08-11-2012, 06:15 PM
Compensation
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Compensation Definition
Compensation is a monetary benefit given to employees in return for the services provided by them.
The literal meaning of the term compensation is something which counterbalances the efforts of workers .
Milkovich & Newman defined compensation as:
All forms of financial and tangible services and benefits that an employee receives in his/her tenure of employment
Compensation is a broader term which includes wages ,salary, pay, perquisites ,fringe benefits , performance ,incentives, commissions, bonus, stock options, remuneration.
Compensation Management
Compensation management is a system of compensating individuals for the work they perform in such a way that the organization is able to attract , retain and motivate them to perform well keeping in view organizational and market factors
Objectives of compensation management
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.
To build employer branding
Reward System
An organization designs and implements a reward system to focus worker attention on the specific behaviors the organization considers necessary to achieve desired objectives and goals.
Reward management is concerned with the formulation and implementation of strategies and policies ,the purposes of which are to reward people fairly, equitably and consistently in accordance with their value to the organization and thus help the organization to achieve its goals.
The Aims of Reward Management
To establish a fair and equitable Remuneration.
To attract competent personnel
To retain the present Employees
Reward people according to what the organization values and wants to pay for.
Reward the people for the value they create
Develop performance culture.
Motivate people
Function consistently
Operate transparently
To improve union management relations
Total Rewards
Total rewards is the monetary and non-monetary return provided to employees in exchange for their time, talents, efforts and results. It involves the deliberate integration of five key elements that effectively attract, motivate and retain the talent required to achieve desired business results. The five key rewards elements are:
Compensation
Benefits
Work-life
Performance and Recognition
Development and Career Opportunities
Reward strategy
Reward strategy issued to guide the designs of specific compensation decisions
Reward strategy is the declaration of intent that defines what the organization wants to do in the longer term to develop and implement reward policies ,practices and process that will further the achievement of business goals and meet the needs of its stakeholders