MSG Team's other articles

9703 How to Engage Women Employees ?

There has been a flurry of conferences, studies and researching on why women employees are likely to leave their companies earlier as compared to men employees. Why is the number of unhappy female employees growing? Why great leaders are unsuccessful in retaining women employees even after spending a lot of money, time and effort? Although […]

11928 Why Agile Workplaces and Modular Teams are the Future in the New Normal

What are Agile Workplaces how they are the Future in the New Normal? As workplaces become virtual and working from home becomes the norm, organizations would have to adopt newer methodologies and strategies to adjust to the New Normal. Agile methodologies, long thought to be the answer to the Digital Age workplaces are now gaining […]

9137 The Importance of Employee Engagement in an Age of Distraction and Automation

The Double Whammy of Automation and Distractions Affecting the Workforce We live in an Age of Distraction and an Age of Automation. While there are enough distractions in the form of Smartphones, Social Media, and other cutting edge technology enabled devices and gadgets, we are also witnessing rapid automation of entire industries and verticals where […]

11368 Staffing Role of the HR Manager: Strategic Workforce Planning

Staffing and Recruiting during the Boom Years One of the key areas that the HRM unit works with is the staffing function. Hiring and on boarding of employees’ remains a critical activity that many HR managers are yet to master. This is mainly because of the unevenness of the demand and supply in the market […]

10077 Job Description & Job Specification – Definition and Purpose

Job Analysis is a primary tool to collect job-related data. The process results in collecting and recording two data sets including job description and job specification. Any job vacancy can not be filled until and unless HR manager has these two sets of data. It is necessary to define them accurately in order to fit […]

Search with tags

  • No tags available.

“If you pick the right people and give them the opportunity to spread their wings - and put compensation and rewards as a carrier behind it - you almost don’t have to manage them.”

Jack Welch

Most of us would have heard the term “compensation” in the context of getting paid for the work that we do. The work can be as part of full time engagement or part time in nature. What is common to them is that the “reward” that we get for expending our energy not to mention the time is that we are compensated for it.

From the perspective of the employers, the money that they pay to the employees in return for the work that they do is something that they need to plan for in an elaborate and systematic manner. Unless the employer and the employee are in broad agreement (We use the term broad agreement as in many cases, significant differences in perception about the employee’s worth exist between the two sides), the net result is dissatisfaction from the employee’s perspective and friction in the relationship.

It can be said that compensation is the “glue” that binds the employee and the employer together and in the organized sector, this is further codified in the form of a contract or a mutually binding legal document that spells out exactly how much should be paid to the employee and the components of the compensation package. Since, this article is intended to be an introduction to compensation management, the art and science of arriving at the right compensation makes all the difference between a satisfied employee and a disgruntled employee.

Though Maslow’s Need Hierarchy Theory talks about compensation being at the middle to lower rung of the pyramid and the other factors like job satisfaction and fulfilment being at the top, for a majority of employees, getting the right compensation is by itself a motivating factor. Hence, employers need to quantify the employee’s contribution in a proper manner if they are to get the best out of the employee. The provision of monetary value in exchange for work performed forms the basis of compensation and how this is managed using processes, procedures and systems form the basis of compensation management.

As the module progresses, readers would be introduced to other aspects of compensation management like the components of compensation management, types of compensation, inclusion of variable pay, the use of Employee Stock Options etc. The aspect of how skewed compensation management leads to higher attrition is discussed as well. This aspect is important as studies have shown that a majority of the employees who quit companies give inadequate or skewed compensation as the reason for their exit. Hence, compensation management is something that companies must take seriously if they are to achieve a competitive advantage in the market for talent.

Considering that the current trend in many sectors (particularly the knowledge intensive sectors like IT and Services) is to treat the employees as “creators and drivers of value” rather than one more factor of production, companies around the world are paying close attention to how much they pay, the kind of components that this pay includes and whether they are offering competitive compensation to attract the best talent.

In concluding this article, it is pertinent to take a look at what Jack Welch had to say in this regard: As the quote (mentioned at the beginning of this article) says, if the right compensation along with the right kind of opportunities are made available to people by the firms in which they work, then work becomes a pleasure and the manager’s task made simpler leading to all round benefits for the employee as well as the employer.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Corporate Strategies to beat the Downturn: Cutting Slack and Layoffs

MSG Team

Compensation and the IT Sector

MSG Team

Compensation Management and Globalization

MSG Team