Submitted to:- Submitted by:- Gopalakrishna BV Divakar Kumar
Compensation administration is a segment of management or human resource management focusing on planning, organizing, and controlling the direct and indirect payments employees receive for the work they perform. Compensation includes direct forms such as base, merit, and incentive pay and indirect forms such as vacation pay, deferred payment, and health insurance. Compensation does not refer, however, to other kinds of eployee rewards such as recognition ceremonies and achievement parties. The ultimate objectives of compensation administration are: efficient maintenance of a productive workforce, equitable pay, and compliance with federal, state, and local regulations based on what companies can afford. The basic concept of compensation administration—compensation management—is rather simple: employees perform tasks for employers and so companies pay employees wages for the jobs they do. Consequently, compensation is an exchange or a transaction, from which both parties—employers and employees—benefit: both parties receive something for giving something. Compensation, however, involves much more than this simple transaction. From the employer's perspective, compensation is an issue of both affordability and employee motivation. Companies must consider what they can reasonably afford to pay their employees and the ramifications of their decisions: will they affect employee turnover and productivity? In addition, some employers and managers believe pay can influence employee work ethic and behaviour and hence link compensation to performance. Moreover social, economic, legal, and political forces also exert influence on compensation management, making it a complicated yet important part of managing a business. Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men.
Advantages of Fair Compensation System:
Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following: 1. If an ideal compensation system is designed, it will have positive impact on the efficiency and results produced by workmen. 2. Such system will encourage the normal worker to perform better and achieve the standards fixed. 3. This system will encourage the process of job evaluation. It will also help in setting up an ideal job evaluation, which will have transparency, and the standards fixing would be more realistic and achievable. 4. Such a system would be well defined and uniform. It will be apply to all the levels of the organization as a general system. 5. The system would be simple and flexible so that every worker/recipient would be able to compute his own compensation receivable. 6. Such system would be easy to implement, so that it would not penalize the workers for the reasons beyond their control and would not result in exploitation of workers. 7. It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers. 8. Such system would help management in complying with the various labor acts. 9. Such system would also bring about amicable settlement of disputes between the workmen union and management. 10. The system would embody itself the principle of equal work equal wages. Encouragement for those who perform better and opportunities for those who wish to excel.
Need for designing of compensation Policy:
After going through the role and essentials of a sound compensation system, it becomes imperative that every business organization...