Compensation Pl Definition And Strategy

1609 WordsOct 16, 20157 Pages
The Compensation Plan, Definition and Strategy Compensation is commonly defined as a systematic approach to offering value to employees in exchange for their time, effort and work completed. An organization may provide several different types of compensation that impacts the overall satisfaction of the employees and the growth and success of the company. Essentially, amalgamating the compensation plan to the organizational goals, objectives and company philosophy will support recruitment and retention initiatives. A company’s compensation plan should be logical, strategic and deliberate as it delivers an abundance of vital information about the organization to a prospective candidate or employee. The material reflected in the…show more content…
Extrinsic rewards are tangible and take both monetary and non-monetary forms (p.414). Further, compensation is broken down into direct and indirect. Direct compensation is the monetary component, taking into account base pay, wages, salary and variable pay. Indirect compensation encompasses the benefits provided by the organization to the employee. “Applying Advanced Analytics to HR Management Decisions: methods for selection, developing incentives, and improving collaboration” authored by Sesil (2013) implies that compensation is clearly a key business decision and impacts the success of the organization. It emphasizes that employee compensation is a divisive topic, and closely aligning pay and organizational performance is vital to the well-being of the organization. In fact, compensation decisions are prone to biased decision making, getting the incentives wrong can lead to human capital focusing on the wrong things and to employee morale and engagement problems, employee turnover, or, as some would argue, to the collapse of an organization (p.104). MMI recognizes, that in an effort to be competitive in the local labor market a strong, concrete and fair
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