Compensation Management
Let’s learn more about Compensation Management. It is an activity by which organizations evaluate the contributions of employees in order to distribute fairly, direct and indirect monetary and non monetary rewards within the organization s ability and legal regulations. “It can be defined as the financial and non financial rewards provided by an employer for the time, skills and the effort made available by the employee in fulfilling job requirements aimed at achieving organizational objectives.” Wage: wage refers to hourly rate or daily rate of pay it is the most frequently used pay basis for production and maintenance employees (blue collar workers) generally; wage earning employees are paid only for the actual hours of work.
The three specific forms of compensation are pay, incentives, and benefits.
- Pay: It is the basic compensation an employee receives usually as a wage or salary
- Incentive: it is the compensation that rewards an employee for efforts beyond normal performance expectations. Bonus, commission, and profit sharing plans are incentives
- Benefit: It is additional compensation to an employee as part of organizational membership. Health insurance, pension, vacation pay are benefits.
Components of Total Compensation:
An incentive or a ‗reward’ can be anything that attracts the worker‘s attention and stimulates him to work.
- Macroeconomic Compensation:
Develop a program that recognizes the lifestyle and standard of living of all employees. To survive in a complex, competitive global economy, all organizations, private and public must be able to focus on the effective and efficient delivery of the products they are designed to offer. A key factor in promoting effective delivery of essential goods and services is the provision of a performance based remuneration system for all workers. Compensation Management provides a step by step approach for designing a remuneration system that recognizes job requirements; employee related knowledge and skills and performance related incentives that link individual, team, work unit, and organization performance. Total remuneration also includes a host of benefits that protect and expand the lifestyle and health of workers and their families.
