IMPO

1.8
RTAN
CE OF
AN
IDEAL
COMP
ENSA
TION
SYSTE
M
Compensation refers to the rewards,
an employee gets after offering
his/her mental and physical efforts,
wherein he/she compares his/her
worth. Any dissatisfaction may
result into a conflict or a dispute.
This dissatisfaction not only affects
the performance of the employee
but also imbalances the equity
between human capital investment
and expected returns to the
organization.
As such it is a most sensitive issue in
any organization or HRM as
employers, employees and the
government have observed that 95%
of the industrial disputes in any
organization in India are related to
wage/salary or method of payments.
Compensation decisions have
become more complex in this
competitive age because of an
imbalanced demand and supply
ratio. The HRM of every
organization is required to make
some systems to scrutinize the wage
and salary differentiations or
disparities to ensure a motivated
environment in the organization. The
perceptions of employees and
employers about compensation are
changing and the emphasis is being
laid on how important is pay for the
employees and how it affects
investment to hire competitive
employees and how it compares
with three main factors, namely, job
contents, work environment, and
pay attraction to retain an employee.
The expensive growth of some of the
sectors like IT, Telecom, BPOs and
financial institutions has triggered
off huge demand for talent at all
levels. The consultants and HR
professionals are continuously
surveying and studying the
paradigm shifts of concepts,
perceptions and the need for
revising the compensation systems.
The paradigm shift from standard
wage and salary to compensation or
cost to the company is clearly visible
in today’s hiring practices.