Compensation management involves managing all forms of financial returns and benefits that employees receive as part of their employment. It aims to attract capable employees, motivate performance, and reduce employee turnover. Elements of compensation include wages/salaries, bonuses, economic benefits like paid holidays, insurance contributions, transport and medical facilities, and retirement benefits. Key factors that determine compensation are labor supply and demand, cost of living, productivity, and profits. Job evaluation determines the relative worth of jobs in an organization. Common types of wages include minimum wages, fair wages, living wages, and skill or competency-based pay plans. Compensation management also addresses pay equity and uses incentives like service awards, profit sharing, and stock options to further motivate employees.
