Skip to main content

07. COMPENSATION

Introduction

Compensation in today's businesses is more of a strategic instrument that affects the performance of the organization than just a financial exchange between the employer and employee. Attracting top talent, increasing employee happiness, fostering loyalty, and driving performance may all be achieved through effective pay schemes (Syahreza, et al., 2017). Understanding the many facets of compensation, how it influences employee actions and company culture, and what goes into designing competitive pay plans are all topics covered in this article.





Compensation in Strategical Perspective

Compensation is vital to an organization's operations and strategy. It immediately impacts an organization's capacity to attract and retain top individuals in a competitive market. Well-structured remuneration packages show employees that the company values them and appreciates their contributions. Employee motivation, behavior, and alignment with company goals are all influenced by remuneration techniques. Compensation greatly affects employee behavior and company culture (Pangastuti, et al., 2020). Competitive salary and perks attract top applicants, while performance-based incentives encourage workers. Fairness and transparency in compensation promote trust and equity in the organization. Employees are happier, more engaged, and more loyal when they believe their pay is fair and market-based.


       Components of Compensation

More than simply a salary is required of an efficient compensation plan. It has several parts made to fit the various demands of workers. These parts fall into two main categories: direct and indirect pay. Direct compensation includes wages, salaries, bonuses, and commissions, which are easily quantifiable and directly paid to employees. Employees may get non-monetary advantages like as health insurance, retirement contributions, paid time off, and more as indirect compensation (Slafer, et al., 1996). These elements, when combined, make up a complete pay plan that has the potential to recruit, inspire, and hold on to personnel.



Developing an effective compensation strategy requires careful consideration of various factors. These include:

Market Competitiveness

Compensation must to be competitive in comparison to other companies in the same field and area. To keep pay competitive and relevant, it's a good idea to conduct salary surveys and market analyses on a regular basis.

Organizational Goals and Budget Constraints

A financially viable compensation plan should also contribute to the achievement of the organization's strategic objectives. Managing the organization's budget while still attracting and retaining top people is a complex task.

Legal and Regulatory Compliance

All applicable labour rules and regulations, such as those pertaining to minimum wage, overtime pay, and non-discrimination, must be followed by organizations in regards to compensation procedures.

Employee Needs and Preferences

Workers' different requirements and preferences must be understood. Flexible remuneration packages with direct and indirect benefits can meet employee demands.


Conclusion

Beyond the monetary pay for services rendered, compensation is an essential strategic instrument. Recruiting and keeping talent, inspiring workers, and structuring company culture are all greatly impacted by it. A motivated, loyal, and high-performing staff may be achieved when organizations take the time to craft pay packages that are fair, competitive, and in line with employee requirements and organizational goals. These transforms pay from an expense to an investment in the company's most precious resource: its employees.


References

Lynch, J. & Perry, S. E., 2003. An overview of management compensation.. Journal of Accounting Education, 21(1), pp. 43-60..

Pangastuti, P. A., Sukirno, S. & Efendi,, R., 2020. The effect of work motivation and compensation on employee performance.. International Journal of Multicultural and Multireligious Understanding, 7(3), pp. 292-299.

Slafer, G. A., Calderini, D. F. & Miralles, D. J., 1996. Yield components and compensation in wheat: opportunities for further increasing yield potential.. ncreasing yield potential in wheat: Breaking the Barriers, , pp. 101-133.

Syahreza, D. S., Lumbanraja, P., Dalimunthe, R. F. & Absah, Y., 2017. Compensation, employee performance, and mediating role of retention: A study of differential semantic scales..

Veklych, O., Karintseva, O., Yevdokymov, A. & Guillamon-Saorin, E., 2020. Compensation mechanism for damage from ecosystem services deterioration: Constitutive characteristic. International Journal of Global Environmental Issues,, 19(1), pp. 129-142..

 


 


Comments

Post a Comment

Popular posts from this blog

01. Employee well-being

Introduction                                                                                         Human resource is the most important asset in an organization. Good health and strong mental level in an employee are very important for the success of the organization. Employee well-being means a person who is rich with physical, mental, emotional and economic strength. There are many important factors that affect employee well-being. Such as physical and mental health, social connection, job satisfaction, good work balance environment, job security, family happiness etc.  Categories of employee well-being Physical well-being Physical well-being can be identified as apart of employee well-being. That means being physically fit. An example of this is the medica...

08. GLOBAL HRM STRATEGIES

     Introduction Global Human Resource Management (HRM) strategies are crucial in today's world of cross-border corporate operations. To maintain organizational effectiveness and competitiveness in the face of cultural diversity, regulatory requirements, and the complexity of foreign markets, these techniques are essential   (Crawshaw, et al., 2020) . The article delves into the fundamentals of global HRM strategies, their relevance, and the essential elements that help MNCs succeed.    Global HRM Strategies Many obstacles, such as cultural differences, different legal frameworks, and different worker expectations, arise when a company expands its operations outside its home market. Regardless of where an organization is located, global HRM strategies make sure that the correct combination of workers is on hand to accomplish its worldwide goals. Such approaches not only help with cross-regional operations, but they also help build a unified company ...

02. Employee Training and Development

Training and Development Introduction Human resources have an important place in the organizational structure. A team of skilled and knowledgeable employees guides the company's success. Employees are considered the mirror of the organization. The employee, who is full of subject knowledge, is not reluctant to perform his service. Through regular training, a group of talented employees is born within the organization. The organization should provide training, knowledge, experience, and opportunities to its employees to create an efficient and effective employee. Training and Development Training and development are the process of imparting knowledge, skills, attitudes, and training to employees to help them improve their job performance and career growth. This process is a current investment for the future growth of the organization  (Symonds, 2023). Main objectives of Training and Development Increasing the knowledge level of tasks. Developing employees' skills on the job. Cre...