Objectives of compensation management

The basic objective of compensation management can be briefly termed as meeting the needs of both employees and the organization. The Employer wants to pay little salaries and wages to the workers to manage their working costs. Employees wants to get paid high as possible.

1. Objectives of Compensation Management

2. Compensation Management Compensation management is a HRM function that deals with the salaries, wages and any kind of rewards that individuals receive on performing on an organizations tasks. Compensation is what employees receive in exchange of their work. It is a particular kind of price, that is, the price of labor .

3. Objectives of Compensation Management The basic objective of compensation management can be briefly termed as meeting the needs of both employees and the organization. The Employer wants to pay little salaries and wages to the workers to manage their working costs. Employees wants to get paid high as possible. Main Objectives of compensation management are:

4. 1. Acquire Qualified Personnel Compensation needs to be high enough to attract the applicants. Pay level must be as high as the supply and demand of workers in the markets. Try to give better pay package to the workers so they feel better when they compare their salaries with the other company’s workers. Premium wages are sometimes needed to attract applicants working for others .

5. 2. Retain current employees Employees can quit the job if the compensation levels are not competitive, resulting in higher turnover. Everyone like to work for a better reward, if the pay levels are not competitive then most of the employees will quit and find the better one for them. To retain these employees the pay level must be competitive with that of other employees.

6. 3. Ensure equity To retain and motivate employees to do their work, the employee compensation level must be fair. The wages and salary administration must be fair to achieve the equity. Compensation management strives for internal and external equity. Internal equity requires that pay be related to the relative worth of a job so that similar jobs get similar pay. External equity means paying workers what comparable workers are paid by other firms in the labor market.

7. 4. Reward desired behavior Pay should reinforce desired behaviors and act as a motivator for these behaviors to occur in future. Compensation plans reward to performance, responsibility, experience and other behavior. Excellent performance and loyalty and other behaviors must be rewarded though the company’s compensation plan.

8. 5. Control Costs An effective compensation system help the organization to retain reasonable costs of workers. If there is no good compensation system then workers can be over paid or underpaid.

9. 6. Comply with legal regulations A good compensation (salary and wages) system looks at the challenges on organizations that are imposed by the government and ensures employees comply .

10. 7. Facilitate understanding The objectives of the compensation management must be easily understood by the Human resource management, company’s administration and the operating managers .

11. 8. Further administrative efficiency The compensation program should be designed so it can managed efficiently and making optimal use of Human resource information system. These objectives should be secondary considerations with other objectives of the company .

12. 9. Motivating Personnel The aim of compensation is also to motivate personnel to work on the productivity. Other than money workers can be motivated by promotions, recognition, acceptance and status etc.

13. 10. Consistency in Compensation Compensation management aims to achieve consistency both internal and external to compensate employees. Internal consistency involves payment on the basis of the criticality of jobs and employees’ performance on jobs. High compensation refers to higher job as well the high performance in the same job .

14. 11. To be Adequate Compensations must be sufficient enough to fulfill all the needs of the employees substantially. The must fulfill the needs of the workers inside and outside the organization.