TRANS Asian Journal of Marketing & ManagementResearch Vol.1 Issue 1, September 2012, ISSN (online) ……COMPENSATION MANAGEMENT:A THEORETICAL PREVIEWDR. B. C. M. PATNAIK*; PRABIR CHANDRA PADHI**• *Associate Professor, School of Management, KIITUniversity, Bhubaneswar. **Research Scholar, CMJ University.
Compensation is a systematic approach to providingmonetary value to employees in exchange for workperformed. Compensation may achieve several purposesassisting in recruitment, job performance, and jobsatisfaction. An ideal compensation management systemwill help you significantly boost the performance of youremployees and create a more engaged workforce that’swilling to go the extra mile for your organization. Such asystem should be well-defined and uniform and shouldapply to all levels of the organization as a general system.ABSTRACT
With effective compensation management you’ll alsoenjoy clearer visibility into individual employeeperformance when it comes time to make criticalcompensation planning decisions.Employees should be managed properly and motivatedby providing best remuneration and compensation asper the industry standards. The lucrative compensationwill also serve the need for attracting and retaining thebest employees.ABSTRACT
Human Resource :Human resources is the set of individuals who make up theworkforce of an organization, business sector or aneconomy. "Human capital" is sometimes usedsynonymously with human resources, although humancapital typically refers to a more narrow view; i.e., theknowledge the individuals embody and can contribute to anorganization. Likewise, other terms sometimes used include"manpower", "talent", "labor" or simply "people".The professional discipline and business function thatoversees an organizations human resources is calledhuman resource management (HRM, or simply HR).KEYWORDS
Management :The organization and coordination of the activities of a businessin order to achieve defined objectives.Management is often included as a factor of production alongwith‚ machines, materials, and money. According to themanagement guru Peter Drucker (1909-2005), the basic task ofmanagement includes both marketing and innovation. Practice ofmodern management originates from the 16th century study oflow-efficiency and failures of certain enterprises, conducted bythe English statesman Sir Thomas More (1478-1535). Managementconsists of the interlocking functions of creating corporate policyand organizing, planning, controlling, and directing anorganizations resources in order to achieve the objectives of thatpolicy.KEYWORDS
Compensation Policies :As an employer we believe that it is in the best interestof both the organization and our employees to fairlycompensate our workforce for the value of the workprovided. It is our intention to use a compensationsystem that will determine the current market value ofa position based on the skills, knowledge andbehaviors required of a fully competent incumbent.KEYWORDS
Organization :A social unit of people that is structured and managedto meet a need or to pursue collective goals. Allorganizations have a management structure thatdetermines relationships between the differentactivities and the members, and subdivides andassigns roles, responsibilities, and authority to carryout different tasks. Organizations are open systems--they affect and are affected by their environment.KEYWORDS
Pay has become the drivingforce for seeking employmentin the industryA compensation system thatcan motivate employees towork while at the same timenot eating too deep into theorganization’s resourcesresourceINTRODUCTION
Remuneration does not simply compensateemployees procedures that will attain maximumreturn on Naira spent in Compensation is paymentin the form of hourly wages or annual salarycombined with benefits such asinsurance, vacation, stock options, etc. that canpositively or negatively affect an employees workperformance.INTRODUCTION
Compensation is the remuneration receivedby an employee in return for his/hercontribution to the organizationCompensation is an integral part of humanresource management which helps inmotivating the employees and improvingorganizational effectiveness.INTRODUCTION
Bob (2011) Compensation processes are based onCompensation Philosophies and strategies and containarrangement in the shape of Policies and strategies, guidingprinciples, structures and procedures which are devisedand managed to provide and maintain appropriate types andlevels of pay, benefits and other forms of compensationBob (2011) This constitutes measuring jobvalues, designing and maintaining pay structures, payingfor performance, competence and skill, and providingemployee benefits. However, compensation management isnot just about money. It is also concerned with that non-financial compensation which provides intrinsic or extrinsicmotivationLITERATUREREVIEW
Pearce (2010) Compensation implies having acompensation structure in which the employeeswho perform better are paid more than the averageperforming employees.Nweke (2010) Successive constitutional reviewsand Civil Service reforms have catalysed theevolution of the civil service as an institution forspearheading the rapid transformation of the stateand ensuring continuity of administrationLITERATUREREVIEW
Hewitt (2009). Compensation Management as the namesuggests, implies having a compensation structure inwhich the employees who perform better are paid morethan the average performing employees. This encouragestop-performers to work harder and helps to build acompetitive atmosphere in the organizationHarrison and Liska (2008) in their study posit that rewardis the centre piece of the employment contract-after all itis the main reason why people work. This includes alltypes of rewards, both intrinsic and extrinsic, that arereceived as a result of employment by the organizationLITERATUREREVIEW
Employee compensation includes all forms of paygoing to employees and arising from their employment.It has two mains components, direct financialpayments (wages, salaries, incentives, and bonuses)and indirect financial payments (financial benefits likeemployer-paid insurance vacations).In turn, there are two basic ways to make directfinancial payments to employees: based on incrementsof time or based on performance. Time-based pay isstill the foundation of most employers pay plans.ANALYZE
The second direct payment option is to pay forperformance. For example, piecework ties compensation tothe amount of production (or number of “pieces” the workerturns out. Sales commissions are another performance-based (in this case, sales-based) compensation. Otheremployees devise pay plans that combine time-based payplus incentives.The compensation plan should first advance the firm’sstrategic aims-management should produce an alignedreward strategy. This means creating a compensationpackage including wages, incentive, and benefits thatproduces the employee behaviors the firm needs to supportand achieve its competitive strategy.
With respect to compensation, managers should addressfour forms of equity: external, internal, individual, andprocedural.- External equity refers to how a job’s pay rate in onecompany compares to the job’s pay rate in othercompanies- Internal equity refers to how fair the job’s pay rate is whencompared to others job within the same company- Individual equity refers to the fairness of an individual’spay as compared with what his or her coworkers areearning for the same or very similar jobs within thecompany, based on each individual’s performance- Procedural equity refers to the “perceived fairness of theprocesses and procedures used to make decisionsregarding the allocation of pay
Compensation management specialist call thesecompensable factors. They are the factors that establishhow the jobs compare to one another, and that determinethe pay for each job.Identifying compensable factors plays a central role in jobevaluation. Manager usually compare each job with allcomparable jobs using the same compensable factors.However, the compensable factors use depend on the joband the job evaluation method. For example, “decisionmaking” might make sense for a manager’s job, but not fora cleaner’s job.
What should the pay rate be for each job? Of course, jobswith more points should command higher pay. The questionis what pay rate to use. Our company’s current, “internal”pay rates? Or pay rates based on what “external” market ispaying?With a market-competitive pay system, the employer’sactual pay rates are competitive with those in the relevantlabor, as well as equitable internally. Put simply, the basicapproach is to compare what the employer is currentlypaying for each job (“internal pay”) with what the market ispaying for the same or similar job (“external pay”), and thento combine this information to produce a market-competitive pay system.
REFERENCES• Bob, N. (2011). Making employees suggestionsCount, Journal of personnel management 17; 20 -41.• Bob, N. (2011). Making employees suggestionsCount, Journal of personnel management 17; 20 -41.• Pearce, L.(2010). Managerial compensation based onorganization performance, Journal of industrialRelation, 52:3-28.• Nweke, A.(2009). Three years of Visionary leadership inAnambra State, Journal of Anambra State, CivilService, 8(1), 7-12.
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