Compensation refers to a wide range of financial and non financial rewards to employees for their services rendered to the

organisation.

Objectives of compensation management Acquire qualified personnel - compensation needs to be high enough to attract the applicants. Retain present employees - employees may quit when compensation levels are not competetive, resulting in higher turnover. Ensure equity Compensation mgmnt strives for internal and external equity.Internal equity requires that pay be related to the relative worth of jobs, so that similar jobs get similar pay.External equity means paying workers what comparable workers at other firms in the labour market are paid.

Reward desired behaviors pay should reinforce desired behaviors and act as an incentive for those behaviors to occur in the future. Control costs a rational compensation system helps the organization obtain and retain workers at a reasonable cost Comply with legal regulations a sound wage and salary system considers the legal challenges imposed by Govt. and ensures the employer's compliance. Facilitate understanding it should be so designed such that it is easily understood by the human resource specialist,operating managers and employees.

Components of compensation - Monthly wage and salary or total pay including basic wage, house rent allowance, dearness allowance. - Bonus at the end of the year. - Economic benefits such as paid holidays, leave travel concession. - Contribution towards insurance premium - Contribution towards retirement benefits such as employee provident fund. - Transport and medical facilities.

Factors affecting wages/compensation

Demand for and supply of labour wage is a price or compensation for the services rendered by a worker. The firm requires these services, and it must pay a price that will bring forth the supply which is controlled by the individual worker or by a group of workers acting together through their unions. The primary result of the operation of the law of supply and demand is the creation of the going wage rate. Ability to pay Employers ability to pay is an imporatant factor affecting wages not only for the individual firm,but also for the entire industry.

Cost of living another important factor affecting the wage is the cost of living adjustment of wages. Productivity of workers to increase the best results from the worker and to motivate him to increase his efficiency, wages have to be productivity based. Labor unions Higher wages may have to be paid by the firm to its workers under the pressure of trade unions. Government to protect the working class from the exploitation of powerful employees, the Govt has enacted several laws on minimum wages, hours of work, equal pay for equal work, payment of bonus etc.

Determination of wages Job analysis Minimum wage laws

Job description

JE

W.Sur

W struct

Administr of wage

Performance PA standards Wage payments