Module-7 Compensation and Benefits Administration

By Suvojit Banerjee MBA,VTU

compensation is referred to as money and other benefits received by an employee for providing services to his employer. . compensation includes direct cash payments. indirect payments in the form of employee benefits and incentives to motivate employee to strive for higher levels of productivity . In the case of HRM.Meaning and Definition of Compensation ‡ The literal meaning of compensation is to counter balance. ‡ According to Cascio.

Definition of Compensation Management ‡ According to I.retain. . which determine employee wages or salary direct or indirect rewards .Kessler. Compensation Management refers to payment systems.and motivate them to perform well-keeping in view organizational and market factors . ‡ According to Tapomoy Deb. Compensation Management is a system of compensating individuals for the work they perform in such a way that the organization is able to attract.

2. 3. A good compensation package is important to motivate the employees to increase the organizational productivity.Need of Compensation Management 1. Salary is just a part of the compensation system. Thus. Thus. compensation helps in running an organization effectively and accomplishing its goals. . the employees have other psychological and selfactualization need to fulfill. Unless compensation is provided no one will come and work for the organization. compensation serves the purpose.

The most competitive compensation will help the organization to attract and sustain the best talent. Motivation Compensation Mgmt. Employee Retention Need satisfaction .Need of Compensation Management 4.

2. Attracting and Retaining Personnel Motivating Personnel Optimizing Cost of Compensation Consistency in Compensation . 3.Objectives of Compensation Management 1. 4.

wage payments. It includes areas such as job evaluation. profit-sharing. wage changes and adjustments. control of compensation costs and such other related areas. surveys of wages and salaries. development and maintenance of wage structure. . supplementary payments. incentives. establishing rules for administrating wages.Wages and Salary Administration  Wages and salary administration refers to the establishment and implementation of sound policies and practices of the employee compensation.

Wages are the compensation of wage earners. . ‡ According to Benham. the numerous employees who use the tools and equipments for their employers to produce goods and services that are sold by their employers. Wages means the amount paid to the labor for his services to the employer.Definition of Wages ‡ According to Yoder and Heneman.

. expertise. Salary is the monetary compensation paid by an employer to his clerical and managerial employees in exchange for their work.Definition of Salary ‡ According to Tapomoy Deb. skills and contributions in attaining the goals and objectives of the organization.

Salary ‡ Wages is compensation to the employees for services rendered to the organization.Wages vs. In case the quantum of services rendered is difficult to measure. ‡ Payment made to labor is generally referred as wages. Money paid periodically to persons whose output cannot be easily measured such as clerical staff as well as supervisory staff. then the payment is called salary. . is generally referred to as salary.

Link with Productivity . Internal Equity 2. Built-in Incentives 4. External Competitiveness 3.Need for sound Wage and Salary Administration The main requirements of a sound structure of base compensation are as follows: 1.

To retain the present employees. 2. 5. To improve Productivity.Objectives of Wage and Salary Administration A sound wage and salary administration seeks to achieve the following objectives: 1. . 6. 4. To improve union management relations. 7. To control costs. 3. To attract competent personnel. To establish a Fair and Equitable Remuneration. To improve public image of the company.

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