Challenges and Objectives of International Compensation Management

 
International Compensation
 
Ms Dinna Johnson
Asst Professor
Dept of Management Studies
Nirmala college Muvattupuzha
 
Dept of Management Studies NCM
 
Compensation is the amount of remuneration
paid to an employee by the employer in return to
the employee’s services to the company. Almost
all the employees accept jobs in MNCs, take-up
assignments in various countries, and take-up the
risk, bear inconveniences and discomforts in
foreign assignments mostly based on the
compensation package.
compensation package plays a pivotal role in
international human resource management as
the employees leave their comfortable current
jobs, home, relatives, friends and society at the
home country to earn more finance and for
better future prospects
 
 
Dept of Management Studies NCM
 
Complexities of Compensation
Management
 
The salary and benefits levels vary from country
to country.
Cost of living varies widely among countries
Varying requirements of providing housing, and
medical and health facilities for employee family
members and school facilities for employee
children indifferent countries.
Varying salary levels of expatriates in their
respective home countries. These salary levels
are viewed as opportunity costs by the
expatriates while accepting compensation
package for their foreign assignments
 
 
Dept of Management Studies NCM
 
 
Foreign exchange rates fluctuate widely
Varying tax rates.
Varying rates of inflation and deflation among the
developed and developing countries.
Varying local conditions in host countries in terms
of cost of living, availability of housing and
medical facilities, school facilities and security
situations that require the MNCs to design
different pay packages for different countries;
 
 
Dept of Management Studies NCM
 
OBJECTIVES OF INTERNATIONAL
COMPENSATION
MANAGEMENT
 
Recruitment and Retention of suitable Employees
Consistency and Equity
Facilitate Mobility
Adaptability to Foreign Cultures and Environment
Cost of Staff
vis-à-vis
Ability to Pay
Simplify Collective Bargaining Procedures
 
Dept of Management Studies NCM
 
 
Organizational Performance
Competitive and Comparable Compensation
Package
 
Dept of Management Studies NCM
 
Components of international
compensation
 
Pay or Base salary
 
Cost of Living Allowance
 
Tax equalization Allowance
 
International Market Allowance
 
Housing Allowance
 
Educational Allowance
 
Relocation Allowance
 
Settling-in and settling out Allowance
 
Medical Allowance
 
Dept of Management Studies NCM
 
Hardship and Danger Allowance
 
Exchange rate Protection Allowance
 
Insurance Allowance
 
Stock-Option
 
Bonus
 
Gratuity
 
Pension
 
Benefits
 
Social Security Measures
 
 
Dept of Management Studies NCM
 
Pay or Base salary
 
The meaning of the term pay or base salary varies from
country to country as well as from one MNC to the
other with regard to international compensation. Some
organizations provide some base salary to all
categories of employees like PCNs,TCNs and HNCs.
These organizations pay international market
allowance for foreign employees and domestic market
allowance for HCNs over and above the base salary.
Some other MNCs provide base salary equivalent to
the salary earned by the PNCs and TCNs in their
respective home countries and pay additional
allowances to meet the cost of hardships,
inconveniences and risks
 
Dept of Management Studies NCM
 
Structure of International Compensation
package
 
 
Dept of Management Studies NCM
 
Cost of Living Allowance (COLA)
 
Cost of living varies from one city to other city of the
same country and from one country to the other
country. In addition, it varies from one period of time
and the other period of time in the same city and
country and year.
Some MNCs include housing allowance, education
allowance and tax equalization allowance in COLA,
while others pay them separately. The COLA would be
adjusted accordingly when it is inclusive of other
allowances as well as exclusive of other allowances
 
 
Dept of Management Studies NCM
 
Tax Equalization Allowance
 
Personal income tax makes wide variation in the
salary of employees among different countries.
The jobs in United Arab Emirates, Oman and
Brunei Darussalam are more attractive than that
of Sweden.
MNCs consider the varying tax rates in different
places, while designing the compensation
package for expatriates in order to maintain the
same living standard as well as same ability to
save compared to those of employee’s home
town and/or previous place of employment.
 
 
Dept of Management Studies NCM
 
International Market Allowance
 
Employees with distinctive skills and skills of short
supply are demanded by many MNCs across the world.
MNCs, in order to attract such employees pay
competitive salary, by adjusting the compensation
package. Adjustment of compensation package in this
regard would be payment of international market
allowance.
Some MNCs include cost of living allowance, tax
equalization allowance and exchange rate stabilization
allowance in the international market allowance.
However, international market allowance is to attract
the employees by paying more than what they are
offered by competitive employers.
 
 
 
Dept of Management Studies NCM
 
Housing Allowance
 
House rents in some cities/countries would be exorbitant
and some times they are more than the employees after
tax salary t would be rather difficult for an employee to
accept overseas employment with such exorbitant house
rents. They can’t live in similar houses of their home
country, even if they accept foreign employment with
exorbitant rents.
Hence, MNCs pay house rent allowance equivalent to on-
going house rents in the place of employment. Some MNCs
procure the houses on lease and pay the actual house rent
directly to the house owners and relieve the employee
from uncertainties of house rent cost hikes from time to
time as well as cultural issues/ harassment from the land
lords
 
Dept of Management Studies NCM
 
Educational Allowance
 
Educational allowances for expatriates include
cost of language training to employee and
his/her family members, training an
educational cost for employee’s continuous
learning and development and educational
expenses of school/university going children
of the employee.
 
Dept of Management Studies NCM
 
Relocation Allowance
 
Movement of an employee and his/her family
members from the home country to a foreign
country involves a variety of expenses like
temporarily closing up of the family activities and
professional activities at the home, transferring
the children from the home country
school/university to the foreign
schools/universities, payment of advanced taxes,
rents and fee at the home country, acquiring visa,
travel to foreign country, freight and loss of
certain things including baggage.
 
 
Dept of Management Studies NCM
 
Settling-in and Settling-out Allowances
 
Settling-in and settling-out allowances are
similar to relocation allowances. MNCs
provide settling-in allowances in order to
reduce employee’s financial burden from
buying various goods/services when they
arrive in a foreign country. Settling-out
allowance is provided to meet the costs of
leaving for home country or any other foreign
country.
 
 
Dept of Management Studies NCM
 
Hardship Premium
 
The dangerous geographical conditions like earth quakes in
Indonesia, physical threat, violence and hostility to
foreigners from locals make the foreign employment
difficult. The Wars between the countries like Iran-Iraq war,
Iraq-Kuwait war, and Eritrea and
Ethiopia war also created problems for foreigners who
worked in these countries during the war periods. Further,
the military coups like those in Pakistan and Fiji Islands
caused discomfort for the foreigners worked in these
countries.
Added to these hardships, prevalence of disease,
inadequate/poor medical facilities in some developing
countries particularly of those Africa, and South American
countries create further hardship for foreigners to live and
work in such countries.
 
 
Dept of Management Studies NCM
 
 
Hardship allowance varies from 5% to 25% of base
salary
It is rather difficult for MNCs to recruit as well as retain
the employees for such hard jobs and risky and
discomfort locations, with the normal compensation
package. Therefore, MNCs offer special allowance, i.e.,
hardship allowance in order to attract and retain
employees for hard jobs as well as jobs in hard
locations.
Danger pay allowance is paid to employees where civil
insurrection, civil war, terrorism, war time conditions
threaten physical harm or pose imminent danger to the
health or well-being of employee.
 
 
Dept of Management Studies NCM
 
Exchange Rate Protection Allowance
 
Foreign exchange rate fluctuations greatly
determine the repatriation amount to home
country of foreign employees. Adverse
fluctuations reduce the repatriation amount, and
thereby discourage the foreign employees from
continuation of employment. For example, the
fluctuations in the value of US dollar against
Indian Rupee during 2007 and 2008 (from 1US$ =
46 to 1US$ = 39), prompted some Indian
software professionals working US companies to
quit the US jobs and return to India
 
Dept of Management Studies NCM
 
Insurance Allowances
 
MNCs either provide insurance allowance or
buy insurance policies for employees in order
to provide them security against all kinds of
health issues, risks against life and physical
security of employee and his/her family
members. Different kinds of insurance
facilities provided to employees include:
 
Dept of Management Studies NCM
 
Health Insurance
 
Prescription Drug coverage
 
Dental Insurance
 
Vision insurance
 
Travel insurance
 
Life insurance
 
Vehicle insurance
 
Emergency medical evacuation and repatriation service
 
Medical information, records and physician assistance.
 
Dept of Management Studies NCM
 
Stock Option
 
Stock options are common in most of the MNCs
in many countries. This benefit allows employees
to purchase the shares of the MNCs at fixed
and/or reduced prices. Employees are motivated
when the MNC allows them to buy the shares at
the reduced prices. The stock options are viewed
as performance-based incentives. This scheme
allows the MNCs to attract and retain competent
employees, by creating a sense of belongingness
and ownership among them
 
Dept of Management Studies NCM
 
Bonus
 
MNCs provide individual and/or group bonus
to expatriates based on their performance like
output, sales, productivity, savings and cost
minimization. This benefit provides mutual
advantage to the employees as well as MNCs.
 
Dept of Management Studies NCM
 
Gratuity
 
Gratuity is the retirement benefit and/or
contract-termination benefit. This benefit
encourages the employees to continue their
employment with the same MNC until the
completion of contract and for the long run
 
Dept of Management Studies NCM
 
 Pension
 
    Some MNCs pay pension to the expatriates
and host country nationals who served the
company for relatively long-period. However,
MNCs face complexities in pension payment
with regard to calculation, country of origin,
varying legal requirements of different
countries, and fluctuations in exchange rates.
Therefore, they limit pension facility to certain
categories of employees only.
 
 
Dept of Management Studies NCM
 
Other Benefits
 
Cafeteria
 
Travel fares
 
Recreational Allowances
 
Facilities for physical and mental fitness
 
Socialization programs
 
Conveyance benefits
 
Dept of Management Studies NCM
 
Social Security Measures
 
For employment security
For health protection
For old age and retirement
For personal identification, participation and
stimulation
 
Dept of Management Studies NCM
 
Performance management (PM) is a goal-
oriented process directed toward ensuring that
organizational processes are in place to maximize
the productivity of employees, teams, and
ultimately, the organization. It is a major player in
accomplishing organizational strategy in that it
involves measuring and improving the value of
the workforce. PM includes incentive goals and
the corresponding incentive values so that the
relationship can be clearly understood and
communicated. There is a close relationship
between incentives and performance.
 
Dept of Management Studies NCM
 
Performance appraisal (PA) is a formal system of review
and evaluation of individual or team task performance.
A critical point in the definition is the word  formal,
because in actuality, managers should be reviewing an
individual’s performance on a continuing basis.
PA is especially critical to the success of performance
management. Although performance appraisal is but
one component of performance management, it is
vital, in that it directly reflects
For many organizations, the primary goal of an
appraisal system is to improve individual and
organizational performance. There may be other goals,
however. A potential problem with PA, and a possible
cause of much dissatisfaction, is expecting too much
from one appraisal plan.
 
 
Dept of Management Studies NCM
 
Performance
Appraisal Process
 
Dept of Management Studies NCM
 
Uses of Performance Appraisal
 
Human Resource Planning
Recruitment and Selection
Training and Development
Career Planning and Development
Compensation Programs
Internal Employee Relations
Assessment of Employee Potential
 
Dept of Management Studies NCM
 
Characteristics of an Effective
Appraisal System
 
Job-Related Criteria
Performance Expectations
Standardization
Trained Appraisers
Continuous Open Communication
Conduct Performance Reviews
Due Process
 
Dept of Management Studies NCM
 
Incentive
 
An Incentive or Reward can be anything that at tracts a
employee’s attention, stimulates him to work; Other
words it can define as “an incentive e scheme is a plan
or programme to motivate
individual or group performance. In other terms,
incentives are also called as ‘payments by results’.
Incentives are paid in addition to wages and salaries
Incentives depend upon productivity, sales, profit, or
cost reduction efforts. Now, let us also see the different
incentive schemes. There are: (i) Individual Incentive
Schemes, (ii) Group Incentive Programs and (iii) Plant
Wide Incentive Schemes.
 
Dept of Management Studies NCM
 
 
Individual Incentives include: Merit Pay Plans
(annual increase, based on performance)
Piecework Plans (pay based on number of
units produced typically in a specified time
period.) Time-savings bonuses and
commissions Work best where clear objectives
can be set and tasks are independent.
 
 
 
Dept of Management Studies NCM
 
 
Group Incentives include: Incentives can be
offered to groups, rather than individuals, when
employees' tasks are interdependent and require
cooperation.
Plant-wide Incentives include:
Direct employee efforts toward organizational
goals (such as cost reduction)
Scanlon Plan - supervisor and employee
committees suggest labour-saving improvements
IMPROSHARE - formula is used to determine
bonuses based on labor cost savings
 
 
Dept of Management Studies NCM
 
 
The Rewards are classified into two:
Direct compensation
Indirect compensation
 
Dept of Management Studies NCM
 
Incentives
 
In recent years some MNC have been designing special incentives
programmes for keeping expatriate motivated. programmes for
keeping expatriate motivated. In the process a growing
number of firms have dropped the ongoing premium for overseas
assignment and replaced it with on time lump-sum premium. The
lump sum payment has at least three advantages. First expatriates
realize that they are paid this only once and that too when they
accept an overseas assignment. So the payment tends to retain its
motivational value. Second, costs to the company are less because
there is only one payment and no future financial commitment.
This is so because incentive is separate payment, distinguishable for
a regular pay and it is more readily for saving  or spending.
 
 
 
Dept of Management Studies NCM
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International compensation management poses various complexities due to differences in salary levels, cost of living, exchange rates, and tax rates across countries. The objectives include recruitment, retention, consistency, mobility, adaptability, cost-effectiveness, and simplification of bargaining. Ensuring competitive and comparable compensation packages is crucial for organizational performance.


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  1. International Compensation Ms Dinna Johnson Asst Professor Dept of Management Studies Nirmala college Muvattupuzha Dept of Management Studies NCM

  2. Compensation is the amount of remuneration paid to an employee by the employer in return to the employee s services to the company. Almost all the employees accept jobs in MNCs, take-up assignments in various countries, and take-up the risk, bear inconveniences and discomforts in foreign assignments mostly based on the compensation package. compensation package plays a pivotal role in international human resource management as the employees leave their comfortable current jobs, home, relatives, friends and society at the home country to earn more finance and for better future prospects Dept of Management Studies NCM

  3. Complexities of Compensation Management The salary and benefits levels vary from country to country. Cost of living varies widely among countries Varying requirements of providing housing, and medical and health facilities for employee family members and school facilities for employee children indifferent countries. Varying salary levels of expatriates in their respective home countries. These salary levels are viewed as opportunity costs by the expatriates while accepting compensation package for their foreign assignments Dept of Management Studies NCM

  4. Foreign exchange rates fluctuate widely Varying tax rates. Varying rates of inflation and deflation among the developed and developing countries. Varying local conditions in host countries in terms of cost of living, availability of housing and medical facilities, school facilities and security situations that require the MNCs to design different pay packages for different countries; Dept of Management Studies NCM

  5. OBJECTIVES OF INTERNATIONAL COMPENSATION MANAGEMENT Recruitment and Retention of suitable Employees Consistency and Equity Facilitate Mobility Adaptability to Foreign Cultures and Environment Cost of Staff vis- -vis Ability to Pay Simplify Collective Bargaining Procedures Dept of Management Studies NCM

  6. Organizational Performance Competitive and Comparable Compensation Package Dept of Management Studies NCM

  7. Components of international compensation Pay or Base salary Cost of Living Allowance Tax equalization Allowance International Market Allowance Housing Allowance Educational Allowance Relocation Allowance Settling-in and settling out Allowance Medical Allowance Dept of Management Studies NCM

  8. Hardship and Danger Allowance Exchange rate Protection Allowance Insurance Allowance Stock-Option Bonus Gratuity Pension Benefits Social Security Measures Dept of Management Studies NCM

  9. Pay or Base salary The meaning of the term pay or base salary varies from country to country as well as from one MNC to the other with regard to international compensation. Some organizations provide some base salary to all categories of employees like PCNs,TCNs and HNCs. These organizations pay international market allowance for foreign employees and domestic market allowance for HCNs over and above the base salary. Some other MNCs provide base salary equivalent to the salary earned by the PNCs and TCNs in their respective home countries and pay additional allowances to meet the cost of hardships, inconveniences and risks Dept of Management Studies NCM

  10. Structure of International Compensation package Dept of Management Studies NCM

  11. Cost of Living Allowance (COLA) Cost of living varies from one city to other city of the same country and from one country to the other country. In addition, it varies from one period of time and the other period of time in the same city and country and year. Some MNCs include housing allowance, education allowance and tax equalization allowance in COLA, while others pay them separately. The COLA would be adjusted accordingly when it is inclusive of other allowances as well as exclusive of other allowances Dept of Management Studies NCM

  12. Tax Equalization Allowance Personal income tax makes wide variation in the salary of employees among different countries. The jobs in United Arab Emirates, Oman and Brunei Darussalam are more attractive than that of Sweden. MNCs consider the varying tax rates in different places, while designing the compensation package for expatriates in order to maintain the same living standard as well as same ability to save compared to those of employee s home town and/or previous place of employment. Dept of Management Studies NCM

  13. International Market Allowance Employees with distinctive skills and skills of short supply are demanded by many MNCs across the world. MNCs, in order to attract such employees pay competitive salary, by adjusting the compensation package. Adjustment of compensation package in this regard would be payment of international market allowance. Some MNCs include cost of living allowance, tax equalization allowance and exchange rate stabilization allowance in the international market allowance. However, international market allowance is to attract the employees by paying more than what they are offered by competitive employers. Dept of Management Studies NCM

  14. Housing Allowance House rents in some cities/countries would be exorbitant and some times they are more than the employees after tax salary t would be rather difficult for an employee to accept overseas employment with such exorbitant house rents. They can t live in similar houses of their home country, even if they accept foreign employment with exorbitant rents. Hence, MNCs pay house rent allowance equivalent to on- going house rents in the place of employment. Some MNCs procure the houses on lease and pay the actual house rent directly to the house owners and relieve the employee from uncertainties of house rent cost hikes from time to time as well as cultural issues/ harassment from the land lords Dept of Management Studies NCM

  15. Educational Allowance Educational allowances for expatriates include cost of language training to employee and his/her family members, training an educational cost for employee s continuous learning and development and educational expenses of school/university going children of the employee. Dept of Management Studies NCM

  16. Relocation Allowance Movement of an employee and his/her family members from the home country to a foreign country involves a variety of expenses like temporarily closing up of the family activities and professional activities at the home, transferring the children from the home country school/university to the foreign schools/universities, payment of advanced taxes, rents and fee at the home country, acquiring visa, travel to foreign country, freight and loss of certain things including baggage. Dept of Management Studies NCM

  17. Settling-in and Settling-out Allowances Settling-in and settling-out allowances are similar to relocation allowances. MNCs provide settling-in allowances in order to reduce employee s financial burden from buying various goods/services when they arrive in a foreign country. Settling-out allowance is provided to meet the costs of leaving for home country or any other foreign country. Dept of Management Studies NCM

  18. Hardship Premium The dangerous geographical conditions like earth quakes in Indonesia, physical threat, violence and hostility to foreigners from locals make the foreign employment difficult. The Wars between the countries like Iran-Iraq war, Iraq-Kuwait war, and Eritrea and Ethiopia war also created problems for foreigners who worked in these countries during the war periods. Further, the military coups like those in Pakistan and Fiji Islands caused discomfort for the foreigners worked in these countries. Added to these hardships, prevalence of disease, inadequate/poor medical facilities in some developing countries particularly of those Africa, and South American countries create further hardship for foreigners to live and work in such countries. Dept of Management Studies NCM

  19. Hardship allowance varies from 5% to 25% of base salary It is rather difficult for MNCs to recruit as well as retain the employees for such hard jobs and risky and discomfort locations, with the normal compensation package. Therefore, MNCs offer special allowance, i.e., hardship allowance in order to attract and retain employees for hard jobs as well as jobs in hard locations. Danger pay allowance is paid to employees where civil insurrection, civil war, terrorism, war time conditions threaten physical harm or pose imminent danger to the health or well-being of employee. Dept of Management Studies NCM

  20. Exchange Rate Protection Allowance Foreign exchange rate fluctuations greatly determine the repatriation amount to home country of foreign employees. Adverse fluctuations reduce the repatriation amount, and thereby discourage the foreign employees from continuation of employment. For example, the fluctuations in the value of US dollar against Indian Rupee during 2007 and 2008 (from 1US$ = 46 to 1US$ = 39), prompted some Indian software professionals working US companies to quit the US jobs and return to India Dept of Management Studies NCM

  21. Insurance Allowances MNCs either provide insurance allowance or buy insurance policies for employees in order to provide them security against all kinds of health issues, risks against life and physical security of employee and his/her family members. Different kinds of insurance facilities provided to employees include: Dept of Management Studies NCM

  22. Health Insurance Prescription Drug coverage Dental Insurance Vision insurance Travel insurance Life insurance Vehicle insurance Emergency medical evacuation and repatriation service Medical information, records and physician assistance. Dept of Management Studies NCM

  23. Stock Option Stock options are common in most of the MNCs in many countries. This benefit allows employees to purchase the shares of the MNCs at fixed and/or reduced prices. Employees are motivated when the MNC allows them to buy the shares at the reduced prices. The stock options are viewed as performance-based incentives. This scheme allows the MNCs to attract and retain competent employees, by creating a sense of belongingness and ownership among them Dept of Management Studies NCM

  24. Bonus MNCs provide individual and/or group bonus to expatriates based on their performance like output, sales, productivity, savings and cost minimization. This benefit provides mutual advantage to the employees as well as MNCs. Dept of Management Studies NCM

  25. Gratuity Gratuity is the retirement benefit and/or contract-termination benefit. This benefit encourages the employees to continue their employment with the same MNC until the completion of contract and for the long run Dept of Management Studies NCM

  26. Pension Some MNCs pay pension to the expatriates and host country nationals who served the company for relatively long-period. However, MNCs face complexities in pension payment with regard to calculation, country of origin, varying legal requirements of different countries, and fluctuations in exchange rates. Therefore, they limit pension facility to certain categories of employees only. Dept of Management Studies NCM

  27. Other Benefits Cafeteria Travel fares Recreational Allowances Facilities for physical and mental fitness Socialization programs Conveyance benefits Dept of Management Studies NCM

  28. Social Security Measures For employment security For health protection For old age and retirement For personal identification, participation and stimulation Dept of Management Studies NCM

  29. Performance management (PM) is a goal- oriented process directed toward ensuring that organizational processes are in place to maximize the productivity of employees, teams, and ultimately, the organization. It is a major player in accomplishing organizational strategy in that it involves measuring and improving the value of the workforce. PM includes incentive goals and the corresponding incentive values so that the relationship can be clearly understood and communicated. There is a close relationship between incentives and performance. Dept of Management Studies NCM

  30. Performance appraisal (PA) is a formal system of review and evaluation of individual or team task performance. A critical point in the definition is the word formal, because in actuality, managers should be reviewing an individual s performance on a continuing basis. PA is especially critical to the success of performance management. Although performance appraisal is but one component of performance management, it is vital, in that it directly reflects For many organizations, the primary goal of an appraisal system is to improve individual and organizational performance. There may be other goals, however. A potential problem with PA, and a possible cause of much dissatisfaction, is expecting too much from one appraisal plan. Dept of Management Studies NCM

  31. Performance Appraisal Process Dept of Management Studies NCM

  32. Uses of Performance Appraisal Human Resource Planning Recruitment and Selection Training and Development Career Planning and Development Compensation Programs Internal Employee Relations Assessment of Employee Potential Dept of Management Studies NCM

  33. Characteristics of an Effective Appraisal System Job-Related Criteria Performance Expectations Standardization Trained Appraisers Continuous Open Communication Conduct Performance Reviews Due Process Dept of Management Studies NCM

  34. Incentive An Incentive or Reward can be anything that at tracts a employee s attention, stimulates him to work; Other words it can define as an incentive e scheme is a plan or programme to motivate individual or group performance. In other terms, incentives are also called as payments by results . Incentives are paid in addition to wages and salaries Incentives depend upon productivity, sales, profit, or cost reduction efforts. Now, let us also see the different incentive schemes. There are: (i) Individual Incentive Schemes, (ii) Group Incentive Programs and (iii) Plant Wide Incentive Schemes. Dept of Management Studies NCM

  35. Individual Incentives include: Merit Pay Plans (annual increase, based on performance) Piecework Plans (pay based on number of units produced typically in a specified time period.) Time-savings bonuses and commissions Work best where clear objectives can be set and tasks are independent. Dept of Management Studies NCM

  36. Group Incentives include: Incentives can be offered to groups, rather than individuals, when employees' tasks are interdependent and require cooperation. Plant-wide Incentives include: Direct employee efforts toward organizational goals (such as cost reduction) Scanlon Plan - supervisor and employee committees suggest labour-saving improvements IMPROSHARE - formula is used to determine bonuses based on labor cost savings Dept of Management Studies NCM

  37. The Rewards are classified into two: Direct compensation Indirect compensation Dept of Management Studies NCM

  38. Incentives In recent years some MNC have been designing special incentives programmes for keeping expatriate motivated. programmes for keeping expatriate motivated. In the process a growing number of firms have dropped the ongoing premium for overseas assignment and replaced it with on time lump-sum premium. The lump sum payment has at least three advantages. First expatriates realize that they are paid this only once and that too when they accept an overseas assignment. So the payment tends to retain its motivational value. Second, costs to the company are less because there is only one payment and no future financial commitment. This is so because incentive is separate payment, distinguishable for a regular pay and it is more readily for saving or spending. Dept of Management Studies NCM

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