Before knowing about Compensation management one must know the labor laws of the country which are governing employees compensation or remuneration system. As a result, the need for meeting the growing expectations of workers possessing requisite knowledge, skills and experience was also being increasingly realised. Compensation is a primary motivation for most employees. On this law may support worker agitation for not complying payment of wages by their employer in accordance with wage laws and in some cases law may support employer if workers agitation causes serious damages to organisation. Salary is an important component for an employee as it determines their purchasing power and economic status in the society. Size of the organization and its ability to pay its employees. Functions of Human Resource Management. Government policies on wage determination Cost of living of the employees. The creation of salary ranges and pay scales for different positions within an organization are the central responsibility of compensation management staff. Knowledge: Minimum required level of specialized training, education, and previous related work experience.
This factor indirectly determines the financial health of the organization. First and last word on compensation j. 3.
The compensation system followed by a company should be regularly evaluated and updated as per its evolving strategies and also based on the moves of its competitors. In very simple terms, compensation is the results or rewards that the employees receive in return for their work. Employee compensation has three main components and the relative proposition of each component in the total compensation varies by the organization.
Wage determination is difficult as there are various factors and guidelines that have to be discussed before determining the wages. Executive pay is an important part of corporate governance, and is often determined by a company's board of directors. How to meet the ever rising expectations of workers while simultaneously trying to contain the costs? C. How are salaries determined?
Compensation or reward is an important aspect of human resource management. Edwin B Flippo: “The function of compensation is defined as the adequate and equitable remuneration of personnel for their contributions to the organizational objectives.” Money and benefits received may be in different forms base compensation in money form and various benefits, which may be associated with employee’s service to the employer like provident fund, gratuity, insurance scheme, and any other payment which the employee receives or benefits he enjoys in lieu of such payment.
Dearness allowance (DA) is paid as a percentage of basic pay. Copyright 10. iii. It determines the standard of living and purchasing power.
Compensation system mostly influences retention of employee in the organisation. Privacy Policy 9. Dale Yoder: “Compensation is paying people for work.” They may not be inclined to give their best to the organisation.
g. Working Environment: The physical conditions encountered during a typical work day.
It is the tool that organizations use to manage and reward their employees, so that they perform efficiently. Local Meaning of Compensation in HRM Compensation refers to the remuneration that an employee receives in return for his/her services to the organization. Also, employee compensation programmes play an important role for organization in attracting, motivating and retaining the competent employees. Compensation is a wide range of financial and non-financial rewards or payments. Their expectations were also not very high. Compensation can be defined in the following ways: i. These are the two types of compensation that need to be managed and have its own contribution in the development of the organization. Compensation management is an integral part of human resource management and helps in motivating the employees and improving organizational effectiveness. Retrieved from https://phdessay.com/hrm-compensation/, We use cookies to give you the best experience possible. It must balance each of these concerns while trying to keep its house in order. – Wages, Salaries, Overtime Pay, and Commissions/Incentives and Bonuses).
How are jobs evaluated? Ability to pay – Refers to the financial position of the employers and their willingness to pay to the employee. As major economies show signs of recovering from the 2008 recession, compensation can become more decisive to retaining and motivating critical senior executive talent. iv. It must keep the competitive pressures in mind while trying to go overboard while hiring people. o. Scheduling, Planning and Forecasting: The complexity, variety and nature of the activities involved in determining and carrying out plans and reports. of independence at work, salary package, learning on the job, growth Another reason for studying compensation from the organization’s perspective is to assess its impact on a wide range of employee attitudes and behaviours and, ultimately the effectiveness of the organization and its units. managers do not understand why they get paid what they do. Naturally judiciary of the concern country is watchdog for dealing labour issues. By continuing we’ll assume you’re on board with our cookie policy, Your Deadline is Too Short? Productivity based wages have come into picture as a tool for increasing the motivation level of workers.
motivation and other factors succeeds. It includes such areas as job evaluation, surveys of wage and salaries, analysis or relevant organisational problems, development and maintenance of wage structure, establishing rules for administering wages, wage payments incentives, profit sharing, wage changes and adjustments, supplementary payments, control of compensation costs and other related items.
Monetary and non-monetary rewards greet knowledge workers everywhere. Supply and demand of labor – Forms one of the major determinants of compensation. There is no exact and accurate yardstick that can determine the correct pay rate.
From a manager's point of view, the compensation package offered to a company's employees is essential not only because it costs money, but because it is likely to be the primary reason the employees work for the firm. It is designed to abide with the various labor acts and thus does not result in conflicts between the employee union and the management. Assisting in departmental re-organizations.
Customized surveys with data from selected private research universities, 3. Effective compensation system builds employer brand, which plays a key role in attracting talent. Employees, in exchange of their work, generally expect some appreciation. R. S. Schular: Compensation is such an activity through which organization on the basis of its ability and within law reasonably assesses the contribution of employees directly and indirectly for the distribution of financial and non financial remuneration. It tries to give proper refund to the employees for their contributions to the organization. Job satisfaction: Your employees would be happy with their jobs and would love to work for you if they get fair rewards in exchange of their services. Benham: Compensation is the value of work of the employees according to the agreement between employer and employee. If one does a remarkable job then he or she deserves a higher compensation package than one whose work is of poor quality. Executive compensation is not only a consideration close to the pocket book of CFOs but also a topic of increasing importance to managements and boards. MIDPOINT: The "market" (or average) wage paid to one who is fully qualified. He helps answer questions like: Is the product easy to figure out? At the same time, the organisation must keep the labour costs under control. Image Guidelines 4. Before uploading and sharing your knowledge on this site, please read the following pages: 1.
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