Compensation management is a key HR function focused on managing employee salaries and rewards in exchange for their work, encompassing various forms of financial returns such as salaries, bonuses, and benefits. It includes three compensation types: non-monetary, direct, and indirect, each serving different employee needs while aiming to balance organizational costs. The objectives of compensation management include acquiring and retaining talent, ensuring equity, complying with regulations, and motivating personnel.

1. Compensation Management

2. What is Compensation Management?
 Compensation management is a Human
Resource Management function that deals
with the salaries and any kind of rewards
that individuals receive on performing 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.  Compensation refers to all forms of
financial returns: like salary, wages,
overtime, provident fund, gratuity,
insurance scheme, bonus or other benefits
that are provided by the organization on an
employee’s excellent performance.
Compensation can be in the form of cash or
kind.

4. Different Types of Compensation
There are different types of
compensation.
1.Non-monetary Compensation.
2.Direct Compensation.
3.Indirect Compensation.

5. 1. Non-monetary Compensation
 It involves any kind of benefits that an
employee receives by doing a job that does
not involves any tangible value. Examples
are career development and opportunities
for recognition, as well as work
environment and conditions.

6. 2. Direct Compensation
 Direct compensation is the salary that one get
from a job which includes all other health
benefits. Money is included under direct
compensation. It is an employee’s basic wage that
can be annual, monthly or weekly or any
performance base pay that an employee receives.
 These include the basic salary, house rent
allowances, medical benefits, city allowances,
conveyance, provident funds, etc. It also includes
bonuses, payments for holidays, etc.

7. 3. Indirect Compensation
 Indirect compensation are like the non-
monetary benefits an employee gets from
an organization.
 It includes all from required public
protection programs such as retirement
programs, paid holidays, health insurance
and travelling expenses.

8. Objectives of Compensation
Management
 The basic objective of compensation
management can be briefly termed as
meeting the needs of both employees and
the organization. Employers want to pay as
little as possible to keep their costs low.
Employees want to get as high as possible.

9. Objectives of compensation
management are:
1.Acquire qualified personnel.
2.Retain current employees.
3.Ensure equity.
4.Reward desired behavior.
5.Control costs.

10. Objectives of compensation
management are:
6. Comply with legal regulations.
7. Facilitate understanding.
8. Further administrative efficiency.
9. Motivating Personnel.
10.Consistency in Compensation.
11.To be adequate

11. Importance of Sound Wage Structure
 A sound wage policy is to adopt a job
evaluation program in order to establish
fair differentials in wages based upon
differences in job contents. Besides the
basic factors provided by a job description
and job evaluation, those that are usually
taken into consideration for wage and
salary administration are;

12. 1.The organizations’ ability to pay.
2.Supply and demand of labor.
3.Prevailing market rate.
4.The cost of living.
5.The living wage.
6.Psychological and Social Factors.
7.Skill Levels Available in the Market.