Impact of Compensation Practice on Employee Informatics a study of Vindhyanchal NTPC Singrauli (M.P.)
M.U. Siddiqui1, Vishwanath Vishwakarma2
1Professor and Head (Commerce), Govt. P.G. College Waidhan, Distt. Singrauli (M.P.)
2Guest Faculty (Commerce), Govt. Autonomous Degree College, Satna (M.P.)
*Corresponding Author E-mail:
ABSTRACT:
Compensation is the remuneration received by an employee in return for their contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non- monetary benefits to employees. Compensation includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and sales commission. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. Direct Compensation is typically made up of salary payments and health benefits. The creation of salary ranges and pay scales for different positions within the company are the central responsibility of compensation management staff. Direct compensation that is in line with industry standards provides employees with the assurance that they are getting paid fairly. Indirect Compensation focuses on the personal motivations of each person to work. Although salary is important, people are most productive in jobs where they share the company's values and priorities. These benefits can include things like free staff development courses, subsidized day care, the opportunity for promotion or transfer within the company, public recognition, the ability to effect change in the workplace, and service to others. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards.
KEYWORDS: Compensation, Human Resource Management, Employee Performance.
INTRODUCTION:
Human Resource Management is the management of an organization's employees. Providing and maintaining necessary balance of human resource for smooth operations of organization is a primary function of HRM. Now HR work is not only concerned with traditional activities of recruitment and selection, training and development but its scope has been widened to many new and distinguished areas. Rewards are direct and indirect. Providing respectable compensation to persons working in organization have soothing effect on both employee and organizational performance.
Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. The impact of compensation and benefits on employee performance and organizational effectiveness depends on the existing compensation and performance management programs at an individual company. Typically, most employees respond to increases in pay and benefits with a positive and more productive attitude. However, the opposite is true as well. Sometimes, employees only notice rewards of a salary increase the day the increase is communicated to them, and the day they receive the first paycheck that includes the salary increase. The best people are most often drawn to the companies that pay the most and offer the best opportunity for advancement. There are still some people in the work force that have a very strong work ethic, and continue to stay motivated regardless of the compensation package provided. On the other hand, there are also employees that need constant increases in pay, better benefits, more work-life balance, etc., in order to perform well on a consistent basis.
Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non- monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.
Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows:
Compensation System
Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity.
Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. The monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.
Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. They include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes.
Compensation continues to be influenced by several factors that are producing some important trends in compensating workers. One of such trends is aligning wages to the organizations goals. Others include tailoring compensation to the needs of employees; better salary, and pay equity (Fisk 2001). Various existing theories to support this argument have been identified and one of such is the Reinforcement theory which is propounded by B.F. Skinner. This theory holds that individuals can actually be motivated by their work environment when it is properly developed. Hence, rather than considering internal factors such as attitudes, feelings, impressions and other cognitive behaviour, employers should keep on making positive changes in the external environment of the organization. It emphasizes the importance of a person's actual experience of a reward, and the implication of this for compensation management is that high employee performance followed by a monetary reward will make future high performance more likely.
Another theory that is relevant to the study is the Expectancy theory propounded by Victor Vroom. This theory though focuses on the link between rewards and behaviour too emphasizes expected rewards rather than experienced rewards. In other words, it is mainly concerned with effects of incentives. It stresses that behaviours (job performance) can be described as a function of ability and motivation while motivation is a function of expectancy, instrumentality, and valence perceptions. Expectancy perceptions often have more to do with job design and training than pay systems. Although this theory implies that linking an increasing amount of rewards to performance will increase motivation and performance, some authors have questioned this assumption, arguing that monetary rewards may increase intrinsic motivation.
Extrinsic motivation depends on rewards such as pay and benefits, which are controlled by an external source whereas intrinsic motivation depends on rewards that flow naturally from work itself. Therefore, while it is important to keep in mind that money is not the only effective way to motivate behavior, and that money rewards will not always be the answer to motivation problems, it does not appear that monetary rewards run much risk of compromising intrinsic motivation in most work settings.
Another theory relevant to the study is the Equity Theory and Fairness, propounded by John Stacey Adams as Equity Theory but was later on advanced by Elaine Hatfield and her colleagues, which is now known as Equity Theory and Fairness. This theory which probably came as a result of continuous agitation for fair and equitable wages for all workers is the bedrock on which this study hinges. The theory which is divided into two suggests that people evaluate the fairness of their situations by comparing them with those of other people. According to this theory, a person (P) compares his/her own ratio of perceived outcomes (O = pay benefits, working conditions) to perceived inputs (I = effort, ability, experience) to the ratio of a comparison other (O) – external inequity pay. The main implication of this theory for managing employee compensation is that to a large extent, employees evaluate their pay by comparing it with what others are paid, thereby influencing their attitude to work by such comparisons.
Compensation is the remuneration received by an employee in return for their contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. Compensation includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and sales commission. Compensation weighs significantly in job performance. An organization's performance management system begins long before the employee reports for her first day on the job. Performance management starts with discussing the job duties, responsibilities and expectations with candidates during the recruitment and selection process. Ideally, a job posting should contain a summary of the job, the qualifications the company is looking for and what the company expects from employees in that particular role. Consequently, when a recruiter hands a job applicant the full job description, essentially saying, "This is what we expect from the person we hire to fill this position and if you accept this, we can move forward with the selection process."
Some of the most common methods of employee compensation which as impact on employee performance are as follows,
Pay incentives are associated with increased performance and productivity. For example, employees receive a pay raise for reaching a certain level of performance. Bottom line increases in quantifiable productivity are associated with individual incentives; with studies showing increases on average of 30 percent when incentive programs are introduced.
This involves giving employees bonuses or other compensation when they perform well. It is the most widely used method for organizations. Research studies show that there is some support that merit pay is associated with increased performance, though many studies failed to demonstrate a definitive impact of this system on performance.
This involves rewarding employees when profitability targets are met. Studies suggest that they do have an impact on performance. However, employees may be less motivated by this type of reward as compared to other reward systems, because they may not see the connection between their own efforts and increased profits. Profit sharing rewards are also often disseminated in the future (e.g., at retirement) and can therefore be less motivating than immediate rewards.
This involves offering employees the opportunity to buy stock in the company at a fixed rate. Studies investigating the impact of this approach for middle and upper management show positive results. However, this option has its issues — for example, when stock prices fall, this could impact employee motivation. It also opens the door for ethical and even criminal violations to occur.
This involves rewarding employees based on group performance, accounting for the interdependent nature of jobs. Studies show that this approach is effective, and that it can result in high performance, teamwork, increased profits, and decreased losses.
Offering a variety of performance incentives is best. For example, some programs emphasize individual performance, while others reward group performance, and so it is best to offer a range to balance the benefits and risks of these, thereby avoiding unhealthy competition while maximizing motivation.
A well designed compensation and benefits plan helps to attract, motivate and retain talent in the organization. A well designed compensation; benefits plan will benefit in the following ways.
1. Job satisfaction:
Employees would be happy with their jobs and would love to work for organization if they get fair rewards in exchange with their performance.
2. Motivation:
We all have different kinds of needs. Some of us want money so they work for the company which gives them higher pay. Some value achievement more than money, they would associate themselves with firms which offer greater chances of promotion, learning and development. A compensation plan that hits workers’ needs is more likely to motivate them to perform in the desired way.
3. Drive employee performance:
The basic idea is that if an employee knows that his/her bonus depend on the occurrence of a specific event (or paid according to performance, or if a certain goal is achieved), then the employee will do whatever he/she can to secure this event (or improve their performance, or achieve the desired goal). In other words, the bonus is creating an incentive to improve business performance.
4. Low Absenteeism:
It employees enjoy the office environment and are happy with the compensation. Their performance will be high and absenteeism will be very low.
5. Low Turnover:
Would employees want to work for any other organization if working organization offers them fair rewards.
6. Peace of Mind:
An organization offering of several types of insurances to workers relieves them from certain fears. Workers as a result now work with relaxed mind. They perform very well without any mental stress.
7. Increases self-confidence:
Reward system helps to increase the self confidence of the employees. It helps to increase the performance of the employees in the organization.
REVIEW OF THE LITERATURE:
Compensation processes are based on Compensation Philosophies and strategies and contain arrangement in the shape of Policies and strategies, guiding principles, structures and procedures which are devised and managed to provide and maintain appropriate types and levels of pay, benefits and other forms of compensation (Bob, 2011). Compensation implies having a compensation structure in which the employees who perform better are paid more than the average performing employees (Pearce, 2010). Compensation management is one of the central pillars of human resources management (HRM). It is concerned with the formulation and implementation of strategies and policies that aim to compensate people fairly, equitably and consistently in accordance with their value to the organization (Armstrong, 2005). Compensation Management as the name suggests, implies having a compensation structure in which the employees who perform better are paid more than the average performing employees (Hewitt, 2009). Harrison and Liska (2008) in their study posit that reward is the centre piece of the employment contract-after all it is the main reason why people work. This includes all types of rewards, both intrinsic and extrinsic, that are received as a result of employment by the organization. In another study, Brown (2003) sees compensation as a return in exchange between their employees and themselves as an entitlement for being an employee of the organization, or as a reward for a job well done.
Dessler (2009)
The best compensation policy is not based upon the companyal affiliation among the stakeholders and the administration, but also taking into consideration the difference of opinion whichgive birth to conflicts in other constricting relationships which exist in the company. In thearticle the finest compensation plan is revised taking into the consideration the two most important factors which are (1) equity and risky debt, and (2) equity and convertible debt. Future, the benefits of making parallel administration compensation with the stake holders welfare are discussed, that this action will reduce the cost of debt. The study shows that the control and the ownership of the firm play a vital role in determining the compensation plan for the executives of the company. The study displays that when a firm is externally controlled by the shareholders than the company is more efficient in compensating its CEOs and the top-management rather than the firm which are internally controlled by the administration. One major reason for this cause is that the segregation of compensation plans and the performance of the firm, on the other hand externally controlled companies have learned the art of inclusion of the compensation of the top management and the performance of the firm in terms of the profit.
Harris, Helfat (1997)
This paper discusses the compensation structure of skilled workers in a hierarchical firm. Promotion depending upon the compensating the employee is a systematic process. The appraisal process takes a long period of time and do not serve its purpose as the workers use their shrewdness techniques showing that they are among the skilled workers. On the other hand, the manager can also show unacceptable behavior, sometimes by not providing the incentives that the employee really deserves. Usually the managers appraise the the educated workers despite of the fact that two workers are working on the some level and even though the uneducated worker is more skillful the promotion is given to the educated and less skillful person. The paper discusses the action plan of providing promotion plan that are efficient and effective at the sametime.
Bernhardt (1995); Boyd, Salamin (2001)
There are many studies conducted in the field of compensating the employees of the business but a little is known by the strategic compensation system and that is aligned with the company strategy. Previously all research conducted on this topic are limited to only the American companies and there are still many things that are unclear about the topic. It was found out thatthe pay structures are connected with the divisional strategic orientation, and there are missing gaps in the previous studies conducted. More over, it was found out that the position that the employees hold in the company hierarchy is one of the most important variables affecting thecompensation system. The position of employee in the company affects the reward structure, andthe consequences of the performance on the strategically formed goals.
OBJECTIVES OF THE STUDY:
· To study about the compensation management provided by the N.T.P.C. (VSTPS).
· To evaluate the compensation management and its impact on the employees performance.
· To study the need which are required for improving the compensation system in the N.T.P.C. (VSTPS).
· Identify the employer operational characteristics that lead to success.To study the components of compensation in NTPC.
· To analyze the employees satisfaction with monetary and nonmonetary compensation practices.
· To analyze the employees satisfaction with retirement benefits.
· To analyze the employees satisfaction with Recognition and rewards.
· To analyze the employees satisfaction with appropriateness and fairness in compensation practices
· To find out the level of acceptance/response amongst the employees to the same.
· To ascertain the job satisfaction amongst the employees in N.T.P.C. (VSTPS).
· To identify the differences of benefits, incentives etc. given to the employees by these company, apart from wages and Salary.
· To locate areas of inter personal and personnel problems generating out of nature of work like, stress, fatigue, etc.
· To study the employees grievances handling and settlement by the department and Managements of NTPC company.
· To know the NTPC managements perception about their employees.
· To examine the employees preparedness to the changes in Technology like departmental computerization, machinery, Networking etc.
· To verify the level of awareness of employees about personnel policies of their company and extent of their dependency on their respective Unions.
· To suggest remedial measures based on the findings.
HYPOTHESIS OF THE STUDY:
The study of the problem is aimed to test the following hypothesis :-
· There may be some needs for improvement in compensation management.
· Employees may be satisfied by the compensation system.
· There may be a positive impact of Compensation system on employed performance.
· Monetary Compensation has a direct significant effect on employee’s satisfaction.
· Nonmonetary Compensation has a direct significant effect on employee’s satisfaction.
· Retirement Benefits has a direct significant effect on employee’s satisfaction.
· Recognition and rewards has a direct significant effect on employee’s satisfaction.
· Appropriate and Fair Compensation has a direct significant effect on employee’s satisfaction.
RESEARCH METHODOLOGY:
Research in common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. Research as "a careful investigation or inquire specially through search for new fact in any branch of knowledge. "Singrauli District is one of the district in Madhya Pradesh, blessed with good basic infrastructural facilities and resources, which could contribute to the process of development of the industries in the area and in particular to the development of the industries. But the pace of development in Singrauli District is found to be relatively slow. The majority of the working population depends on agriculture. This is the main reason for the stagnation in the National Thermal Power Corporation of Singrauli District. The Government of India had declared almost the entire district as an industrially backward area. Hence, incentives are provided for the starting of industries in this district. By and large, the whole background makes one conclude that the policies are sufficient enough to accelerate the pace of cement industrial development in the District. These are the main reasons for selecting the Singrauli District as the study area to evaluate the Compensation Practice of the NTPC (VSTPS).
Collection of Data
The present study is based on primary as well as secondary data. The personal interview method has been adopted to collect primary data. For this, a well designed and a pre-tested interview schedule (vide appendix) was prepared to collect the information relating to the study. With a view to identifying the growth components of the entrepreneurs, the researcher had an in-depth review of previous studies undertaken, relating to the topic of the present study. Further, the researcher had preliminary discussions with the officials of the NTPC (VSTPS) and a few entrepreneurs registered in NTPC (VSTPS), Singrauli. In the light of the information gathered, the researcher prepared interview schedule and identified the ten growth factors.
The secondary data were collected from Various books, Journals, News Papers, Published and Unpublished reports, Handbooks, and Reports and Records in NTPC (VSTPS), Singrauli.
Tools of Analysis
The data and information collected through the field study was processed and analysed with the help of conventional statistical analyses. An analysis was carried to find out the various strength, weakness, opportunities and threats faced by NTPC employees.
CONCLUSION:
Compensation Practice itself is recently being recognized as a full-fledged profession and Compensation Practice is an even important phenomenon. Many research studies had been done on Compensation Practice but Employees creativity has been recognized as a crucial part of an organization's ability to be innovative. To know which factors contribute to employee involvement in creative work, in this paper, we first examine the effects of Compensation Practice to employees. Moreover, we study the employees' positive work attitudes and their intention to leave as a mediating mechanism to explain the impact of compensation to employees on the involvement of employees in creative work. Survey data from 300 employees in NTPC (VSTPS) Singrauli will used to test the hypotheses of the study. The hypotheses will tested with hierarchical regression analyses using Pai and Bar Chart. The results support the direct impact of Compensation Practice to employees on employees' creative work involvement. In addition, the findings indicate that the indirect effect of Compensation Practice to employees on the involvement of employees in creative work through positive work attitudes and their intention to leave are significant. Consequently, NTPC would be reinforce Compensation Practice to employees to elevate their involvement in creative work.
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Received on 21.08.2023 Modified on 17.09.2023 Accepted on 13.10.2023 © A&V Publication all right reserved Int. J. Ad. Social Sciences. 2023; 11(4):203-210. DOI: 10.52711/2454-2679.2023.00032 |