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Compensation Management What Do You Mean By Compensation Structure? What Are The Components Of Modern Compensation Structure?

1281 words - 6 pages

IntroductionWhen it comes to employee compensation, most managers are busy asking: "What do I have to pay to…?" That is not an easy question to answer. A better question might be: "What do I want my compensation package to say?"Compensation package of the organization says it all like the child care and health benefits say that the company values family. Giving longevity bonuses for employees on the anniversaries of their employment says that the company value employees who stay with the business. Throwing a party at the end of your business's busy season lets the employees and their families know that you appreciate it when your people go the extra mile. No matter what compensation ...view middle of the document...

Non-Monetary Compensation can include any benefit an employee receives from an employer or job that does not involve tangible value. This includes career and social rewards such as job security, flexible hours and opportunity for growth, praise and recognition, task enjoyment and friendships.Employers have a wide variety of compensation elements from which to choose. By combining many of these compensation alternatives, progressive mangers can create compensation packages that are as individual as the employees who receive them.The general consensus of recent studies is that pay should be tied to performance to be effective. However this is not possible in all businesses because performance can be affected by many factors over which employees have no influence, like stress, pressure to perform. Successful managers must search for things employees influence and base performance objectives on these areas. An operation may benefit from the following: tenure bonuses for long-time employees, equipment repair incentives to encourage good equipment maintenance, or bonuses for arriving to work on time.Let's see the elements of the compensation structure in detail1)Basic Pay and Salaries: This is the most important part of the compensation structure as the cash payment is one of the essential part of the employees life from this, he can determine what he can afford and what he cannot. Salary is determined by various factors like education, qualification and relevant experience. Once the pay is defined it can be revised depending on the performance of the employee2)Salary Add-Ons: This is the additional payments made over and above the basic pay like overtime pay, shift differentials, housing allowance, transport allowance etc.3)Stock Options: A right to buy a piece of the business which may be given to an employee to reward excellent service. An employee who owns a share of the business, will go an extra mile to work hard and achieve the goals of the organization. Stock options are usually deducted from the basic pay, the employee has the options to select the percentage how much he wants to contribute. The best part is it becomes a compulsive savings for the employee.4)Annual Payments: The oldest element of the annual payment is the bonus paid for Diwali in India, even during the British times. The annual payments also include an exemption in taxes, leave allowances, etc.5)Performance Bonuses: A bonus is paid when specified performance objectives are met. This inspires employees to set and achieve a higher performance level and is an excellent motivator to accomplish organizational goals. Performance Bonuses can show an employer appreciates his/her employees and ensures that good performance or special events are rewarded.6)Other Benefits:...

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