Compensation Function and Objectives and the Components of Wage Structure of the Organization

Topics: Employment compensation, Employee benefit, Profit Pages: 4 (956 words) Published: March 20, 2010
Today there is a lot of talk about compensation, its cost to the organization and the company's return on its compensation investment. As a result, a variety of new pay systems have been developed, each with its own objectives, benefits and risks. Some companies have already installed new pay plans, and many more are considering it. Strategic compensation planning allows an organization to focus on its strategic objectives and develop a comprehensive plan, considering base pay, short- and long-term incentives, benefits and growth opportunities. This kind of planning helps ensure that the compensation system will support the organization's long-and short-term objectives without overlap, which would have more than one pay plan driving the same objectives. An organization's compensation program focuses on two major objectives. First, it must identify the right pay programs to recognize and reward desired behaviors. Second, it must decide how to organize work procedures to make the best use of available resources.

Basic wages/Salaries:-
These refers to the cash component of the wage structure based on which other elements of compensation may be structured. It is normally a fixed amount which is subject to changes based on annual increments or subject to periodical pay hikes. It is structured based on the position of an individual in the organization and differs from grades to grades.

Dearness allowance:-
The payment of dearness allowance facilitates employees and workers to face the price increase or inflation of prices of goods and services consumed by him. The onslaught of price increase has a major bearing on the living conditions of the labour. The increasing prices reduce the compensation to nothing and the money's worth is coming down based on the level of inflation.The payment of dearness allowance, which may be a fixed percentage on the basic wage, enables the employees to face the increasing prices.

The bonus can be paid...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Incentive as a Component of Salesman Compensation Structure Essay
  • Compensation: Structure and Pg Essay
  • Compensation Management What do you mean by Compensation Structure? What are the components of modern Compensation structure? Essay
  • Compensation Essay
  • Wage and Compensation Essay
  • Compensation Essay

Become a StudyMode Member

Sign Up - It's Free