Compensation disposal is one of the most of import countries of human resource direction because sound compensation policies, programmes and their effectual executing are indispensable to secure, maintain and develop the human resource of the organisation to acquire effectual consequence from them. It involves the choice, planing, development and way of programmes designed to implement compensation or inducement policy through fiscal wagess. Beach has defined pay and salary disposal as follows: “ pay and salary disposal refers to the constitution and execution of sound policies and patterns of employee compensation.
It includes such countries as occupation rating, studies of rewards and wages, analysis of relevant organisational jobs, development and care of pay construction, set uping regulations for administrating rewards. Wage payments, inducements, net income sharing, pay alterations and accommodations, auxiliary payments, control of compensation costs and other related points ” . The traditional construct of pay and salary disposal emphasized on lone finding of pay and salary constructions in organisational scenes. In simple words, “ compensation disposal is a systematic process for set uping a sound compensation construction. ”
Meaning of compensation: Compensation may be viewed as a system of wages that motivates an employee to execute better.
The term compensation is used to intend employees ‘ gross net incomes in the signifier of fiscal wagess and benefits as portion of employment relationship. In footings of human resource direction, compensation is referred to as money and other benefits received by an employee for supplying services to his employer. Compensation direction, besides known as pay and salary disposal, wage direction, or reward direction, is concerned with designing and implementing entire compensation bundle or salary construction.
Compensation may besides be viewed as
( a ) A system of wagess that motivates employees to execute the assigned undertaking,
( B ) A tool used by organisations to further the values, civilization and the behaviour they require, and
( degree Celsius ) An instrument that enables organisations to accomplish their concern ends.
“ Compensation means something, such as money, given or received as payment or reparation, as for a service or loss. Compensation may be defined as money received in the public presentation of work, plus the many sorts of benefits and services that organisations provide their employees. ”
“ Compensation includes direct hard currency payments, indirect payments in the signifier of employee benefits and inducements to actuate employees to endeavor for higher degrees of productiveness ”
“ Compensation is the wage received by an employee in return of hisher part to the organisation. It involves equilibrating the work employee relation by supplying fiscal and non- fiscal benefits or inducements to employees. ”
Compensation can be classified into:
( 1 ) Financial compensation and
( 2 ) Non- Financial compensation.
Fiscal compensation includes Direct compensation and Indirect compensation.
The direct compensation is used to depict fiscal wage normally hard currency and includes such elements as basic wage, dearness allowance, overtime wage, displacement allowance, inducement, fillip, net income sharing fillip and committees, etc.
Indirect compensation or pay addendums or fringe benefits refer to such benefits as provident fund, pension strategy, medical and wellness insurance and ill leave and assorted other benefits and fringe benefits.
Non- fiscal compensation includes congratulations and acknowledgment and satisfaction of employees.
The basic demand of compensation direction is to run into the demands of both employees and the employer. The employers want to pay every bit small as possible to maintain their costs low. Employees want to acquire every bit high as possible. The compensation direction attempts to equilibrate between these two with following specific demands:
1. Attracting and Retaining Forces: From organisation ‘s point of position, every organisation wants new endowment and accomplishment from outside, for this intent the compensation direction purposes at pulling and retaining right forces at right topographic point in the organisation clip to clip.
2. Motivating Forces: Compensation direction purposes at actuating forces for higher productiveness. Compensation direction can be designed to actuate people through pecuniary compensation.
3. Optimizing Cost of Compensation: Compensation direction purposes at Optimizing cost of compensation by set uping link public presentation with compensation.
4. Consistency in Compensation: Compensation direction attempts to accomplish consistency-both internal and external-in compensating employees. Internal consistence involves payment on the footing of criticalness of occupations and employees ‘ public presentation on occupations. External consistence involves similar compensation for a occupation in all organisations.