Performance and Compensation

Performance & Compensation

Performance:

Performance evaluation is an on-going activity with the individual as the focus.

Your manager continuously evaluates your job performance. Regular interaction between you and your manager and the continuous feedback should give you a sense of how your manager perceives your performance. However, to avoid haphazard or incomplete evaluation, we conduct formal reviews and appraisals annually. This gives both you and your manager a formal opportunity to discuss, set goals and evaluate performance.

Performance reviews are normally conducted twice a year – an informal appraisal in September and annual appraisal in March. A review may also be conducted in the event of a promotion or change in role and responsibilities. The outcome of these reviews will be used for the annual appraisal, which will be conducted in January every year. Compensation review is also done annually along with the Performance Appraisal once a year.

We believe that it is the employee who is a key player during the review. Hence, it is the employee who initiates the process by doing the self-assessment and indicating his development plan for the next 6 months. Based on the inputs received, the manager conducts the review. During formal review, your manager will consider the following, among others:

*Performance
*The quality and quantity of work
*Initiative and effort
*Attitude, willingness and continuous improvement

FTD Group believes in maintaining transparency of the process and encourages employees to discuss openly with their managers on these aspects on a continuous basis.

A final evaluation and recommendation will be completed according to the Performance Review Process, designed by the HR Department.

Compensation:

It is our goal to attract, motivate and reward high performers who produce high-quality, innovative and professional work. To achieve these goals, our compensation program attempts to compensate each employee according to their contribution, level and complexity of duties and responsibilities.

Compensation Structure:

The HR assigns each position to a Salary Grade. A range of pay is specified for each grade according to prevailing market pay rate. Adjustments to individual salaries ordinarily are made in terms of a percentage of current salary. Irrespective of the grade, a common compensation structure is followed for all positions. A sample compensation structure adopted by xxxxxx, eligibility and taxability of the components is given below:

· Basic pay 40% of the CTC
· Conveyance Allowance
· HRA 40% of Basic
· Flexible Allowance
· Medical Allowance
· Food Allowance
· Leave Travel Allowance
· Provident Fund 12%
· Gratuity 4.8% on Basic Pay
· Medical Insurance & Personal Accident Insurance

Pay Day:

Salary will be paid on the last working day of every month. Salary will be deposited at the company’s bankers (Citi Banks), and employees are required to open an account with Citibank on joining. Incase the employees have accounts in these banks prior to their joining, they are required to give details of their account numbers to the Accounts department for crediting salary and maintenance of records.


Pay Deduction:

The law requires that xxx make certain deduction from every employee’s compensation towards income taxes and statutory compliances.

If any employee has any questions concerning why deductions are made from the paycheck or how they are calculated, please address the issues to Accounts department.

Pay corrections:

xxx takes all reasonable steps to ensure that employees receive the correct amount of pay in each paycheck and that employees are paid promptly on the scheduled payday. In the unlikely event that there is an error in the amount of pay, the employee should promptly bring the discrepancy to the attention of accounts department, so that correction can be made as quickly as possible.

Compensation Programs and Policies

Employee Benefits:

*Benefit Plan Costs
*Health Care Plans(PPO, POS, HMO, HSA)
*Dental Care Plans
*Retirement Plans
*Flexible Benefit Plans
*Disability Benefit Plans
*Group Life & AD&D Insurance Plans
*Benefits for Part-Time Employees
*Domestic Partner Benefits

Employee Policies and Programs:

*Paid-Time Off (PTO)
*Alternative Work Schedules(including Telecommuting)
*Recruiting and Hiring
*Hiring Bonuses
*Referral Bonuses
*Retention Bonuses
*Severance Practices
*Workplace Environment
*Career Planning & Professional Development
*Military Leave Policy

Benefit Plan Costs

Benefit Costs as Percent of Payroll

Medical, Dental, Vision, Disability, Life, AD&D Plans

Retirement Plans

Benefits Costs as a Monthly Amount Per Employee

Medical, Dental, Vision, Disability, Life, AD&D Plans
Retirement Plans

HSA Qualified Health Plans

*Impact on Other Healthcare Options
*Monthly Premium Costs
*Percent of Premiums Paid by Company
*Annual Deductibles
*Out-of-Pocket Maximums (OOP)
*Lifetime Reimbursement Limits
*Prescription Expense Coverage
*Company Contributions

Dental Care Plans

*Types of Dental Plans Offered
*Timing of Employee Eligibility to Enroll
*Expenses Covered
*Costs of Monthly Premiums
*Percent of Monthly Premium Paid by Company

*Deductibles and Co-Insurance
*Out-of-Pocket (OOP) Maximums
*Orthodontic Expense Coverage
*Orthodontic Reimbursement Limits

Retirement Plans

Types of Retirement Plans Available to Employees

Defined Benefit Plan
401(k)
Simple-IRA
Profit Sharing Plan
ESOP
SEP-IRA
Salary Reduction SEP

*Eligibility Requirements
*When do Employee Contributions Fully Vest
*Retirement Plan Costs

as a Percentage of Payroll
per Employee

Flexible Benefit Plans

*Premium Conversion/Premium Only Plan (POP)
*Unreimbursed Medical Expenses (UME)
*Dependent Child Care Expenses (DCC)
*Dependent Adult Care Expenses (DAC)
*Adoption Assistance Expenses (AAE)
*Cafeteria Plan
*Transportation Benefit Plan

Disability Benefit Plans (Short- and Long-Term)

*Who Pays the Premium
*Eligibility for Disability Benefits
*Waiting Periods
*Duration of Plans
*Setting Amount of Disability Benefits
*Disability Payouts

Benefits for Part-Time Employees

*Benefits Available
*Work Requirements for Eligibility
*Covering the Costs

Domestic Partner Benefits

*Domestic Partner Healthcare Benefits: Coverage
*Eligibility Requirements

Recruiting and Hiring

*Recruiting Budgets
*Recruiting Sources
*Job Posting Websites
*Recruiting Tools
*Interviewing Applicants
*Pre-Employment Testing
*Pre-Employment Screening

Referral Bonuses

*Referral Bonus Eligibility by Employee Type and Level
*Referral Bonuses Awarded by Type of New Hire
*Referral Bonus Payments by Type of Hire
*Amount of Referral Bonus
*Timing of Referral Bonus Payouts

Hiring Bonuses

*Hiring Bonus Eligibility by Employee Type and Level
*Calculating Hiring Bonuses
*Hiring Bonus Amounts by Employee Type and Level
*Timing of Hiring Bonus Payouts
*Hiring Bonus Forfeiture and Repayment Policies

Retention Bonuses

*Retention Bonus Eligibility by Employee Type and Level
*Calculating Retention Bonuses
*Retention Bonus Amounts by Employee Type and Level
*Payment of Retention Bonuses

Impact on Earning Volatility

Impact on Earning Volatility

(1) Revaluation of share options/shares during life of grant

With share option and performance share grants, fluctuations in the values of the share options and shares during the life of the grant do not affect the results of the company. This is because the measurement of the share option or share is determined at the date of the grant and is not subsequently revalued. In contrast, for SAR, the company is required to revalue the SAR at every reporting date until the right is settled or expires. This is because the company has to measure its liability (cash payment to employees) at the expected settlement amount. Hence, SAR schemes create more volatility to the financial results. In addition, more resources are also required to perform the revaluation at every reporting date.SAR will continue to impact earnings even after the vesting period because the liability is re-measured until the exercise date.

(2) Treatment of unvested rights

The compensation cost is a function of number of options or shares that are expected to vest by the vesting date and the fair value of the option or share. In estimating the number of options or shares expected to vest, only non-market based conditions, which are not based on the market performance of the shares, are considered. These non-market based conditions include the continuance of service over a period of time, and the meeting of a certain revenue target. If no employees meet the non-market based vesting condition by the vesting date, the company does not incur any expense. No performance shares would be issued for performance share schemes and no share options or SAR would vest. If share options or SAR are vested by vesting date, the financial impact of the two schemes is different.

For share option schemes, if the share options are not subsequently exercised by the employees (for instance, because the options are out of the money), the company is not allowed to reverse the expenses already charged to the income statement. For SAR schemes, the liabilities are stated at the expected cash settlement. If the SAR is not subsequently exercised, the company is allowed to reverse the expenses previously charged to the income statement.

Impact on Tax

Regardless of the above changes, charges to an entity’s income statement relating to share option or performance share schemes, in form of capital or notional cost (such as cost of options granted), are not tax-deductible. Compensation charges that represent actual outgoings (cash outflow or actual liability) to the company may be deductible such as the buying back of its own shares, i.e. treasury shares, to satisfy the obligation to the employees.

In addition, such share-based compensation costs must be directly related to the employee’s employment compensation benefits in Singapore to be tax-deductible. The compensation costs to the entity should match the services rendered by the employee to the same entity. Certain steps must be taken to support the claim for a deduction.

Impact on Earnings Per Share

Share option and performance share grants have a dilutive effect on EPS, as shares will be issued. For SAR schemes, shares are not issued; hence there is no dilutive effect on EPS.

Moving forwardPrior to the implementation of FRS 102, the design of the share compensation plan is often dependent on non-financial factors as the company is not required to recognize an expense on the equity instrument granted. However, with the implementation of FRS 102, it is critical for companies to consider and analyse the financial impact, arising from the design and structure of the scheme, at an early stage.

Compensation trends in India

Compensation trends in India

India’s transition to a market driven economy began in 1991 with the introduction of liberalization (pro-market economic reforms). Prior to 1991, the Government was (and still is) the biggest employer and job creator, accounting for over 85% of post-matriculation (High School) jobs. Pay was largely determined by high-level agreements between employee unions and the Government and was largely guaranteed in nature. A similar situation was prevalent in the private sector, where Government pay scales were often used as a benchmark in fixing and revising pay. Compensation packages were low on cash and high on fringe benefits such as accommodation, cars, and subsidized loans. Variable pay was largely restricted to top and senior management in few private sector enterprises. Grading systems were largely industry-wide and salary progression was purely determined by length of service.

Current trends

Productivity gains (4% in 2003-04), fast growth in real wages (40% over the last 5 years), a booming but extremely competitive economy (GDP growth of 6%), simplification of tax rules and emergence of knowledge-based industries such as Information Technology & Outsourcing Services, Healthcare etc are key factors that have influenced compensation in India post liberalization. Compensation is now characterized by a Total Cost of Employment approach, a rapid movement to flexible benefits, and increasing levels of variable pay (variable pay now forms about 7% - 35% of fixed pay). Grade structures have become organization specific and salary progression is driven by market forces and individual performance. Average salary increases over 2003-04 ranged from 5% - 20%. The average increase was 11%. While most organizations benchmark compensation nationally within a select group of competitors, a few organizations are beginning to benchmark themselves internationally at senior management levels. India has the fastest compensation increase rate in the Asian region at 11.7% and it also has the highest labour turnover in the region.

Different compensation plans - how do they affect your financial results

With the introduction of FRS 102 Share-based Payment, companies are required to recognize the expenses of employee equity compensation schemes with effect from 1 January 2005. This article highlights the major implications to the financial results of the three most common equity compensation schemes, namely share option scheme, performance shares scheme, and Share Appreciation Rights (SAR, also known as phantom share scheme).

Key CharacteristicsThe key characteristics of each scheme are as follows:

Share option scheme

The company grants employees the right to subscribe for new shares in the company at a fixed price.

Employees are required to pay the company the exercise price in consideration for the shares.

Employees can generally only exercise the right after remaining in service with the company for a period of time and/or after meeting certain performance targets.

The right would generally expire after a period of 5 to 10 years from the date of the grant.

Performance share scheme

The company grants employees shares in the company.

Employees will generally receive the shares, at no cost, after remaining in service with the company for a period of time and/or after meeting certain performance targets.

Share Appreciation Rights

Similar to the share option scheme except that:Upon exercise of the option, the employees do not pay the exercise price to the company nor receive the shares; instead, they are paid the difference between the exercise price and the market price of the shares in cash.

While all three schemes require the use of fair values of the share options or shares for the recognition of the compensation expense over the vesting period, the impact on the company’s financial position and financial results is different.

Impact on net assets

The three schemes have a different effect on the net asset values of companies. Under FRS 102, share option scheme and performance share scheme are considered “equity-settled”. This means that in recognizing an expense for the compensation costs, a corresponding increase in shareholders’ equity is recognized. Hence, the net asset position of the company is unchanged. In contrast, obligations under SAR schemes are considered liabilities of the company, as there would be a cash settlement when the right is exercised. The recognition of the compensation cost under SAR results in a decrease in the net asset of the company.

Compensation Tips

Compensation Tips: Everything is Negotiable

It's all negotiable. Every new job -- every performance review, in fact -- is an opportunity to negotiate base salary, various kinds of bonuses, benefits, stock options, and other incentives that add to job satisfaction and provide financial security. Taking control of your job search and conducting a smart search that takes into account more than just financial considerations can also lead to that elusive condition called happiness. Are you prepared to negotiate for happiness?
The negotiation process is an opportunity to define, communicate, and achieve what you want. But to get the right job that pays what you deserve, you'll need to do your homework. The first step in the negotiation clinic is to understand the negotiation basics.

Negotiation requires gathering information, planning your approach, considering different alternatives and viewpoints, communicating clearly and specifically, and making decisions to reach your goal. “The author Maryanne L. Wegerbauer” In her book, describes how each party in a negotiation can fulfill specific needs and wants of the other party, a concept called "relative power." According to Wegerbauer, understanding your strengths and resources; being able to respond to the needs of the other party; and knowing your competition enable you to assess your bargaining position more accurately.

Learn the power factors

What is your power over the other side of the table? Relative power, Wegerbauer says, is a function of the following.

Business climate factors

 Overall state of the economy and the industry in which you compete
 Overall unemployment rate and the general employment picture
 Demand for industry- and profession-specific knowledge and skills

Company factors

 Profitability
 Position in the business cycle (startup, growing, stable, turnaround)

Hiring manager factors

 Urgency of the company's need to fill the position
 Decision-making authority
 Staffing budget

Applicant factors

 Other opportunities
 Technical expertise, unique knowledge/skill set
 Resources (financial depth, networks, etc.)
 Level of competition/availability of other candidates
 Career risk

Plan and communicate

A negotiation is composed of two major steps: planning (research and strategy) and communication (information exchange and agreement. In the planning step, get as much information as you can up front and, using both the company's written and unwritten signals, map your skills against what the company values.

Give it time

Timing is also important. Remember that the best time to negotiate is after a serious job offer has been made and before you have accepted it. Once you are clear about the initial offer, you can express interest and even enthusiasm, but ask for more time to consider the job offer. Wegerbauer suggests that this request is made "in light of the importance of the decision." Sometimes you can split up the negotiating session into two meetings: one to firm up the job design and responsibilities and the second to go over compensation and benefits. The key message here is not to make an impulsive decision. If they really want you, there's time.

Consider the alternatives

You should be prepared with a rationale for everything to strengthen your position. Counteroffers are an expected part of many negotiations, so be sure to remain flexible. Keep in mind that different companies can give negotiations more or less latitude. Smaller companies may be more flexible than large, bureaucratic companies. Unionized companies usually have very little room for individual negotiations.

Negotiate for a win-win

Remember that the negotiation is not about strong-arm tactics or win/lose. It is a two-way process where you and your prospective employer are each trying to get something you need. In a negotiation, you're both designing the terms of a transaction so that each of you will receive the maximum benefit from the final agreement.

Compensation Plans

Develop a program outline.

*Set an objective for the program.
*Establish target dates for implementation and completion.
*Determine a budget.

Designate an individual to oversee designing the compensation program.

*Determine whether this position will be permanent or temporary.
*Determine who will oversee the program once it is established.
*Determine the cost of going outside versus looking inside.
*Determine the cost of a consultant's review.

Develop a compensation philosophy.

*Form a compensation committee (presumably consisting of officers or at least including one officer of the company).

*Decide what, if any, differences should exist in pay structures for executives, professional employees, sales employees, and so on (e.g., hourly versus salaried rates, incentive-based versus noncontingent pay).

*Determine whether the company should set salaries at, above, or below market.

*Decide the extent to which employee benefits should replace or supplement cash compensation.

Conduct a job analysis of all positions.

*Conduct a general task analysis by major departments. What tasks must be accomplished by whom?

*Get input from senior vice presidents of marketing, finance, sales, administration, production, and other appropriate departments to determine the organizational structure and primary functions of each.

*Interview department managers and key employees, as necessary, to determine their specific job functions.

*Decide which job classifications should be exempt and which should be nonexempt.

*Develop model job descriptions for exempt and nonexempt positions and distribute the models to incumbents for review and comment; adjust job descriptions if necessary.

*Develop a final draft of job descriptions.

*Meet with department managers, as necessary, to review job descriptions.

*Finalize and document all job descriptions.

Evaluate jobs.

*Rank the jobs within each senior vice president's and manager's department, and then rank jobs between and among departments.

*Verify ranking by comparing it to industry market data concerning the ranking, and adjust if necessary.

*Prepare a matrix organizational review.

*On the basis of required tasks and forecasted business plans, develop a matrix of jobs crossing lines and departments.

*Compare the matrix with data from both the company structure and the industrywide market.

*Prepare flow charts of all ranks for each department for ease of interpretation and assessment.

*Present data and charts to the compensation committee for review and adjustment.

Determine grades.

*Establish the number of levels - senior, junior, intermediate, and beginner - for each job family and assign a grade to each level.

*Determine the number of pay grades, or monetary range of a position at a particular level, within each department.

Establish grade pricing and salary range.

*Establish benchmark (key) jobs.

*Review the market price of benchmark jobs within the industry.

*Establish a trend line in accordance with company philosophy (i.e., where the company wants to be in relation to salary ranges in the industry).

Determine an appropriate salary structure.

*Determine the difference between each salary step.

*Determine a minimum and a maximum percent spread.

*Slot the remaining jobs.

*Review job descriptions.

*Verify the purpose, necessity, or other reasons for maintaining a position.

*Meet with the compensation committee for review, adjustments, and approval.

Develop a salary administration policy.

*Develop and document the general company policy.

*Develop and document specific policies for selected groups.

*Develop and document a strategy for merit raises and other pay increases, such as cost-of-living adjustments, bonuses, annual reviews, and promotions.

*Develop and document procedures to justify the policy (e.g., performance appraisal forms, a merit raise schedule).

*Meet with the compensation committee for review, adjustments, and approval.

Obtain top executives' approval of the basic salary program.

*Determine and present cost impact studies that project the expense of bringing the present staff up to the proposed levels.

*Present Date to the compensation committee for review, adjustment, and approval.

*Present data to the executive operating committee (senior managers and officers) for review and approval.

Communicate the final program to employees and managers.

* Present the plan to the compensation committee for feedback, adjustments, review, and approval.

*Make a presentation to executive staff managers for approval or change, and incorporate necessary changes.

*Develop a plan for communicating the new program to employees, using slide shows or movies, literature, handouts, etc.

*Make presentations to managers and employees. Implement the program.

*Design and develop detailed systems, procedures, and forms.

*Work with HR information systems staff to establish effective implementation procedures, to develop appropriate data input forms, and to create effective monitoring reports for senior managers.

*Have the necessary forms printed.

*Develop and determine format specifications for all reports.

*Execute test runs on the human resources information system.

*Execute the program.

Monitor the program.

*Monitor feedback from managers.

*Make changes where necessary.

*Find flaws or problems in the program and adjust or modify where necessary.

Types of Compensation

What are different types of compensation?

Different types of compensation include:

*Base Pay
*Commissions
*Overtime Pay
*Bonuses, Profit Sharing, Merit Pay
*Stock Options
*Travel/Meal/Housing Allowance
*Benefits including: dental, insurance, medical, vacation, leaves, retirement, taxes...

Components of Compensation System

What are the components of a compensation system?

Compensation will be perceived by employees as fair if based on systematic components. Various compensation systems have developed to determine the value of positions. These systems utilize many similar components including job descriptions, salary ranges/structures, and written procedures.

The components of a compensation system include:

Job Descriptions A critical component of both compensation and selection systems, job descriptions define in writing the responsibilities, requirements, functions, duties, location, environment, conditions, and other aspects of jobs. Descriptions may be developed for jobs individually or for entire job families.

Job Analysis The process of analyzing jobs from which job descriptions are developed. Job analysis techniques include the use of interviews, questionnaires, and observation.

Job Evaluation A system for comparing jobs for the purpose of determining appropriate compensation levels for individual jobs or job elements. There are four main techniques: Ranking, Classification, Factor Comparison, and Point Method.

Pay Structures Useful for standardizing compensation practices. Most pay structures include several grades with each grade containing a minimum salary/wage and either step increments or grade range. Step increments are common with union positions where the pay for each job is pre-determined through collective bargaining.

Salary Surveys Collections of salary and market data. May include average salaries, inflation indicators, cost of living indicators, salary budget averages. Companies may purchase results of surveys conducted by survey vendors or may conduct their own salary surveys. When purchasing the results of salary surveys conducted by other vendors, note that surveys may be conducted within a specific industry or across industries as well as within one geographical region or across different geographical regions. Know which industry or geographic location the salary results pertain to before comparing the results to your company.

Policies and Regulations

Compensation and Benefits

Compensation the methods and practices of maintaining balance between interests of operating the company within the fiscal budget and attracting, developing, retaining, and rewarding high quality staff through wages and salaries which are competitive with the prevailing rates for similar employment in the labor markets.

Compensation is a tool used by management for a variety of purposes to further the existance of the company. Compensation may be adjusted according the the business needs, goals, and available resources.

"If you pick the right people and give them the opportunity to spread their wings - and put compensation and rewards as a carrier behind it - you almost don't have to manage them."

-Jack Welch

Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction.

How is compensation used?

Compensation is a tool used by management for a variety of purposes to further the existence of the company. Compensation may be adjusted according the business needs, goals, and available resources.

Compensation may be used to:

*Recruit and retain qualified employees.
*Increase or maintain morale/satisfaction.
*Reward and encourage peak performance.
*Achieve internal and external equity.
*Reduce turnover and encourage company loyalty.
*Modify (through negotiations) practices of unions.

Recruitment and retention of qualified employees is a common goal shared by many employers. To some extent, the availability and cost of qualified applicants for open positions is determined by market factors beyond the control of the employer. While an employer may set compensation levels for new hires and advertise those salary ranges, it does so in the context of other employers seeking to hire from the same applicant pool.

Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that must be reached between the monetary values, the employer is willing to pay and the sentiments of worth felt be the employee. In an attempt to save money, employers may opt to freeze salaries or salary levels at the expense of satisfaction and morale. Conversely, an employer wishing to reduce employee turnover may seek to increase salaries and salary levels.
Compensation may also be used as a reward for exceptional job performance. Examples of such plans include: bonuses, commissions, stock, profit sharing, gain sharing.