Compensation plays a key role in organizations by attracting capable employees, motivating superior performance, and retaining employees over an extended period of time. It helps create a strong human resource base that enhances productivity, efficiency, and quality. A suitable compensation plan is critical for achieving the right human resource infrastructure with skilled employees in the right jobs. Compensation also plays an important role in retaining top talent, motivating employees to maintain high standards, and boosting morale to achieve goals.

1. Role of Compensation in
Organisation
Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)
Professor
Al-Qurmoshi Institute of Business Management
Hyderabad

2. Role of Compensation in
Organisation
 To attract capable employees to the organization
 To motivate them toward superior performance
 To retain their services over an extended period of
time
 To establish a positive corporate reputation
 To increase or maintain morale/satisfaction
 To achieve internal and external equity
 To reduce turnover and encourage company loyalty

3. Role of Compensation in
Organisation (Contd.)
 Compensation plays a very important role in attracting
the best talent in the organization, as well as, retaining
them for a long time.
 It helps in creating a solid human resource base in the
organization which enhances the productivity, efficiency
and overall quality in the organization.
 A sound human resource infrastructure with employees
possessing proper set of skills for right job, is critical to
the success of any organization and
 It is perfectly achieved via a suitable compensation plan

4. Role of Compensation in
Organisation (Contd.)
 In order to avoid high attrition levels, compensation plays a
key role in retaining the top talent in the organization.
 To maintain high standards of productivity and service, the
organization must motivate employees.
 A suitable compensation, incentives and rewards program is
the key motivator in any organization today.
 In order to motivate employees and boost their morale to
achieve desired performance levels and goals,
compensation plays a key role
 In order to achieve more incentives and compensation,
employees raise their performance levels.

5. Role of Compensation in
Organisation (Contd.)
 In the absence of appropriate compensation plans,
employees will not be motivated to perform efficiently
and will always look for changing the current
organization.
 Organizations should reward employees for their
specific contributions to the achievement of the
organizational goals and objectives.
 In today’s dynamic business environment where
innovation and efficiency is the key, compensation is a
crucial tool to reward the best performing employees
for their important role in success of the organisation.

6. Role of Compensation in Organisation
(Contd.)
 If there is an appropriate compensation system, it will
encourage normal worker to perform better & achieve the
standards fixed.
 It would not penalize the workers for the reasons beyond
their control and would not result in exploitation of
workers.
 It will raise the morale, efficiency and cooperation among
the workers.
 It would embody itself the principle of equal work & equal
wages and would provide satisfaction to the workers.
 It would help management in complying with various
labour acts
 It would bring amicable settlement of disputes between the
workers’ union and management.
 It would provide encouragement for those who perform
better and opportunities for those who wish to excel.