An effective Compensation plan plays a?dynamic ?role? in a business organization. Since, among four Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men. Land, Labour, Capital and Organization are four major factors of production. Every factor contributes to the process of production/business. It expects return from the business process such as Rent is the return expected by the Landlord. Similarly Capitalist expects Interest and Organizers i.e. Entrepreneur expects profits. The labour expects wages from the process. It is evident that other factors are in-human factors and as such labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos. Labour therefore expects to have fair share in the business/production process.
Compensation may be used to:
Recruit and retain qualified employees. Increase or maintain morale/satisfaction. Reward and chicago white home jersey encourage peak performance. Achieve internal and external equity. Reduce turnover and encourage company loyalty. Modify (through negotiations) practices of unions.The components of a compensation system include:
Job Descriptions: Job analysis job evaluation job description? Pay Structures Salary Surveys. Policies and RegulationsVarious types of compensation include:
Basic Pay and Dearness allowance. Commissions Overtime Pay Bonuses, Profit Sharing, Merit Pay Stock Options Travel/Meal/Housing Allowance Medi claim Benefits such as: dental, insurance, medical, vacation,Benefits of Fair Compensation System:
Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following:
- If an ideal compensation system is designed, it will have positive impact on the efficiency and results produced by workmen. Such system will encourage the normal worker to perform better and achieve the standards fixed. This system will encourage the process of job evaluation. It will also help in setting up an ideal job evaluation, which will have transparency, and the standards fixing would be more realistic and achievable. Such a system would be well defined and uniform. It will be apply to all the levels of the organization as a general system. The system would be chicago white home jersey simple and flexible so that every worker/recipient would be able to compute his own compensation receivable. Such system would be easy to implement, so that 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, being just and fair would provide satisfaction to the workers. Such system would help company in complying with the various labor acts. Such system would also bring about amicable settlement of disputes between the workmen union and company. The system would embody itself the principle of equal work equal wages. Encouragement for those who perform better and opportunities for those who wish to excel.
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