What Is Compensation?

Compensation refers to all

forms of financial returns and
tangible services and benefits
employees receive as part of
an employment relationship.
  To reward employees’ past performance
 To remain competitive in the labor market
 To maintain salary equity among employees
 To mesh employees’ future performance with
organizational goals
 To control the compensation budget
 To attract new employees
 To reduce unnecessary turnover

1. To elicit desired behavior from employee.

 Motivate people to join the organization
 Motivate people to stay with the organization
 Motivate people to perform at high levels
 Wages & Salaries in the organisation should be in line
with wages and salaries for comparable jobs in other
organisation.

 Ensuring that jobs in our company are paid the same as

the same jobs (in terms of KSA)in other companies.
 Data relating to pay levels can be collected through W
& S Survey. A salary survey reveals what other
organisations pay for specific jobs and the basis for
payment.

 Once the going rate prevailing in the region is known

the co. can decide a higher or lower level for its
employees without distrubing internal equity.
 Ensuring that compensation for jobs that are similar in
terms of KSA within the organization should be the
same.
 It implies a proper relationship between wages paid for
different jobs within the co. Pay differentials should be
related directly to differentials between job
requirements.

 Fair pay differentials between jobs can be established

with the help of job evaluation.Job evaluation help to
determine relative worth of a job.It is useful in
eliminating widely varying wages for jobs of equal
difficulty.It also minimises wage differentials on the
basis of sex, religion, caste etc.