CU MBA SEM IV -COMPENSATION AND REWARDS MANAGEMENT

• Attrition: Number of employees leaving the organization • Employee engagement: employee participation in the decision making • Performance linked compensation: additional incentive paid to executives • Variable Pay: rewards in the form of incentives, commissions, bonus to the team or individual • Merit based incentive plans: determined on the key skills and outstanding potentials • Direct compensation: direct monetary benefits in terms of cash or kind. • Indirect compensation: indirect monetary benefits including allowances. 11.6 LEARNING ACTIVITY 1. Discuss the importance of employee retention in the time of Covid 19 pandemic in the Indian economy. _________________________________________________________________________ _________________________________________________________________________ 2. What factors will you consider to motivate employees on the cost of their health and less compensation to retain in the organization? _________________________________________________________________________ _________________________________________________________________________ 11.7 UNIT END QUESTIONS 151 A. Descriptive Questions Short Questions: 1. What is meant by employee retention? 2. What is a retention strategy? CU IDOL SELF LEARNING MATERIAL (SLM)

3. Describe the factors of employee retention. 4. Describe the ways of developing a successful executive performance pay plan. 5. What are the effective strategies of employee retention? Long Questions: 1. Why employee retention plays a major role in the organization? 2. How will absence of employee turnover affect the organization? 3. When will employees stay in the organization? 4. Explain the importance of employee retention 5. ‘Absence of employee retention increases the cost of recruitment, training and development programmes and creates an unhealthy working environment for the employees as well as for the management.’ Justify the statement. B. Multiple Choice Questions 1. A ___________ is the effective plan of formulated by the organizations to minimize employee turnover and absenteeism, reduce attrition, stabilize retention and promotes employee growth in the organization. a. fixed pay b. retention strategy c. Executive compensation d. Total compensation 2 __________increases the cost of recruitment, training and development programmes and creates an unhealthy working environment for the employees as well as for the management. a. Absence of employee retention b. executive perks c. annual bonus d. long term incentive 3. Violation of rules and regulation of the organization may contribute to _________employee turnover. a. Base Pay of executives b. involuntary c. annual bonus 152 CU IDOL SELF LEARNING MATERIAL (SLM)

d. long term incentive 4. Reduction in costs that will save finances in the process of __________________. a. recruitment and training b. executive perks c. annual bonus d. sales 5 __________ will determine the honesty and the transparency of the organization towards the employees. a. Performance linked compensation b. executive perks c. annual bonus d. Equitable and fair compensations Answers 1-b, 2-a, 3-b, 4-a, 5-d 11.8 REFERENCES Textual Reference: Wages and Salary Administration by A. M. Sharma Online References: • https://www.netsuite.com/portal/resource/articles/human-resources/employee- retention-benefits.shtml • https://www.hifives.in/6-effective-strategies-to-improve-employee-retention/ • http://www.thegarnergrp.com/blog/bid/94565/The-5-Most-Important-Elements-of- Executive-Compensation-Packages • https://www.investopedia.com/terms/p/performancecompensation.asp 153 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT12EMPLOYEE BENEFITS STRUCTURE 12.0 Learning Objectives 12.1 Introduction 12.2 Importance of employee benefits 12.3 Components and difference of employee benefits 12.4 Summary 12.5 Keywords 12.6Learning activity 12.7 Unit End Questions 12.8 References 12.0 LEARNING OBJECTIVES After studying this unit, you should be ableto - Explain the meaning of employee benefits - Describe the components of employee benefits - Outline the importance of employee benefits - Differentiate the employee benefits 12.1 INTRODUCTION Meaning Of Employee Benefits Employee’s job satisfaction and loyalty is a vital factor in the success and productivity of any organization. Providing satisfactory employee benefits apart from the basic pay can help in reducing employee turnover in the organization. Employee Benefits share a large component of total compensation and have a great potential to satisfy the employee, department, and organizational output. Employee benefits are also the non-wage remunerations which are offered to employees in addition to their salaries. 154 CU IDOL SELF LEARNING MATERIAL (SLM)

It is researched that employee benefits have effects on attitudes, retention, and job decisions. Thus, many organizations have implemented employee benefit plans that provide employee's choice in matching the preferences of job decisions and benefits. Generally, forms of benefits include legally mandated benefits like social security, also pensions, insurance, pay for leisure, etc. Flexible benefits plan will help to control costs and enhance employee job satisfaction. Fig 12.1 12.2 IMPORTANCE OF EMPLOYEE BENEFITS Sometimes employee benefits define the attractiveness of the job. More often employee perks are more important to employees than the total remuneration itself. 155 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 12.2 • Provide healthy working culture and environment: Most of the employees prefer to work in organizations that provide relaxed and positive work environment with great benefits. Thus, organizations need to invest time and efforts in designing a good benefit plan that makes the employees feel safe and positive which enhances the performance and efficiency in the organization. • Offer rewards and recognition: The employees when well recognized in the organization through their efforts and good results and often rewarded with good perks and incentives tend to show loyalty towards the organizations and might seldom think of switching jobs. • Encourage employee engagements: When the management provide higher benefits to the employees, and also consider them in implementation, the employee feels motivated and important in the organization and feels to have job security. • Unbiased growth: The exposure to regular growth opportunities and active benefit plans will help the organization to retain employees at a comparatively higher rate. Once the employee feels stagnant in the job position for a considerate amount of time, they will leave the 156 CU IDOL SELF LEARNING MATERIAL (SLM)

organizationand search for better growth opportunities outside the organization. Fig 12.3 • Retention of employees: Employee turnover is majorly affected by job satisfaction. Good benefits in the compensation system enhances the essence of job assurance and increases the job satisfaction of the employees. • Drives motivation: A strong benefit plan drives motivation in the employees in terms effort and reward relationship. Organizations with value added approach on the compensation boosts employees’ morale to deliver better performance. 157 CU IDOL SELF LEARNING MATERIAL (SLM)

12.3 COMPONENTS OF EMPLOYEE BENEFITS Types of Employee Benefits are divided into: Fig 12.4 • Legally Required: Benefits which are mandated by law, and must be provided by the organisation to the employees are called legally required benefits. Examples are Social Security Benefit, Workmen remuneration insurance, health insurance, medical leave, maternity leave etc. 158 CU IDOL SELF LEARNING MATERIAL (SLM)

• Discretionary Benefits: These benefits are voluntarily provided by the organization to the employees are called as discretionary Benefits. It may include leisure pay, travelling allowance, house rent allowance, earned and privilege leaves, etc. 159 CU IDOL SELF LEARNING MATERIAL (SLM)

Components of Employee Benefits Fig 12.5 • Short-term employee benefits: short term employee benefits are the provided within a period of one year. It includes payments like salaries, wages and social security contribution (i.e., health insurance), paid leaves, gain sharing and bonus and non- monetary benefits like vehicle allowance, free medical services, subsidized goods, free lunches, etc. • Post-employment benefits: The employment benefits which are given after the completion of the employment tenure are called post-employment benefits. For instances, pensions, gratuity, provident fund, post-employment medical care. • Long-term benefits: Benefits which go beyond the period of one year like Sabbatical leave, long term disability benefits. • Termination benefits: Voluntary Retirement Scheme (VRS) is an example of such benefit. Benefits which are paid to the relatives or nominees of the employee after a permanent termination like insolvency or death are also known as termination benefits. 160 CU IDOL SELF LEARNING MATERIAL (SLM)

12.4 SUMMARY 1. Employee Benefits share a large component of total compensation and have a great potential to satisfy the employee, department, and organizational output. 2. Forms of benefits include legally mandated benefits like social security, also pensions, insurance, pay for leisure, etc. Flexible benefits plan will help to control costs and enhance employee job satisfaction. 3. Sometimes employee benefits define the attractiveness of the job. More often employee perks are more important to employees than the total remuneration itself. 4. The employees when well recognized in the organization through their efforts and good results and often rewarded with good perks and incentives tend to show loyalty towards the organizations and might seldom think of switching jobs. 5. Employee turnover is majorly affected by job satisfaction. Good benefits in the compensation system enhances the essence of job assurance and increases the job satisfaction of the employees. 6. Benefits which are mandated by law, and must be provided by the organisation to the employees are called legally required benefits. Examples are Social Security Benefit, Workmen remuneration insurance, health insurance, medical leave, maternity leave etc. 7. These benefits are voluntarily provided by the organization to the employees are called as discretionary Benefits. It may include leisure pay, travelling allowance, house rent allowance, earned and privilege leaves, etc. 8. Short term employee benefits are the provided within a period of one year. It includes payments like salaries, wages and social security contribution. 9. The employment benefits which are given after the completion of the employment tenure are called post-employment benefits. 10. Benefits which go beyond the period of one year like Sabbatical leave, long term disability benefits. 11. Benefits which are paid to the relatives or nominees of the employee after a permanent termination like insolvency or death are also known as termination benefits. 161 CU IDOL SELF LEARNING MATERIAL (SLM)

12.5 KEYWORDS • Discretionary benefits: These benefits are voluntarily provided by the organization to the employees • Attrition: Number of employees leaving the organization • Employee engagement: employee participation in the decision making • Performance linked compensation: additional incentive paid to executives • Variable Pay: rewards in the form of incentives, commissions, bonus to the team or individual • Merit based incentive plans: determined on the key skills and outstanding potentials • Direct compensation: direct monetary benefits in terms of cash or kind. • Indirect compensation: indirect monetary benefits including allowances. 12.6 LEARNING ACTIVITY 1. Discuss the importance of employee benefits in the time of recession in the Indian economy. ___________________________________________________________________________ ___________________________________________________________________________ 2. What employee benefits will you consider to motivate employees on the cost of the survival of the organization in a recessionary phase and the prosperity phase? ___________________________________________________________________________ ___________________________________________________________________________ 12.7 UNIT END QUESTIONS 162 A. Descriptive Questions Short Questions: CU IDOL SELF LEARNING MATERIAL (SLM)

1. What is meant by employee benefits? 2. What are the most popular employee benefits? 3. Describe the types of employee benefits. 4. Explain the importance of employee benefits. 5. Describe the components of employee benefits Long Questions: 1. How does sometimes employee benefits define the attractiveness of the job? 2. How will absence of employee benefits affect the organization? 3. How does employee benefits increase retention in the organization? 4. ‘A strong benefit plan drives motivation in the employees in terms effort and reward relationship.’ Justify the statement. 5. What are the effective types of employee benefits? B. Multiple Choice Questions: 1. ______are also the non-wage remunerations which are offered to employees in addition to their salaries. a. fixed pay b. Employee benefits c. Executive compensation d. Total compensation 2 Generally, forms of benefits include legally mandated benefits like social security, also ________, etc. a. pensions b. insurance c. pays for leisure d. all of the above 3.Violation of rules and regulation of the organization may contribute to _________employee turnover. a. Base Pay of executives 163 CU IDOL SELF LEARNING MATERIAL (SLM)

b. involuntary c. annual bonus d. long term incentive 4. Types of Employee Benefits are divided into _________ a. legally required benefits b. discretionary benefits c. temporary benefits d. both a and b 5. Benefits are voluntarily provided by the organization to the employees are called as ___________. a. discretionary benefits b. executive perks c. annual bonus d. Equitable and fair compensations Answers 1-b, 2-d, 3-b, 4-d, 5-a 12.8 REFERENCES • Textual Reference: Wages and Salary Administration by A. M. Sharma • Online References:  https://semoscloud.com/blog/employee-benefits-definition-examples-and-best- practices/  https://servstaffing.com/work-benefits-are-as-important-as-the-salary-heres-why/  https://businessjargons.com/employee-benefits.html  https://www.investopedia.com/terms/p/performancecompensation.asp 164 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT13STRATEGIC COMPENSATION CHALLENGES STRUCTURE 13.0 Learning Objectives 13.1 Introduction 13.2 Components of strategic compensation 13.3 Challenges faced in strategic compensation 13.4 Summary 13.5 Keywords 13.6Learning activity 13.7 Unit End Questions 13.8 References 13.0 LEARNING OBJECTIVES After studying this unit, you should be ableto - Explain the meaning of strategic compensation. - Classify the types of strategic compensation. - Outline the challenges of strategic compensation. 13.1 INTRODUCTION Meaning Of Strategic Compensation In the initial era of business organization and planning, compensation was considered as a mere remuneration to be given in cash or kind to the employees. But with the growing market and business trends, there is a lot of brain work involved in releasing remunerations and compensations to the employees. A well-developed strategic compensation planning brings out leaps of positive productivities from the employers’ as well as employees’ point of view. 165 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 13.1 Organizations adopt a strategic approach towards compensation policies to attract and retain talents in the business. Stability of tenure works in benefit for the organization. Strategically designing the compensation system will help the organization in achieving goals at a relatively faster pace. A strategic compensation planning will direct the organization in implementing efficient total compensation taskforce and administration. Employees are looking for not only paying well organizations, but also for a strategic growth platform in terms of compensatory levels. 166 CU IDOL SELF LEARNING MATERIAL (SLM)

Following are the steps in creating a strategic compensation plan. Welcoming employees’ inputs and suggestions Analysis of competitor’s compensation strategy Deciding budget of the organization Develop a plan and system of rewards Set up pay grades Legal compliances Communication about total compensation to the employees 167 CU IDOL SELF LEARNING MATERIAL (SLM)

13.2 COMPONENTS OF STRATEGIC COMPENSATION An effective compensation strategy involves key components based on pay, benefits and career opportunities. Fig 13.2 The organization should define its compensation strategy considering the types of pay structure and non-monetary benefits to the employees. Good career and skill enhancements formulate a productive compensation strategy for all the stakeholders of the organization. Remuneration strategic decisions are taken considering what type of compensation strategy the organization wants to adopt on the basis of a variety of criteria. 168 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 13.3 13.3 CHALLENGES FACED IN STRATEGIC COMPENSATION 169 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 13.4 1. Allocation of the right budget: A systematic allocation of compensatory budget specifies how much financial resource should be invested in developing a productive human resource in the organization. Not only the base pay structure, but also the percentages of incentives and commissions are also determined in the budget allocation of compensation strategy. 2. Deciding fair salary ranges as per the prevailing rates: To be in line with the market trends, it is important to set up a benchmark for the salary ranges and levels of promotions in the management hierarchy. Fixing salary ranges for particular job profiles helps the employees to get a clear idea of the remuneration package of their desired positions, and further motivate them to strive hard for it. 3. Undertake Regular audits: Business environment is dynamic and fluctuates frequently with the prevailing trends in the similar industries. A regular salary audit helps the organization to sustain and retain the financial goodwill as well as the confidence of the employees to invest their time and efforts in the organization. 4. Deciding Non-Monetary Benefits and making peace with trade unions: 170 CU IDOL SELF LEARNING MATERIAL (SLM)

Provision of non-monetary benefits is good strategy to retain the employees. An affordable package of health and retirement allowance, vacation pay, dearness allowances should increase the percentage of employee participation and reduces turnover in the organization. All the types of benefits are to be in agreement with the trade unions. 5. Evaluating accurate Performance Management Systems: Performance Management Systems are a vital part of strategic compensation planning as it caters to achievement of goals of the employees as well as collectively of the organization. Individual vs team reward systems develop a productive Performance Management System. 6. Complying with Legally Structured Compensation System: A well-developed compensation strategy is a result of legal compliance of remuneration acts and policies adhered by the government. It lays a foundation to develop productive compensation strategies and approach to hire right talent in the organization. PRACTICE QUESTIONS/EXAMPLES Fig 13.5 Considering the above influence of strategic compensation planning, describe the limitations and challenges of a strategic compensation plan at family-controlled companies. 13.4 SUMMARY 1. A well-developed strategic compensation planning brings out leaps of positive productivities from the employers’ as well as employees’ point of view. 2. A strategic compensation planning will direct the organization in implementing efficient total compensation taskforce and administration. 3. An effective compensation strategy involves key components based on pay, benefits and career opportunities. 171 CU IDOL SELF LEARNING MATERIAL (SLM)

4. All the types of benefits are to be in agreement with the trade unions. 5. A systematic allocation of compensatory budget specifies how much financial resource should be invested in developing a productive human resource in the organization. 6. To be in line with the market trends, it is important to set up a benchmark for the salary ranges and levels of promotions in the management hierarchy. 7. A regular salary audit helps the organization to sustain and retain the financial goodwill as well as the confidence of the employees to invest their time and efforts in the organization. 8. A package of health and retirement allowance, vacation pay, dearness allowances increase the percentage of employee participation and reduces turnover in the organization. 9. Performance Management Systems are a vital part of strategic compensation planning as it caters to achievement of goals of the employees as well as collectively of the organization. 10. A well-developed compensation strategy is a result of legal compliance of remuneration acts and policies adhered by the government. 13.5 KEYWORDS • Compensation taskforce: stakeholders involved in the team of compensation system • Performance Management Systems: A system to monitor performance and potential appraisals of the employees. • Compensation policies: The rules and regulations of a company to pay remuneration to their employees • Retention of employees: The stability of tenure or working period of an employee in an organization • Reward system: A mechanism used award your employees in exchange of their performance • Equitable pay: Fair remuneration as per the similarities of the nature and experience of jobs 172 CU IDOL SELF LEARNING MATERIAL (SLM)

13.6 LEARNING ACTIVITY Fig 13.6 173 CU IDOL SELF LEARNING MATERIAL (SLM)

1. Considering the strategic principles in Fig 13.6, Analyze the challenges in the compensation planning of and IT industry and develop a compensation system (monetary and non-monetary benefits) of the same. _________________________________________________________________________ _________________________________________________________________________ 2. _______________________________________________________________ _____________________________________________________________ 13.7 UNIT END QUESTIONS A. Descriptive Questions Short Questions: 1. What is meant by strategic compensation planning? 2. Describe the challenges of strategic compensation planning. 3. Differentiate between the two types of strategic compensation planning. 4. Explain specific tactical HR decisions in strategic compensation. 5. What are the factors of trade unions in strategic compensation planning? Long Questions: 1. Why do organizations adopt a strategic approach towards compensation? 2. What are the internal challenges faced by the organization in strategic compensation planning? 3. What are the external challenges faced by the organization in strategic compensation planning? 4. Explain why regular audits are essential in strategic compensation. 5. Explain the steps of creating a strategic compensation planning. 174 CU IDOL SELF LEARNING MATERIAL (SLM)

B. Multiple Choice Questions: 1. A _______compensation planning will direct the organization in implementing efficient total compensation taskforce and administration. a. strategic b. non-strategic c. functional d. non-monetary 2. The first step in creating a strategic compensation plan is a. Deciding budget of the organization b. Set up pay grades c. Welcoming employees’ inputs and suggestions d. Communication about total compensation to the employees 3. An effective compensation strategy involves key components based on pay, benefits and __________. a. SWOT analysis b. career opportunities c. health benefits d. traveling allowances 4. _________ considers the quality of manpower and its allied systems to develop a compensation system. a. Human Resource Compensation Strategy b. competitive compensation strategy c. incentive compensation strategy d. Marketing strategy 5. Individual vs team reward systems develop a productive __________________. a. Human Resource Management b. ERP modules c. Performance Management System d. Management Information System 175 CU IDOL SELF LEARNING MATERIAL (SLM)

Answers 1- a, 2-c, 3-b, 4-a, 5-c 13.8 REFERNCES Textual Reference: Wages and Salary Administration by A. M. Sharma Online References: • https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2020/new- compensation-trends-for-the-future-of-work.html • https://www.guidespark.com/blog/how-to-develop-a-strategic-compensation-strategy/ 176 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT14 INTERNATIONAL COMPENSATION STRUCTURE 14.0 Learning Objectives 14.1 Introduction 14.2 Global convergence of compensation practices 14.3 Pay for performance for global employees 14.4 Summary 14.5 Keywords 14.6Learning activity 14.7 Unit End Questions 14.8 References 14.0 LEARNING OBJECTIVES After studying this unit, you should be ableto - Explain the meaning of international compensation - Describe the Global convergence of compensation practices - Outline the Pay for performance for global employees - Identify the methods of Pay for performance for global employees 14.1 INTRODUCTION Meaning Of International Compensation International Compensation is termed as the internal rate of return (monetary or non- monetary) including base salary, employee benefits, perks and long term &short-term incentives or commissions that is offered to the employees in accordance with their contributions towards performance in achieving the desired goal of an international organization. 177 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 14.1 The socio-economic conditions of the employing country should be taken into consideration while establishing an international compensation package. It is somehow easy to formulate the compensation package for the parent national nation, but difficult to bring about the efficiency in the host and third country nationals. International compensation given to the employee also depends on the level of performance and efficiency of the employee in achieving a certain target. Variable Pay can be in the form of incentives, commissions, bonus, team or individual rewards, etc. Variable pay adds a considerable raise to the basic pay salary structure of the employee. It serves as a great motivational factor for the employee to perform better and eventually benefit the efficiency of the organization as well. 14.2 GLOBAL CONVERGENCE OF COMPENSATION PRACTICES For many organizations, maintaining a domestic remuneration program that supports the goals of the organization and meets the financial requirements of employees is a difficult challenge. This challenge is strengthened when a parallel remuneration program must be premeditated to operate in multiple nations with different working cultures. For organizations competing in an international market, handling reimbursement requires a thorough 178 CU IDOL SELF LEARNING MATERIAL (SLM)

understanding of the taxation policies of compensation and benefits, divergent state social structures, differences in standard of living and employee principles and potentials. Some of the most prominent challenges in compensation structures are: 1. How does a business pay expatriates from different home countries carried together to work on a plan or assignment? 2. What about compensation packages for home country nationals sent to different sections of the world? 3. COMPONENTS OF GLOBAL COMPENSATION PACKAGE Fig 14.2 Approaches To Global Compensation 179 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 14.3 180 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 14.4 181 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 14.5 14.3 PAY FOR PERFORMANCE FOR GLOBAL EMPLOYEES Performance linked compensation refers to additional incentive paid to international employees that have performed more than their regular job requirements at an exceptionally well quality. Employees are benefited with performance linked compensation mostly in the form of bonus and stock options. Variable pay is also known as performance pay, which is used to identify and reward employee performance and contribution greater than their regular and expected job requirements, towards international organization’s productivity and profitability. Variable pay depends on two factors. It may be given at the time of better employee performance or if the organization is doing globally well. Variable pay has become a trending mode of compensation in most of the international organizations. This can be observed highly in the fostering competitive global business environment, where international organizations are seeking to reduce their investment in fixed costs and grow the use of variable costs, since variable costs largely depend on the level of performance of the employees and the organization as a whole. 182 CU IDOL SELF LEARNING MATERIAL (SLM)

14.4 SUMMARY 1. International Compensation is termed as the internal rate of return (monetary or non- monetary) including base salary, employee benefits, perks and long term &short-term incentives or commissions that is offered to the employees in accordance with their contributions towards performance in achieving the desired goal of an international organization. 2. Variable Pay is a part of global total compensation given to the employee which depends on the level of performance and efficiency of the employee in achieving a certain target. Variable Pay can be in the form of incentives, commissions, bonus, team or individual rewards, etc. 3. Some of the most prominent challenges in compensation structures are: a. How does a business pay expatriates from different home countries carried together to work on a plan or assignment? b. What about compensation packages for home country nationals sent to different sections of the world? 4. The approaches to international compensation are balance sheet approach and going rate approach. 183 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Global Organizations frequently use variable pay to inculcate performance driven culture and attract and retain talent. 6. With more practices of global businesses than ever, adopting team-based working pattern, team-based reward/ incentive programs have become necessary. 7. Performance linked compensation refers to additional incentive paid to international employees that have performed more than their regular job requirements at an exceptionally well quality. 8. Variable pay has become a trending mode of compensation in most of the international organizations. This can be observed highly in the fostering competitive global business environment, where international organizations are seeking to reduce their investment in fixed costs and grow the use of variable costs, since variable costs largely depend on the level of performance of the employees and the organization as a whole. 14.5 KEYWORDS • Global Variable Pay: rewards in the form of incentives, commissions, bonus to the team or individual • Pay for performance: additional incentive paid to international employees that have performed more than their regular job requirements • Direct compensation: direct monetary benefits in terms of cash or kind. • Indirect compensation: indirect monetary benefits including allowances. • Cost of living index: standard of living index in terms of inflation • Factor method: evaluates the job on the basis of a variety of factors • Compensation taskforce: stakeholders involved in the team of compensation system 14.6 LEARNING ACTIVITY 184 CU IDOL SELF LEARNING MATERIAL (SLM)

1. Discuss the importance of global pay plans in the time of inflation in the world economy. ______________________________________________________________________ ______________________________________________________________________ 2. What factors will you consider to include in the variable pay plan of the total compensation structure of an international organization in the FMCG industry? ______________________________________________________________________ ______________________________________________________________________ 14.7 UNIT END QUESTIONS A. Descriptive Questions Short Questions: 1. What is meant by international compensation? 2. What is balance sheet approach? 3. What is going rate approach? 4. Differentiate between balance sheet and going rate approach. 5. Describe the components of global compensation plan. Long Questions: 1. What are the challenges faced in designing international compensation plan? 2. Why socio-economic conditions should be taken into consideration in international compensation plan? 3. Explain the importance of designing a global compensation plan. 4. Discuss the challenged faced in designing an international compensation structure. 5. How does pay for performance help in motivating the employees in the international organization? B. Multiple Choice Questions: 1. __________is termed as the internal rate of return (monetary or non-monetary) including base salary, employee benefits, perks and long term &short-term incentives or 185 CU IDOL SELF LEARNING MATERIAL (SLM)

commissions that is offered to the employees in accordance with their contributions towards performance in achieving the desired goal of an international organization. a. fixed pay b. International Compensation c. job analysis d. Total Compensation 2. The approaches to international compensation are balance sheet approach and ________ a. pays rate approach. b. merit rate approach. c. base rate approach. d. going rate approach. 3. Under this method the jobs are classified on pro rata basis and then the job profiles are evaluated under the said categories. a. ranking method b. point method c. classification method d. factor comparison method 4. Global Organizations frequently use variable pay to inculcate performance driven culture and _________ a. rank employees b. compare talent c. promotes employees d. attracts and retain talent. 5. Variable pay is categorised under three groups, viz individual, team and ______________. a. behavioral b. organizational c. technical d.social Answers 1-b, 2-d, 3-c, 4-d, 5-b 186 CU IDOL SELF LEARNING MATERIAL (SLM)

14.8 REFERENCES Textual Reference: Wages and Salary Administration by A. M. Sharma Online References: • https://www.mbaknol.com/human-resource-management/international-compensation- management/ • https://www.organizationalpsychologydegrees.com/lists/5-effective-team-based- rewards/ • https://www.mbaknol.com/human-resource-management/pay-for-performance-compensation- strategy/ • https://www.augi.com/articles/detail/surveys-article-salary-survey-correction-pay-by-education 187 CU IDOL SELF LEARNING MATERIAL (SLM)