Unit 3: Compensation and benefits management

Job evaluation determines the relative worth of jobs to establish a fair pay structure — it rates the job, not the person.

• Process: gain acceptance → form committee → identify and analyse jobs → choose method → rate jobs → assign pay grades → review.

• Bonus: lump-sum payment for performance or profits — statutory bonus (Code on Wages) and performance bonus.
• Pay for performance: merit pay, individual incentives, sales commissions, gain sharing, profit sharing.
• Conditions for success: measurable performance, controllable outcomes, meaningful amounts, fair and transparent rules.

• Pay linked to skills and competencies an employee acquires and demonstrates, rather than the job held.
• Uses: knowledge work, flexible teams, skill-based pay on the shop floor.
• Benefits: encourages learning and flexibility. Issues: measuring competencies, cost of paying for unused skills.

• ESOPs (employee stock option plans), RSUs (restricted stock units), ESPPs (purchase plans), sweat equity and stock appreciation rights.
• Features: grant, vesting period (minimum one year under SEBI SBEB Regulations), exercise; taxed as perquisite on exercise and as capital gains on sale.
• Purpose: align employees with shareholders, retain talent, conserve cash in start-ups.

• Team bonuses for meeting group goals, gain sharing (Scanlon, Rucker plans), project completion awards.
• Issues: free riders, balancing individual and team rewards.

• Reward strategy: long-term intentions for rewards aligned with business strategy — total rewards, pay positioning, mix, communication.
• Psychological contract (Rousseau): unwritten mutual expectations between employer and employee — fair pay, growth, security in return for loyalty and effort; transactional (short-term, monetary) vs relational (long-term, trust-based).
• Breach of the psychological contract reduces trust, commitment and performance.

• Other laws: Code on Social Security (PF, ESI, gratuity, maternity), Income-tax Act (taxation of salary and perquisites), Companies Act Section 197 (managerial remuneration limits), SEBI SBEB Regulations.

• Benefits: statutory (PF, ESI, gratuity, maternity, leave) and voluntary (health insurance, meal cards, transport, education support, wellness programmes, flexible benefits plans).
• Administration: benefits design, cost management, communication, enrolment platforms, compliance.

• Quality of work life (QWL): the degree to which work satisfies employees' personal needs — Walton's criteria: adequate and fair compensation, safe and healthy conditions, opportunity to develop capacities, growth and security, social integration, constitutionalism (rights), work–life balance, social relevance of work.
• Health: medical facilities, occupational health checks, mental health and EAPs (employee assistance programmes).
• Safety: accident prevention, safety committees, training, protective equipment, safety audits; OSH Code, 2020 requirements.
• Welfare: statutory (canteens, crèches, rest rooms, first aid under the Factories Act/OSH Code) and voluntary (housing, transport, education, recreation).