WEEK 10.

Managing Compensation/Establishing a pay structure

LO (Learning Objectives)
1.Explain what is meant by compensation.
2.Direct and Indirect compensation.
3.The link of compensation management and HRM functions.
4.Compensation and strategic goal.
5.The bases of compensation.
6.Factors affecting the compensation mix.
7.Satisfaction and compensation.
Jelaskan hubungan antara Kompensasi, Kepuasan kerja dengan
separation and remaining employees.

9–1
Compensation
• Compensation is all forms of pay and reward
received by employees for performance of
their job.

9–2
 Total Compensation

Direct Indirect

Wages / Salaries Time Not Worked

• Vacations
• Breaks
• Holidays
Commissions
Insurance Plans
Bonuses • Medical
• Dental
• Life
Gainsharing
Security Plans
• Pensions

Employee Services
• Educational assistance
• Recreational programs

© 2007 Thomson/South-Western. All rights reserved. 9–3

 Compensation Management and
Other HRM Functions

Supply of applicants
Aid or impair recruitment Recruitment affects wage rates

Selection standards affect

Pay rates affect selectivity Selection level of pay required

Training and Increased knowledge leads

Pay can motivate training
Development to higher pay

Training and development may Compensation A basis for determining

lead to higher pay Management employee’s rate of pay

Low pay encourages Pay rates determined

unionization
Labor Relations through negotiation

© 2007 Thomson/South-Western. All rights reserved. 9–4

Common Strategic Compensation Goals
1. To reward employees’ past performance
2. To remain competitive in the labor market
3. To maintain salary equity among employees
4. To mesh employees’ future performance with
organizational goals
5. To control the compensation budget
6. To attract new employees
7. To reduce unnecessary turnover

9–5
 Figure 9–3 Factors Affecting the Wage Mix

© 2007 Thomson/South-Western. All rights reserved. 9–6

Compensation is all forms of pay and reward received by
employees for performance of their job.

9–7