LOVELY PROFESSIONAL UNIVERSITY

Academic Task
(Online Assignment – 1)

Name of the faculty member: Rajat Kapoor

Course Code: HRM 204 Course Title: Compensation Management

Student Name: Akash Registration Number: 11813153

Roll Number: A33 Class: B.Tech

Section: MOM53 Batch: 2018-2022

Date of Allotment: 10/02/21 Date of Submission: 22/02/21

 Exploring Compensation Management practices carried out in HCL
Technologies

HCL Overview:
HCL Technologies is an Indian multinational technology company that specializes
in information technology (IT) services and consulting, headquartered in Noida, Uttar
Pradesh, India. It is a subsidiary of HCL Enterprise. Originally a research and
development division of HCL, it emerged as an independent company in 1991 when HCL
entered into the software services business. The company has offices in 32 countries
including United Kingdom, United States, France, and Germany with a worldwide network of
R&D, "innovation labs" and "delivery centers", over 159,000 employees and its customers
include 250 of the Fortune 500 and 650 of the Global 2,000 companies.
It operates across sectors including aerospace and defense, automotive, banking, capital markets,
chemical and process industries, energy and utilities, healthcare, hi-tech, industrial
manufacturing, consumer goods, insurance, life sciences, manufacturing, media and
entertainment, mining and natural resources, oil and gas, retail, telecom, and travel,
transportation, logistics & hospitality.
HCL Technologies is on the Forbes Global 2000 list. It is among the top 20 largest publicly
traded companies in India with a market capitalization of $21.5 billion as of May 2019. As of
July 2020, the company, along with its subsidiaries, had a consolidated annual revenue
of ₹71,265 crore (US$10 billion).

Concept of Compensation Management

Compensation management to refer to the structure, policy, and procedure that enables
organizations to pay employees proportionately based on their level of performance of their
assigned tasks to perform better and paid more than the average performing employees (Hewitt,
2009). Compensation management is one of the main function of human resources strategies
with the best practice by providing fairly pay and benefit to employees, it will positively
encourage employees to perform tasks better to lead to high performance, more productivities,
and to retain them to stay longer in the school. Other researchers, Anthony, Kacmar & Perrewe
(2007) stated that compensation can be both financial and non-financial. Another scholar,
Dessler (2004) addressed that the compensation is a pay, a reward, gift or bonus which the
employee received during employment. It is believed that the overall reward system needs to be
managed well in different type and functions because all employees in the school are different,
principals, school coordinators, teachers, and operational staff that require to provide a range of
rewards , pay, and incentive to demonstrate their job levels. However, different scholars have
stated strongly on the use of team incentives, for example, Dessler (2007) &Armstrong (2010)
said that organization that relies on teams to manage their work must develop incentive plans
that encourage teamwork and focus team member attention on performance, recognition, or
promotion. According to Kuster & Canales (2011a) defined that compensation is a form of
reward given by an organization for good performance that has been shown by employees for the
expectation that employees can improve their performance. It is, therefore, compensation
management play vital roles in the organizations for personnel management, and it’s one of the
main pillars of human resource management strategies that the principal needs to manage and
implement it efficiently and effectively in order to promote employee productivities,
performance to achieve the strategies of the school.

Compensation Management Practice in Organization

1. Pay Structure and Policy - The compensation and benefits seem to be more competitive, it
can help to motivate and retain the employee in the schools. Compensation system can affect the
performance of employees by differentiating the types of compensation into three, namely salary,
reward, and incentives (Kuster & Canales, 2011b). It is believed that pay, reward, and incentive
are competitive, reasonable, and fit to the job level can motivate employees to perform
effectively. However, paying for performance is the main issue in contemporary human
resources management, the schools have a high expectation that productivity improves when pay
is fit to performance and pay and incentives must develop to support this commitment. It` s
necessary that the school needs to manage compensation and benefits effectively in order to
reward principals, coordinators, teachers, and operational staff in a competitive labor market and
equitable manner and be based on merit, competence, responsibility, and accountability.

2. Reward system and practices - An effective reward system has four elements: rewards need
to satisfy the basic needs of all employees; rewards need to be included in the system and be
comparable to ones offered by a competitive organization in the same area; rewards need to be
available to employees in the same positions and be provided fairly and equitably (Goel, 2008).
Thus, a reward strategy should enhance commitment and engagement, and provide more
opportunities for the contributions of people to be valued and recognized. It is necessary that an
effective reward system needs to be managed and practiced in the schools to motivate employee's
behavior and performance. Armstrong (2006) viewed that a reward strategy is a precision of
purpose that describes what the organization intends to do in the longer term to develop and
implement reward policies, practices, and processes that will further the achievement of its goals
and meet the needs of the stakeholders. When the principals use rewards to reinforce employee
behavior that they want to continue in the school. And the reward is powered when the principal
confers it in return for desired actions and outcomes for a positive value to the employees.

3. Incentives Practices - Incentives are usually in monetary rewards forms or other types of
incentive-based compensation which are share ownership and additional benefit like bonuses,
and rewards that are usually provided to improve employee performance . Therefore, developing
a practical incentive for implementation and performance improvement is a difficult task because
individuals are unique and maintain different value and structure. According to Maslow
proposed a theory of motivation in which he said that money is a motivator; however later
Hertzberg in his two-factor theory of motivation differs with that and instead classifies money as
a hygiene factor. Financial incentives and rewards can be completely right motivators, but only
when balanced against the potential advantage and packaged with the progress of verbal
recognition, encouragement, and support. However, it`s important to consider non-financial
rewards, financial rewards, or both to fit with the nature of the school relationship and also the
employee characteristics to make feeling part of a community, a sense of personal achievement,
social recognition, and social responsibility.

Factors Affecting Employee Compensation

The compensation awarded to the employee is dependent on the volume of effort exerted, the
nature of job and his skill. Besides, there are several other internal and external factors affecting
the compensation.

The factors affecting employee compensation can be categorized into:-

a. Internal Factors: 1. Compensation Policy of the Organization 2. Employer’s Affordability 3.

Worth of a Job 4. Employee’s Worth 5. The Organizational Ability to Pay 6. Job Analysis and
Job Description and 7. Employee Related Factors.

b. External Factors: 1. Demand and Supply of Labour 2. Cost of Living 3. Economic

Conditions 4. Prevailing Wage Level 5. Society 6. Government Control 7. Labour Unions 8.
Legislation 9. Globalization 10. Cross Sector Mobility and 11. Compensation Survey.

The most important factors which affect the individual differences in wage rates are:

(i) Worker’s capacity.

(ii) Educational qualifications.
(iii) Work experience.
(iv) Hazards involved in work.
(v) Promotion possibilities.
(vi) Stability of employment.
(vii) Demand for special skills.
(viii) Profits or surplus earned by the organisation.
Compensation Salary Structure

1. Compensation is the total amount of the monetary and non-monetary pay provided to an
employee by an employer in return for work performed as required. Compensation also
includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and
checks, and sales commission.
2. The ultimate goal of compensation planning is to reward and encourage employees to do
well in their jobs. Some of the objectives are sought to be achieved through effective
compensation planning like: Entice the employees Retain the best talent Ensure equity
Reward new ideas and behaviors Cost control Compliance
3. Classification of Salary Components Compensation Structure Governance/Compliance
Sample Salary Component Structure
4. Fixed Salary Details Basic Salary 40% to 50% of CTC House Rent Allowance 50% of
Basic Salary for Metro Cities (Chennai, Mumbai, Delhi and Kolkata) 40% of Basic
Salary for Other Cities Conveyance / Transport Allowance Rs. 800 per month (for
handicapped Rs. 1600 per month) Child Education Allowance Rs. 100 per child/per
month (maximum of two children’s) Other / Special Allowance As per Section 10(14) of
Income Tax act.
5. Non-Monetary Benefits / Perks Details Company Car As per company car policy to
senior management staff Accommodations Company provided accommodations Fixed
Assets FixedAssets / Furniture & Fixtures Employee Stock Option Plan (ESOP) As per
company ESOP plan Others Food Coupons (Rs. 1100pm), Gas, Electricity & Water
Helper , House Maid, Gardener, etc.
6.  Reimbursement Components Details Medical Rs. 15000 p.a. (for self, spouse and
dependants) Leave Travel Allowance (LTA) One month basic salary Two claims in a
block of 4 years (current block 2014 - 2017) Telephone As per company compensation
policy Rs. 2000 – 4000 p.m. Vehicle Maintenance/Petrol Employer car (fuel &
maintenance expenses met by employer) No limit – Up to Rs.10000 p.m. Employee car
(fuel & maintenance expenses met by employer) a. Rs. 1800p.m. for small car (with
1.6cc) b. Rs. 2400 p.m. for big car (with above 1.6 cc) Driver Recommended for senior
management staff
7. Retirement Benefits Details Company Contribution to Provident Fund 12% of PF wage
Gratuity 4.81% of basic p.m. Superannuation As per company policy / trust by-laws
Pension Fund As per company policy or New Pension Scheme (NPS) Insurance Group
Mediclaim Insurance Group Life Insurance, etc. Employer Contribution to Employees
State Insurance (ESI) 4.75% of ESI wage
8.  Ensure that the salary components are in compliance with income tax rules and labour
laws Refer to minimum wages act-state rules for any specific segment of workers Union
employees salary structures are governed by Union agreement/settlement Ensure that the
special/other/personal allowance is lesser than the other components in salary structure.
 Objectives of compensation management

The objectives of compensation management are to attract, engage, and retain employees

through competitive compensation plans that align with the company budget, corresponding job-
market, and government regulations.
Good compensation management should:

 Attract and recruit talent

 Motivate employees
 Maintain morale
 Adhere to government regulations and company compensation philosophy philosophy
 Reflect the current job-market

Rreferences

1. https://en.wikipedia.org/HCL_Technologies
2. Hewitt, A (2009). Managing Performance with incentive pay. Journal of Personnel Management,7(1);
20-31.
3. P.W. Anthony, K.M. Kacmar, P.L. Perrewe, Human Resource Management A Strategic
Approach,Thomsons Learning, Beverly Hill, 2007.
4. Armstrong, M. (2010). Strategic Human Resource Management. (1st Ed.). London: Kogan
PageLimited.
5. Dessler, G. (2004), A Framework for Human Resource Management. 3rd ed. Upper Saddle River,NJ:
Pearson Education.
6. Dessler, G. (2007). Human Resource Management, (11th Ed.). New Delhi: Prentice-Hall Inc.
7. Kuster, I., Canales, P. (2011a). Compensation And Control Sales Policies, And Sales Performane:
The Field Sales Manager’s Points Of View. Emerald: Journal of Business and Industrial
Marketing, hal.
8. Kuster, I., Canales, P. (2011b). Compensation And Control Sales Policies, And Sales Performane:The
Field Sales Manager’s Points Of View. Emerald: Journal of Business and IndustrialMarketing, hal.
9. Armstrong, M. (2006). Human Resource Management Practice. (10th Ed.). London: Kogan Page
Limited.
10. Goel, D. (2008). Performance Appraisal and Compensation Management- A Modern Approach.New
Dehli: Prentice Hall of India.
11. https://www.economicsdiscussion.net/human-resource-management/factors-affecting-employee-
compensation/31636
12. https://www.slideshare.net/stellalauren/compensation-salary-structure-39964785#:~:text=1.,and
%20checks%2C%20and%20sales%20commission.
13. https://www.hibob.com/hr-glossary/compensation-management-objectives/#:~:text=The%20objectives
%20of%20compensation%20management%20are%20to%20attract%2C%20engage%2C
%20and,Motivate%20employees