The basic objective of compensation management can be briefly termed as meeting the needs of both employees and the organization. The Employer wants to pay little salaries and wages to the workers to manage their working costs. Employees wants to get paid high as possible.

1. Objectives of Compensation
Management

2. Compensation Management
 Compensation management is a HRM function
that deals with the salaries, wages and any kind of
rewards that individuals receive on performing on
an organizations tasks.
 Compensation is what employees receive in
exchange of their work. It is a particular kind of
price, that is, the price of labor.

3. Objectives of Compensation
Management
 The basic objective of compensation management can be
briefly termed as meeting the needs of both employees
and the organization. The Employer wants to pay little
salaries and wages to the workers to manage their working
costs. Employees wants to get paid high as possible.
 Main Objectives of compensation management are:

4. 1. Acquire Qualified Personnel
 Compensation needs to be high enough to attract
the applicants. Pay level must be as high as the
supply and demand of workers in the markets. Try
to give better pay package to the workers so they
feel better when they compare their salaries with
the other company’s workers. Premium wages are
sometimes needed to attract applicants working
for others.

5. 2. Retain current employees
 Employees can quit the job if the compensation
levels are not competitive, resulting in higher
turnover. Everyone like to work for a better reward,
if the pay levels are not competitive then most of
the employees will quit and find the better one for
them. To retain these employees the pay level must
be competitive with that of other employees.

6. 3. Ensure equity
 To retain and motivate employees to do their work, the
employee compensation level must be fair. The wages and
salary administration must be fair to achieve the equity.
Compensation management strives for internal and external
equity.
 Internal equity requires that pay be related to the relative worth
of a job so that similar jobs get similar pay. External equity
means paying workers what comparable workers are paid by
other firms in the labor market.

7. 4. Reward desired behavior
 Pay should reinforce desired behaviors and act as a
motivator for these behaviors to occur in future.
Compensation plans reward to performance,
responsibility, experience and other behavior.
Excellent performance and loyalty and other
behaviors must be rewarded though the
company’s compensation plan.

8. 5. Control Costs
 An effective compensation system help the
organization to retain reasonable costs of
workers. If there is no good compensation
system then workers can be over paid or
underpaid.

9. 6. Comply with legal regulations
 A good compensation (salary and wages)
system looks at the challenges on
organizations that are imposed by the
government and ensures employees comply.

10. 7. Facilitate understanding
 The objectives of the compensation
management must be easily understood by
the Human resource management,
company’s administration and the operating
managers.

11. 8. Further administrative efficiency
 The compensation program should be
designed so it can managed efficiently and
making optimal use of Human resource
information system. These objectives should
be secondary considerations with other
objectives of the company.

12. 9. Motivating Personnel
 The aim of compensation is also to motivate
personnel to work on the productivity. Other
than money workers can be motivated by
promotions, recognition, acceptance and
status etc.

13. 10. Consistency in Compensation
 Compensation management aims to achieve
consistency both internal and external to
compensate employees. Internal consistency
involves payment on the basis of the criticality of
jobs and employees’ performance on jobs. High
compensation refers to higher job as well the high
performance in the same job.

14. 11. To be Adequate
 Compensations must be sufficient enough to
fulfill all the needs of the employees
substantially. The must fulfill the needs of the
workers inside and outside the organization.