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Khoovesh Sharma

Khoovesh Sharma

Payroll Management

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. The Lucrative Compensation Will Also Serve The Need For Attracting And Retaining The Best Employees.

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.

Components Of Compensation System

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:

Types Of Compensation

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
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
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.

Need Of Compensation Management
A Good Compensation Package Is Important To Motivate The Employees To Increase The Organizational Productivity.
Unless Compensation Is Provided No One Will Come And Work For The Organization. Thus, Compensation Helps In Running An Organization Effectively And Accomplishing Its Goals.
Salary Is Just A Part Of The Compensation System, The Employees Have Other Psychological And Self-Actualization Needs To Fulfill. Thus, Compensation Serves The Purpose.
The Most Competitive Compensation Will Help The Organization To Attract And Sustain The Best Talent. The Compensation Package Should Be As Per Industry Standards.
Strategic Compensation

Strategic Compensation Is Determining And Providing The Compensation Packages To The Employees That Are Aligned With The Business Goals And Objectives. In Today’s Competitive Scenario Organizations Have To Take Special Measures Regarding Compensation Of The Employees So That The Organizations Retain The Valuable Employees. The Compensation Systems Have Changed From Traditional Ones To Strategic Compensation Systems.

Evolution Of Compensation

Today’s Compensation Systems Have Come From A Long Way. With The Changing Organizational Structures Workers’ Need And Compensation Systems Have Also Been Changing. From The Bureaucratic Organizations To The Participative Organizations, Employees Have Started Asking For Their Rights And Appropriate Compensations. The Higher Education Standards And Higher Skills Required For The Jobs Have Made The Organizations Provide Competitive Compensations To Their Employees.

Compensation Strategy Is Derived From The Business Strategy. The Business Goals And Objectives Are Aligned With The HR Strategies. Then The Compensation Committee Or The Concerned Authority Formulates The Compensation Strategy. It Depends On Both Internal And External Factors As Well As The Life Cycle Of An Organization.

Evolution Of Strategic Compensation

Traditional Compensation Systems

In The Traditional Organizational Structures, Employees Were Expected To Work Hard And Obey The Bosses’ Orders. In Return They Were Provided With Job Security, Salary Increments And Promotions Annually. The Salary Was Determined On The Basis Of The Job Work And The Years Of Experience The Employee Is Holding. Some Of The Organizations Provided For Retirement Benefits Such As, Pension Plans, For The Employees. It Was Assumed That Humans Work For Money, There Was No Space For Other Psychological And Social Needs Of Workers.

Change In Compensation Systems

With The Behavioral Science Theories And Evolution Of Labour And Trade Unions, Employees Started Asking For Their Rights. Maslow Brought In The Need Hierarchy For The Rights Of The Employees. He Stated That Employees Do Not Work Only For Money But There Are Other Needs Too Which They Want To Satisfy From There Job, I.E. Social Needs, Psychological Needs, Safety Needs, Self-Actualization, Etc. Now The Employees Were Being Treated As Human Resource.

Their Performance Was Being Measured And Appraised Based On The Organizational And Individual Performance. Competition Among Employees Existed. Employees Were Expected To Work Hard To Have The Job Security. The Compensation System Was Designed On The Basis Of Job Work And Related Proficiency Of The Employee.

Today’s Modern Compensation Systems

Today The Compensation Systems Are Designed Aligned To The Business Goals And Strategies. The Employees Are Expected To Work And Take Their Own Decisions. Authority Is Being Delegated. Employees Feel Secured And Valued In The Organization. Organizations Offer Monetary And Non-Monetary Benefits To Attract And Retain The Best Talents In The Competitive Environment. Some Of The Benefits Are Special Allowances Like Mobile, Company’s Vehicle; House Rent Allowances; Statutory Leaves, Etc.
Payroll Management Process

Calculation Of Gross Salaries And Deductible Amounts Is A Tedious Task Which Involves Risk. Some Of The Organizations Use The Traditional Manual Method Of Payroll Processing And Some Go For The Advanced Payroll Processing Software. An Organization Opts For Any Of The Following Payroll Processing Methods Available

Manual System

Manual Payroll System Is The Traditional Payroll System Which Involves Pen And Ink, Adding Machine, Spreadsheet, Etc Instead Of Computers, Software And Other Computerized Aids. The Process Was Very Popular When There Were No Computerized Means For Payroll Processing.

Now-A-Days It Is Only Few Small Scale Organizations In The Remote Areas That Use The Manual Payroll. Sometimes The Construction Industry And Manufacturing Industry Also Use The Manual Payroll Systems For The Contractual Labour, As Theses Contracts Are On Daily/Weekly Basis.
There Is Full Control In The Hands Of Owner. But The Process Is Tedious, Time Consuming And Risky As It Is More Prone To Errors.