MSG Team's other articles

11420 Lateral Placements and Some Strategies for those with Work Experience in Business Schools

In recent years, the number of students with work experience has gone up in the business schools around the world. while the business schools in the US and Europe have always had work experience as a prerequisite for enrollment, Asian business schools have tended to take in more students fresh out of graduate courses. while […]

8801 Talent Management – Meaning and Important Concepts

What if you could attract your competitor’s best employee for few extra bucks? Sounds easier than done! Attracting high-worth individuals from the competitors is not everyone’s cup of tea. Targeting them and finally hiring them is the test of your competencies experience, personal traits and brain application. This is where the strategic approach plays an […]

9656 How Perception Management and Optics are the New Normal in Life and Business

Perception and Optics Management are the New Normal We live in a media saturated 24/7 world where media management and perception management as well as optics are the only thing that matter. When Presidents and Prime Ministers of developed and developing nations as well as eminent business leaders and reputed celebrities engage in a never […]

13013 Current State of Employer Branding

Welcome to the talent economy! With the changing perception of organizations and increasing appreciation for talent, it won’t be wrong saying that we have transported into the talent economy. Though the shift has been taking place for many decades, the last decade, however, altered the scenario seemingly in the blink of the eye. The C-suite […]

11359 Some Thoughts on Specialized and Niche Management Programs

Many management programs are offered by leading business schools that specialize in a particular nice or field of management. Prominent among these programs are the specialized courses offered in Systems, HR, and Finance. For instance, the business schools in Asia like the IIMs (Indian Institute of Management) and XLRI (Xavier Labor Relations Institute) along with […]

Search with tags

  • No tags available.

In the previous sections, we looked at the components of the compensation and how each is used to assess the relative importance of an employee as far as remuneration is concerned. In this article, we look at some of the factors that determine how much compensation is to be paid out to the employee by looking at the issue from the perspective of the employer. The subsequent article would take a look at how the employee can influence the compensation setting process with negotiation and bargaining.

From the perspective of the employer, the factors that affect compensation are:

  • The Overall Macroeconomic situation where in the state of the economy of the country in which the firm is situated plays a major role in determining the compensation to be paid. For instance, if an economy is booming or is in a high growth trajectory, chances are that the employers would pay the employees more and conversely, if the economy is in a downward trajectory, chances are that the employers would pay the employees less. We often hear about how because of the recession, salary hikes have been deferred or cut down. This is a direct result of the linkage between firm performance and the performance of the economy.

  • The Demand for a particular skill weighs heavily on the way in which the employer fixes the compensation for the employee. For instance, premium skills like Consulting and Accountancy are paid more as are the Technology Professionals who might be experts in their chosen field. As discussed in earlier articles, it is the expertise and the relative scarcity of such experts that determines how much the employer is willing to pay.

  • The Position of the company in the Business Cycle often determines how much the company is willing to offer to the employee. For instance, if a company is a start-up, chances are that the company would pay more because of the need to get the best possible talent into the company.

    Further, many start-ups give their employees ESOP’s or Employee Stock Option Plans wherein the employees can redeem their stocks after the lock-in period.

  • Finally, the urgency of the firm in filling up the position plays an important role in determining how much the employer is willing to pay the employee and in many cases, if the time to get on board the employee is less, staffing managers along with the line manager in charge of hiring the employee might decide to pay more because they want the employee to come on board as quickly as possible.

These are some of the factors that determine the compensation to be paid to the employee from the perspective of the employer. This is not an exhaustive list but an indicative one and as the module progresses, we shall be revisiting some of these factors along with adding additional information. The next article would talk about how employees can negotiate with the employer for better compensation and perks.

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