if that talent doesn't live locally. The HR trend of international recruitment and hiring is focused on bringing diversity to the organization and it recognizes that employees from abroad may be able to provide unique perspectives on customer service, marketing and sales, among other areas of the business.

Progressive Approaches to Benefits and Compensation

Similar to the trend of recruiting abroad from a diverse pool of applicants is a progressive approach to providing benefits and compensation to employees. Federal laws mandate minimum wage and basic employee benefits, however, globalization has brought new ideas to business owners and managers on how to reward their employees both as a standard policy and as a reward for hard work. Taking their cues from abroad, some U.S.-based businesses are now offering paternity leave, extended holiday time, work-from-home programs and flexible childcare options for their employees. These approaches to compensation allow employees to balance their work with their personal life and are aimed to increase happiness and productivity among the staff.

Introduction of Social Media

Social media and mobile technologies are a hot trend in HR globalization. Social and mobile tech enables HR to expand its services by more easily and rapidly communicating with employees. If the office will be closed for inclement weather, for instance, HR can send social media messages to let employees know as opposed to using a phone tree. Social and mobile tech also helps HR to increase the value of the company by providing the business with employees who are tech savvy and eager to embrace new ways of doing business.

Professional Development

Professional development training programs have also arisen as a trend in response to global compensation approaches. Professional development is about providing employees with opportunities for growth outside the day-to-day routine of the organization. For example, HR might send employees to training seminars to sharpen their IT skills for use in global social media campaigns, or customer service personnel might be sent to language courses to enhance their ability to communicate with customers who live abroad. Such professional development programs keep employees motivated and feeling rewarded, and the new skills these employees learn are put to direct use within the company.

Challenges before HR



Human resources managers have three aspects of responsibility to the organizations that employ them. Unlike other departmental managers whose responsibilities focus on running their departments and respective teams of employees, HR managers are responsible for the HR department functions, supervising the HR staff and ensuring that the organization's entire workforce is cohesive, engaged and productive.

Compliance

Ever-expanding legal considerations, legislation and federal and state laws make compliance an important aspect of running an HR department and determining the extent to which certain laws apply to each workplace. One of the challenges that HR managers face includes staying abreast of the changes and ensuring that the department's strategy coincides with its legal obligations. For example, the Affordable Care Act contains health care reforms that have a serious impact on the way some employers will provide coverage for their employees. The act requires many employers to calculate and report the dollar value of health benefits for employees on their W-2s, according to Ted Lewkowicz, a lawyer who specializes in employee benefits and tax law. In an August 2012 column for HR Specialist, Lewkowicz reminds HR professionals that they're responsible for ensuring that their companies adapt to the changes that the ACA brings. Compliance-related issues require collaboration among HR leadership, compensation and benefits specialists and HRIS, or human resource information systems, specialists. If HR managers drop the ball related to compliance, they put the organization in serious jeopardy.

Perception

Improving employees' and leadership's perception of HR is a challenge HR managers have faced since around the 1980s, when human resources began its evolution from an administrative role to a more substantive one. Personnel administration--responsible for collecting employees' time sheets, processing payroll and scheduling open enrollment for employee's health coverage--is now a strategic business partner accountable for creating a workforce that meets the organization's needs. Executive leadership's perception of HR has to improve so that HR managers can participate in determining the direction of the company.

Employee Relationships

Many workers equate going to the HR department with going to the school principal's office. That suggests two challenges for HR managers--that employees feel there's a parent-child relationship in the workplace, instead of adult-adult relationship, and that nothing good can come out of a visit to the HR department. To convince employees that HR is an employee advocate as much as it is an advocate for the company, HR managers have to devise ways to put a face on HR, so to speak. HR managers are challenged to get out of the confines of the HR department and get to know employees. For organizations that operate 24/7, this means that HR managers or their staff need to be the face of HR around the clock to let all employees know that HR is there to address their needs.

Budget

Because HR departments are revenue-producing, HR managers frequently have to justify budget allocation and the return on investment in HR spending. Just saying that money for HR activities support the organization's most valuable resource--its people--isn't nearly enough to get the kind of budget that supports all of the functions that HR managers would probably like to do. Aside from the basic items related to recruitment, selection, benefits and payroll, HR managers who lobby for extras like costly workforce assessments, employee opinion surveys and advice and counsel from subject matter experts sometimes are denied the amount of money they request. Even training is sometimes considered an extra and unnecessary expense, though it can have a direct impact on maintaining the organization's talent and employees' skills. And, it's not just private sector HR managers who feel the strain of requesting bigger budgets. Public sector HR managers with the federal government report that budget constraints tie their hands, making it virtually impossible to offer salaries that compete with private sector jobs. In an August 2012 column for FedManager.com, human capital officers who participated in a survey about HR challenges reported that the federal government compensation structure is far less competitive and, as a consequence, they can't hire the most talented workers.

.

HR skills and competencies



Although job postings for human resources department managers vary from one organization to the next, there are some constant threads among many of the postings. The core competencies of HR managers are generally the same. Core competencies are basic qualifications that underlie the HR manager's ability to perform job functions. For HR managers, those core competencies include communication and interpersonal relationship skills, analysis and critical thought processes
HR professionals need business acumen, HR expertise, leadership qualities and the ability to establish HR as an advocate. In addition, the OPM says HR professionals are change agents. In order to fulfill this role, HR managers must have four primary competencies: communication, analysis capabilities, relationship-building skills and leadership qualities.

Communication

An HR manager must be able to communicate with everyone in the workplace -- from line staff to executive leadership. In addition, communication skills are important for HR managers to interact effectively with outsourcing providers, union leaders, public officials and employees, prospective employees and colleagues. They need to know when to adapt their communication skills to the audience and the situation. For example, HR managers must be able to convey the importance of fair employment practices to the company's executive team with the same genuineness and passion as they would to hourly employees.

Analytical and Critical Thinking

Analytical and critical thinking skills are a must for HR leaders. An HR manager has to exercise sound judgment and engage in high-impact decision-making in a number of areas. The ability to analyze situations and view the implications of certain decisions from a critical perspective is particularly useful for HR leaders. For example, the decision whether to outsource one or several HR functions isn't something that happens without considering the impact outsourcing has on individual employees as well as the organization overall. HR managers also are involved in representing the company in matters involving employment litigation, which requires that they be able to justify the company's actions related to employment decisions such as hiring and firing.

Relationship-Building

Creating a cohesive HR department that works collaboratively to achieve the goals of the department as well as help the organization reach its goals related to workforce development is a competency that HR managers must have. Relationship-building and interpersonal relationship skills are fundamental to an HR manager's success. One of the challenges HR faces is establishing credibility with employees -- many employees equate their HR departments with the school principal's office, which suggests a level of intimidation and trepidation associated with their view of HR's purpose. That being said, an HR manager must have the ability to establish credibility and trust as well as balance the obligation to be an advocate for both the organization and its employees.

Leadership

Leadership skills are an essential competency for HR managers. HR managers are responsible for creating strategic plans for the HR department as well as the overall workforce. Therefore, leadership skills are critical, particularly in the process of justifying the functional elements of a strategic plan to the company's management team. In addition, HR managers have to direct the activities of the HR department, and in doing so, they need the type of leadership skills that influence HR generalists' and HR specialists' commitment to the HR department goals..

Cost Sheet

From the following question prepare a Cost Sheet
Raw Material             Direct Wages        Indirect Wages    Factory Rent   Bank Charges
Factory Lighting                Factory Heating           Motive Power         Haulage  Commission  on sales
Director Fee (Factory)       Director Fee ( Office)   Factory cleaning       sundry office expenses
Factory stationery              Office Stationery          Loose Tools written off  Delivery van expenses
Office rent and rates          Water supply       Factory Insurance     Legal Expenses
Direct Expenses       Warehouse Rent      M/c Depreciation    Office Bldg Depreciation
Delivery van depreciation   bad debts     Advertising       sales deptt salary

solution

Prime Cost

Raw Material
Direct Wages
Direct Expenses

Works Overhead

Indirect Wages
Factory Rent
Factory Lighting
Factory Heating
Motive Power
Haulage
Director Fee (Factory)
 Factory cleaning
Factory stationery
Loose Tools written off
Water supply
Factory Insurance
M/c Depreciation

Office Overheads

Sundry office expenses
Director Fee ( Office)
Office rent and rates
Legal Expenses
Bank Charges
Office Bldg Depn


Selling and Distribution Expenses
Warehouse Rent
Bad Debts
Salary sales deptt
Sales Commission
Delivery van depn
Advertg
Delivery Van mce

Cost accounting

Items Exluded from cost accounting and therefore not included in cost sheet despite information being provided in a question
1. ITEMS OF APPROPRIATION OF PROFIT
a. Income tax paid and legal expenses re income tax
b Transfer to reserves
c.Dividend on shares paid
d.Amount written off- goodwill, prelim expenses, underwriting commission, dividend allowed on shares
e. Profit based payment to the employees

2.ITEMS OF PURE FINANCE
i. Income and dividend received
ii. Rent received
iii. profit or loss on sale of investment
iv. expenses on raising capital
v. cash discount allowed or received

3. ABNORMAL ITEMS
a. Cost of abnormal idle time
b. cost of abnormal wastage of material
c. exceptional bad debts
d. abnormal savings
e. penalties and fines paid for going against govt regulations and rules