This document summarizes a paper on compensation management. It discusses how compensation involves providing monetary value to employees in exchange for work. An ideal compensation system should motivate employees, boost performance, and engage workers. It should also be well-defined, uniform, and apply to all organization levels. Effective compensation allows for clearer visibility into individual employee performance for compensation planning decisions. The document reviews literature on compensation and discusses analyzing compensation structures, components, equity, and using market rates to determine appropriate pay rates.

1. YULIUS EFFRAIN
1263620066

2. TRANS Asian Journal of Marketing & Management
Research Vol.1 Issue 1, September 2012, ISSN (online) ……
COMPENSATION MANAGEMENT:
A THEORETICAL PREVIEW
DR. B. C. M. PATNAIK*; PRABIR CHANDRA PADHI**
• *Associate Professor, School of Management, KIIT
University, Bhubaneswar. **Research Scholar, CMJ University.

3. ABSTRACT KEYWORDS INTRODUCTION
REVIEW OF
LITERATURE
ANALYZE REFERENCES
Overview

4. Compensation is a systematic approach to providing
monetary value to employees in exchange for work
performed. Compensation may achieve several purposes
assisting in recruitment, job performance, and job
satisfaction. An ideal compensation management system
will help you significantly boost the performance of your
employees and create a more engaged workforce that’s
willing to go the extra mile for your organization. Such a
system should be well-defined and uniform and should
apply to all levels of the organization as a general system.
ABSTRACT

5. With effective compensation management you’ll also
enjoy clearer visibility into individual employee
performance when it comes time to make critical
compensation planning decisions.
Employees should be managed properly and motivated
by providing best remuneration and compensation as
per the industry standards. The lucrative compensation
will also serve the need for attracting and retaining the
best employees.
ABSTRACT

6. KEYWORDS
Compensation
Human Resources
Management
Compensation Policies
Organization

7. Human Resource :
Human resources is the set of individuals who make up the
workforce of an organization, business sector or an
economy. "Human capital" is sometimes used
synonymously with human resources, although human
capital typically refers to a more narrow view; i.e., the
knowledge the individuals embody and can contribute to an
organization. Likewise, other terms sometimes used include
"manpower", "talent", "labor" or simply "people".
The professional discipline and business function that
oversees an organization's human resources is called
human resource management (HRM, or simply HR).
KEYWORDS

8. Management :
The organization and coordination of the activities of a business
in order to achieve defined objectives.
Management is often included as a factor of production along
with‚ machines, materials, and money. According to the
management guru Peter Drucker (1909-2005), the basic task of
management includes both marketing and innovation. Practice of
modern management originates from the 16th century study of
low-efficiency and failures of certain enterprises, conducted by
the English statesman Sir Thomas More (1478-1535). Management
consists of the interlocking functions of creating corporate policy
and organizing, planning, controlling, and directing an
organization's resources in order to achieve the objectives of that
policy.
KEYWORDS

9. Compensation Policies :
As an employer we believe that it is in the best interest
of both the organization and our employees to fairly
compensate our workforce for the value of the work
provided. It is our intention to use a compensation
system that will determine the current market value of
a position based on the skills, knowledge and
behaviors required of a fully competent incumbent.
KEYWORDS

10. Organization :
A social unit of people that is structured and managed
to meet a need or to pursue collective goals. All
organizations have a management structure that
determines relationships between the different
activities and the members, and subdivides and
assigns roles, responsibilities, and authority to carry
out different tasks. Organizations are open systems--
they affect and are affected by their environment.
KEYWORDS

11. Pay has become the driving
force for seeking employment
in the industry
A compensation system that
can motivate employees to
work while at the same time
not eating too deep into the
organization’s resources
resource
INTRODUCTION

12. Remuneration does not simply compensate
employees procedures that will attain maximum
return on Naira spent in Compensation is payment
in the form of hourly wages or annual salary
combined with benefits such as
insurance, vacation, stock options, etc. that can
positively or negatively affect an employee's work
performance.
INTRODUCTION

13. Compensation is the remuneration received
by an employee in return for his/her
contribution to the organization
Compensation is an integral part of human
resource management which helps in
motivating the employees and improving
organizational effectiveness.
INTRODUCTION

14. Bob (2011) Compensation processes are based on
Compensation Philosophies and strategies and contain
arrangement in the shape of Policies and strategies, guiding
principles, structures and procedures which are devised
and managed to provide and maintain appropriate types and
levels of pay, benefits and other forms of compensation
Bob (2011) This constitutes measuring job
values, designing and maintaining pay structures, paying
for performance, competence and skill, and providing
employee benefits. However, compensation management is
not just about money. It is also concerned with that non-
financial compensation which provides intrinsic or extrinsic
motivation
LITERATURE
REVIEW

15. Pearce (2010) Compensation implies having a
compensation structure in which the employees
who perform better are paid more than the average
performing employees.
Nweke (2010) Successive constitutional reviews
and Civil Service reforms have catalysed the
evolution of the civil service as an institution for
spearheading the rapid transformation of the state
and ensuring continuity of administration
LITERATURE
REVIEW

16. Hewitt (2009). Compensation Management as the name
suggests, implies having a compensation structure in
which the employees who perform better are paid more
than the average performing employees. This encourages
top-performers to work harder and helps to build a
competitive atmosphere in the organization
Harrison and Liska (2008) in their study posit that reward
is the centre piece of the employment contract-after all it
is the main reason why people work. This includes all
types of rewards, both intrinsic and extrinsic, that are
received as a result of employment by the organization
LITERATURE
REVIEW

17. Employee compensation includes all forms of pay
going to employees and arising from their employment.
It has two mains components, direct financial
payments (wages, salaries, incentives, and bonuses)
and indirect financial payments (financial benefits like
employer-paid insurance vacations).
In turn, there are two basic ways to make direct
financial payments to employees: based on increments
of time or based on performance. Time-based pay is
still the foundation of most employers pay plans.
ANALYZE

18. The second direct payment option is to pay for
performance. For example, piecework ties compensation to
the amount of production (or number of “pieces” the worker
turns out. Sales commissions are another performance-
based (in this case, sales-based) compensation. Other
employees devise pay plans that combine time-based pay
plus incentives.
The compensation plan should first advance the firm’s
strategic aims-management should produce an aligned
reward strategy. This means creating a compensation
package including wages, incentive, and benefits that
produces the employee behaviors the firm needs to support
and achieve its competitive strategy.

19. With respect to compensation, managers should address
four forms of equity: external, internal, individual, and
procedural.
- External equity refers to how a job’s pay rate in one
company compares to the job’s pay rate in other
companies
- Internal equity refers to how fair the job’s pay rate is when
compared to others job within the same company
- Individual equity refers to the fairness of an individual’s
pay as compared with what his or her coworkers are
earning for the same or very similar jobs within the
company, based on each individual’s performance
- Procedural equity refers to the “perceived fairness of the
processes and procedures used to make decisions
regarding the allocation of pay

20. Compensation management specialist call these
compensable factors. They are the factors that establish
how the jobs compare to one another, and that determine
the pay for each job.
Identifying compensable factors plays a central role in job
evaluation. Manager usually compare each job with all
comparable jobs using the same compensable factors.
However, the compensable factors use depend on the job
and the job evaluation method. For example, “decision
making” might make sense for a manager’s job, but not for
a cleaner’s job.

21. What should the pay rate be for each job? Of course, jobs
with more points should command higher pay. The question
is what pay rate to use. Our company’s current, “internal”
pay rates? Or pay rates based on what “external” market is
paying?
With a market-competitive pay system, the employer’s
actual pay rates are competitive with those in the relevant
labor, as well as equitable internally. Put simply, the basic
approach is to compare what the employer is currently
paying for each job (“internal pay”) with what the market is
paying for the same or similar job (“external pay”), and then
to combine this information to produce a market-
competitive pay system.

22. REFERENCES
• Bob, N. (2011). Making employees suggestions
Count, Journal of personnel management 17; 20 -41.
• Bob, N. (2011). Making employees suggestions
Count, Journal of personnel management 17; 20 -41.
• Pearce, L.(2010). Managerial compensation based on
organization performance, Journal of industrial
Relation, 52:3-28.
• Nweke, A.(2009). Three years of Visionary leadership in
Anambra State, Journal of Anambra State, Civil
Service, 8(1), 7-12.

23. REFERENCES
• Delmestri, G. & Walgenbach, P. (2009). Interference
among conflicting institutions and technical-
economic conditions: The adoption of the
assessment center in
French, German, Italian, UK, and U.S. multinational
firms. International Journal of Human Resource
Management, 20 (4), 885- 911.
• Garcia, M. F., Posthuma, R. A., & Colella, A. (2008). Fit
perceptions in the employment interview: The role of
similarity, liking, and expectations. Journal of
Occupational and Organizational Psychology, 81

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