Reward Prize, Recompense, Return,
Incentive.,
Process
Compensation Benchmarking
• For an organization to attract and retain
talent, it is of utmost importance that it is able
to provide an attractive compensation
package.
• Along with the brand value of the
organization, for attracting top talent, a well
designed compensation package plays a
crucial role.
• But, how does a company go about designing
their compensation package?
• Thus!!! Compensation Benchmarking is a key
element in designing a pay package.
Comparison
• 1) Identify the companies having similar business
or products.
2) Identify the companies from where you loose
your talent and you hire your talent (Most
Common Practice)
3) Identify the companies having similar Revenue
and employee size in same group of business
4) Identify the companies where you want to be
in next one year or so…
1. What are ESOPs?
• An Employee Stock Option Plan is when the
company offers its shares to the employees.
• An ESOP is nothing but an option to buy the
company's share at a certain price.
• This could either be at the market price, or at
a preferential price.
2. Why would a company offer an
ESOP?
• When you invest in shares, of a company. That
makes you a shareholder or part owner in the
company.
• Owning an equity share means owning a share
in the company business.
• Companies offer their employees shares
because it is considered that having a stake in
the company would increase loyalty and
motivation substantially.
3. When are they given?
• There are time limits for availing this scheme.
• For instance, you can acquire the shares after you
complete a particular period of employment.
• This could be a year, even longer.
• If you quit your job before this period is
complete, the stock options lapse.
• Sometimes, the ESOPs are given in a phased out
fashion -- 20% in the second year, another 20% in
the third year, etc
4. When are they taxed?
• The ESOP is not taxed on acquiring the shares.
• You are taxed on the profit you make when
you sell the shares or transfer them.
ESOP-related attitudes and job
involvement
Perks
• Benefits in kind (also called fringe benefits,
perquisites, perqs or perks) are various nonwage compensations provided to employee in
addition to their normal wages or salaries.
persistence
• Often, perqs are given to employees who are
doing notably well and/or have seniority.
• Common perqs are
• take-home vehicles,
• hotel stays,
• free refreshments,
• leisure activities on work time (golf, tennis, etc.),
• stationery,
• allowances for lunch, &
Flexible pay
• Flexible pay shall be awarded for extrameritorious performance that may include
rewarding a variety of outcomes and
behaviors e.g., project completion, sustained
above average performance and revenue
generation, etc.
• There are two types of awards:
• (1) Exceptional Performance Awards, and
• (2) SPOT Awards.
Variable pay
• Variable pay is employee compensation that
changes as compared to salary which is paid in
equal proportions throughout the year.
• Variable pay is used generally to recognize and
reward employee contribution toward
• company productivity,
• profitability,
• team work,
• safety,
• quality
• The employee who is awarded variable
compensation has gone above and beyond his
job description to contribute to organization
success.
• Variable pay is awarded in a variety of formats
including
• profit sharing,
• bonuses,
• holiday bonus,
• deferred compensation,
• cash, and
• goods and services such as a company-paid trip
or a Thanksgiving turkey.
• A Performance Linked Incentive (PLI) is a form of
payment from an employer to an employee
which is directly related to the performance
output of an employee and which may be
specified in an employment contract.
• PLI may either be open ended (does not have a
fixed ceiling) or
• close ended (has an upper ceiling which is
normally stipulated in the employment contract)
• Open ended incentives are normally
applicable revenue generating activities (e.g.,
Sales) and
• Close ended incentives are associated to
support functions (e.g., Operation, Human
Resources, Administration etc.)
Personal Tax
• Personal Tax, popularly known as Income tax
in India is an annual tax on income of
individuals. The Indian Income Tax Act 1961
(Section 4).
• Individuals are taxed on a progressive basis
under three slabs. The slabs for individual
taxpayers for the year 2011-12 is as below
• Slab of Income (Rs)Rate of Tax (%)Upto
1,80,000Nil1,80,000 – 5,00,000105,00,0018,00,000208,00,001 and above30
• Resident woman below the age of 60 years,
the basic exemption limit is Rs 190,000
• For senior citizens, individual of the age of 60
years or above but below 80 years, the basic
exemption limit is Rs 250,000.
• Individual of age of 80 years or above, the
basic exemption limit is Rs 500,000