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COMPENSATION MANAGEMENT

UNIT 4

COMPENSATION MANAGEMENT

Compensation is what employees receive in exchange for their contribution to the organization. Compensation forms such as bonuses, commissions & profit sharing plans are incentives designed to encourage employees to produce results beyond normal expectations. Benefits such as insurance, medical, recreational etc., represents a more indirect type of compensation.

NATURE OF COMPENSATION

Directly through base pay & variable pay & indirectly through benefits. BASE PAY: it is the basic compensation an employee gets, usually as wage or salary. VARIABLE PAY: it is the compensation that is linked directly to performance accomplishment. BENEFITS: these are indirect rewards given to an employee or group of employees as a part of organizational membership. E.g.- insurance, vacation trips, pension etc.

OBJECTIVES
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Attract talent Retain talent Ensure equity: Pay should equal the worth of the job. Similar jobs should get similar pay. New & desired behaviour Control costs. Comply with legal rules Ease of operation

Factors Affecting Compensation

The Overall Macroeconomic situation where in the state of the economy of the country in which the firm is situated plays a major role in determining the compensation to be paid. The Demand for a particular skill weighs heavily on the way in which the employer fixes the compensation for the employee. The Position of the company in the Business Cycle often determines how much the company is willing to offer to the employee. The urgency of the firm in filling up the position.

COMPENSATION MANAGEMENT PROCESS


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Find the worth of each job through job evaluation. Conduct a salary survey to find what other employers are paying for comparable jobs. Group similar jobs into pay grades. Fix the Compensation Package. Fine tune pay rates/ Keep on Reviewing the Pay System.

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