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Compensation Management Notes

Compensation management is the process of managing, analyzing, and determining the salary, incentives, and benefits each employee receives. It aims to attract and retain competent employees by offering fair compensation based on factors like work performance, position, responsibilities, experience, and market rates, while keeping costs low for the organization. However, balancing fair compensation for employees with costs for employers can be challenging.

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43 views

Compensation Management Notes

Compensation management is the process of managing, analyzing, and determining the salary, incentives, and benefits each employee receives. It aims to attract and retain competent employees by offering fair compensation based on factors like work performance, position, responsibilities, experience, and market rates, while keeping costs low for the organization. However, balancing fair compensation for employees with costs for employers can be challenging.

Uploaded by

Himani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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COMPENSATION MANAGEMENT

MEANING
Compensation Management is a very important source of attracting, retaining and
motivating the required human resource for any organization. Although most
employees specially at middle and senior levels claim that money does not play a very
important role in their decision to change or to stay in an organization but in reality
it is the money which motivate most of the employees.
The employees need to be compensated for the services which they render to an
organization. It is not easy to workout suitable compensation package for the
employees and keeps them satisfied. The experience is that the employees mostly
remain dissatisfied with whatever wage or salary they are paid by the employers.
Therefore, the job of wage and salary administration has been complex and subtle,
and littered with techniques to reduce the complexity and cope with the subtleties.
Hence various methods to compensate the employees have been deployed but
without success. Incentive payment schemes, at times have been considered as the
answer to most problems.
The methods of appraisal of employees have been worked out to match the
performance of the employees with proper compensation, but without complete
success.
These days, the organizations are also beset with the problem of ‘take home salary’
concept. The employees are no more interested in knowing how much the company
is spending on each of them but they are keen to known how much would be
available to them in their hands.
This had brought into sharp focus the question of income tax planning. The
organizations are findings newer and newer methods to help employees in planning
their tax liability or how to minimise the tax payment by the employees. On the other
hand the Government has been finding out the loopholes in income tax structure to
plug the same.
Recently, there have been a number of cases where very large organizations have
been caught for not deducting tax at source properly. As a result, today we find that
the number of components of the compensation have been increased and the
nomenclature of some of these components have been changed to keep the same out
of income tax net by the management under pressure from their employees.
However, these efforts have not proved very helpful to the management as it
continues to remain under stress – whether the methods being used in
compensation, are part of tax planning or tax avoidance and at the same time, is it
able to satisfy the employees and maintain positive image among its employees as
well as in the society at large or not.
There is no doubt that the employees work for compensation in terms of money and
their attempt is always to maximise the same. The employees, therefore, are anxious
to minimise the income tax incidence.
The employees work for rewards and the employers seek higher productivity to keep
cost per employee low. A balance is to be struck between these two parties –
employer and employee with regard to compensation.
The compensation should be designed in such a fashion that the organization is able
to attract, motivate, and retain competent employees and at the same time the
employees perceive it fair and equitable.
The perception by the employees is important as the ratio between the input and
output – i.e., services rendered and the reward for the same in terms of
compensation, will determine the level of their satisfaction, which in turn, determine
their contribution, motivation, and retention.
In India, the Government, specially through labour laws has been playing a very
important and significant role in determining wages and also in making it mandatory
for employers to provide welfare schemes to its work force. The employers and
employees have to comply with the same, willingly or unwillingly .

Compensation management is the process of managing , analysing


and determining the salary , incentives and , and benefits each
employee receives.

Compensation Management – Concept

An organisation’s goals or objectives can be achieved when its employees put in their
best efforts in the right direction. Hence, they should be nurtured properly and paid
well for their work, performance, services, etc. Besides wages or salaries,
organisations provide different kinds of incentives, benefits and services to their
employees.
Compensation management ensures that employees get paid a fair salary based on
 Work performance
 Position
 Responsibilities
 Experience
 Job market
 Company budget
Compensation management also known as wage and salary administration
remuneration management or reward management is concerned with designing and
implementing a total compensation package
Thus in short compensation is direct and indirect monetary benefits and rewards
received by employees on the basis of the value of the jobs ,their personal
contributions and overall performance. Such rewards are given to employees by their
organisation according to the ability of the organisation to pay and the legal
provisions.

OBJECTIVES OF COMPENSATION MANAGEMENT

 To attract competent and qualified person towards organisation by offering


fair wage and incentives
 To retain present employees by paying competitive remuneration

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