Problem Statement

To identify and evaluate the effect of compensation on employee's performance

Objective of the research:
•What compensation is? •How monetary compensation effects on employee's performance? •How non monetary compensation effects on employee's performance? •How compensation effect the organization's performance? •What kind of compensation can play measure role in any organization? •What kind of compensation as such does not affect the employee performance? •What is the importance of compensation?

Back ground:
Compensation may be defined as money received for the performance of work plus much kind of benefits and services that organizations provide their employee. Compensation is recompense, reward, wage or salary given by an organization to persons or a group of persons in return to a work done, services rendered, or a contribution made towards the accomplishment of organizational goals. Wage, dearness allowance, bonus and other allowance are examples of monetary compensation, while good accommodation, children education, transport facilities, subsidized ration of essential commodities, etc. come under non-monetary compensation. In short, wage paid to collar workers or salaries paid to white collar employee can be classified as compensation. A good compensation package is a good motivator. Hence, the primary responsibility of the HR manager is to ensure that the company's employees are well paid. BASIC COMPENSATION: WAGE: The remuneration paid, for the service of labor in production, periodically to an employee/worker. Wages means any economic compensation paid by the employer under some contract to his workers for the services rendered by them. Usually refer to the hourly rate paid to such groups as production and maintenance employees' wages include family allowance, relief, pay, financial support etc. SALARY: Salary is influenced by the size of a company by the specific industry, and in part by the contribution of the incumbent to the process of decision-making. Salary refers to the weekly or monthly rates paid to clerical, administrative and professional employees. Salary is determined by mutual agreement between the individual and the employer. INCENTIVE: An incentive scheme is a plan or programs to motivate industries or group performance. An incentive program is most frequently built on monetary, but may also include a variety of non- monetary rewards or prizes. DETERMINATS The effective use of incentives depends on three variables. They are: 1. The individual.

F.effective bonding contracts. A model for understanding how benefit policy is translated into organizational productivity is also presented. 6. Compensation in the industry and availability of special competent personnel 4. i. They analyze the relationship between pay and performance. but by promotion opportunities. The incentive plan. 1018 WB Amsterdam. The work situation. kind of competencies and abilities in managers: 5. because of changing employee and employer needs. The compensation system also significantly affects work satisfaction and turnover intent. motivation. It is clear from the research discussed that compensation/benefit policy can have a sizable impact on employee turnover. Organization's capacity to pay 2. 3.George P. and attitudes. it is determine to a large extent how an individual behaves inside an organization.compensation is largely independent of performance. William A. Our survey results demonstrate a positive relationship between the perceived characteristics of the complete compensation system and extrinsic motivation. Literature Review: Compensation is the core of any employeement exchange. 7. Roetersstraat 11.2. most compensation/benefit programs are far from optimal and almost all programs will undergo substantial redesign in the next decade.promotion bases incentives system and the general reluctance of employees to fire. Baker Changes in compensation from performance-sensitive (commission-based) to less performance-sensitive (base salary plus commission) schemes hurt employee performance. Prevailing pay and benefits in the industry: 3. The Netherlands (2) Faculty of Economics and Econometrics. J. Performance/productivity/responsibilities of individual. coupled with stagnant reward systems and outdated benefit plans. Intrinsic motivation is not affected by the design of monetary compensation. The Netherlands the relationship between benefit and compensation policy and practice and a number of attitudes and behaviors that affect productivity. Schiemann1 A thorough understanding of internal incentives structures is critical to understand and developed. Michael C .Jensen. Flexibility. Qualifications and relevant experience. However. Stability of employment and advancement opportunities. University of Amsterdam. Kennedylaan 100.e. 8. Economic and psychological theories predict that the design and implementation of a performance measurement and compensation system affect the motivation of employees.compensation is one of the most important factor. performance.Kevin J. 3741 EH Baarn. Marco Van Herpen1. The less performance-sensitive plan retained fewer high-performance . Murphy . Factors influencing compensation: 1. Mirjam Van Praag2 and Kees Cools1 Contact Information (1) University of Groningen & The Boston Consulting Group.compensation motivate the employee in different manner. Organization philosophy such as to be leader or pay prevailing rates.

milkovich according to John bishop an individual's relative wage depends on his/her productivity relative to others doing the same job. Ho . Findings indicate that contingent pay was associated with financial performance but base pay was not.George t.Gardner. we found significant differences between organizations.LInn Van Dyne and Jon L.000 top. L. Starting wages were influenced by background characteristics and training cost realizations but not by relative productivity. The wage elasticity was . The wage response to relative productivity and training costs was weaker in small labor markets. we explored the consequences of those decisions for organizational performance.E. Wages one year later were influenced by productivity but the effects were small. Anne Wu Pay level influenced employee performance through its effect on organization-based self -esteem indicates that organizations can increase the return-on-investment of their compensation by reinforcing the connection between pay level and the employee's value to the organization DOnald G. or variability. Using longitudinal data on about 14.2 at small establishments and 0 at establishments with over 400 employees. Second. working from expectancy and agency theory perspectives. we examined the extent to which organizations facing similar conditions make different managerial compensation decisions regarding base pay. suggesting that wages do not fully respond to performance because of the firm specificity of job performance differentials. DATA COLLECTION: Data will be collected from two different sources.G (University of Karachi) Primary Data Following variables are included: Monetary compensation Salary .Y. Our results suggest that organizations tend to make different decisions about pay contingency. barry gerhart. Research Methodology: • Type of Research Quantitative Research • Type of Study Exploratory research has been followed for this study.and middlelevel managers and 200 organizations. and eligibility for long-term incentives. Websites. pierce Compensation strategy. rather than about base pay.salespersons and recruited more low-performance sales staff. bonus pay. • • Secondary Data Published article. Ling-Chu Lee. Joanna L.

. • • SAMPLING DESCRIPTION: Sample size: 100 Sampling Element: Peoples of Karachi • Sampling Type Non probability sampling will be used • Sampling Method • Stratified sampling method is used • We collect data from 10 service sector organizations • We collect data from 100 employees which includes 40 females and 60 males Hypothesis: ALternative hypothesis: Ho: compensation effects negatively on employee performance Null hypothesis: H1:compensation effects positively on employee performance Line of action: I have selected this topic to know about the impact of compensation on employee performance in Karachi. I have chosen this topic because i m doing specialization in human resource management and this report related to my field and it is basic requirement of my course and as well as my degree.this study will also helpful to provide job satisfaction to employees. Scope of study: Through This study management of the organization will know how to improve the performance of employees and their motivation level .Wages Bonus Commission Profit sharing Stock option Warrants Non monetary compensation Flexible work hour Training pleasant work environment Rewards Certificates Appraisal words Promotions Data Gathering For data gathering I will design questionnaire. Contact Method The respondents were contacted directly.

3741 EH Baarn.The impact of corporate compensation and benefit policy on employee attitudes and behavior and corporate profitability .Gardner. DOnald G.F.The Effects of Performance Measurement and Compensation on Motivation.Accounting Area.Y.Marco Van Herpen1. Mirjam Van Praag2 and Kees Cools1 Contact Information (1) University of Groningen & The Boston Consulting Group. Kennedylaan 100.LInn Van Dyne and Jon L.William A. J. The Netherlands (2) Faculty of Economics and Econometrics. Jensen. Reference: 1. 1018 WB Amsterdam.Kevin J. Ling-Chu Lee . 5.National Pingtung Institute of Commerce. Schieman. Roetersstraat 11. The Netherlands. pierce.Michael C . Recruitment and 4. Anne Wu National Chengchi University (Taipei).compensation and incentives theory verses practice 3. Ho . Volume 153 George P.vol2 2. Murphy.milkovich. organizational difference in managerial compensation and financial performance . John bishop. Baker.. George t. Barry gerhart. University of Amsterdam. Joanna L. The recoginition and rewards of employee performance 6. The effect of pay level on organization-based self esteem and performance.How Changes in Compensation Plans Affect Employee Performance.University of California Irvine .

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