compensation_chapter_1 - Chapter 1 Introduction To...

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Chapter 1 Introduction To Compensation Chapter Outline The Concept of Compensation Objectives of Compensation Importance of Compensation Core Components of Compensation Dimension of Non - Compensation System
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The Concept of Compensation Compensation is a systematic approach in order to provide monetary value to employees in exchange for work performed . It may help to achieve several purposes , such as , recruitment , job performance and job satisfaction . Compensation can be defined as a package of quantifiable rewards an employee receives for his / her labor . It represents both Intrinsic ( Psychological mindset resulting from job performance ) and Extrinsic ( including both monetary and non - monetary ) rewards . The term Compensation refers to all forms of financial returns and tangible benefits that an employee receives as a part of employment relationship . Compensation is equal to the sum of wages and salaries and of supplements to wages and salaries . A very neat summary of compensation has been given by Harriet Weinstein H . & Elizabeth Dietz (1996) in Compensation and Working Conditions, which can be considered as a drawing of big picture in a small piece : Workers receive more than wages in exchange for their services . Labor costs consist of compensation , wages and benefits received by employees from employers in exchange for their services as well as other costs associated with maintaining and supporting a staff . As capital and labor costs have become increasingly intertwined , distinguishing them has become problematic . This has rendered the job of estimating the full cost of labor ever more difficult . At the same time , the advent of new benefits has made measuring compensation costs more complicated .”
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Objectives of Compensation Through careful observation , following objectives of compensation have been identified : 1. To recruit and retain qualified employees . 2. To increase or maintain morale / satisfaction . 3. To motivate employees for better performance . 4. To attract and retain skilled and trained workforce . 5. To determine basic wages and salary administration .
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