Direct Compensation vs. Benefits

3008 Words Oct 7th, 2011 13 Pages
1. Introduction
System of rewards is one of the key aspects in managing human resources within any organization. It has profound impact on attracting, retaining and motivation of employees and as a result on the overall performance of an organization. There is no doubt that employee compensation, which according to Dessler refers to all forms of pay or rewards going to employees, is the crucial factor in employee motivation. There are different two types of compensation: direct and indirect compensation.
Direct compensation refers to monetary benefits offered and provided to employees in return for doing their job. The most common forms of direct compensation are wages, salaries, incentives, commissions and bonuses.
Indirect compensation
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The most notably advocate was Henry Ford who used these methods to design the first ever production line, making Ford cars. [http://www.hsfg.gloucs.sch.uk/Intranets/Business%20Studies/Motivation%20Theory.pdf]

Although Taylor's methods produced higher productivity, they also led to workers’ unrest and dissatisfaction, as they were only given boring, repetitive tasks and felt been turned into human machines.
The main criticism of Taylor’s theory is related to the belief that workers are rational in their economic choices and are satisfied by only money itself. Later Taylor’s Theory of Scientific Management was opposed by content theories of motivation.
Content theories focus on internal factors that direct behaviour of an individual. Such theories regard motivation as “ the product of internal drivers that compel an individual to act or move towards the satisfaction of individual needs”. [Human Resource management A contemporary approach] The major content theory of motivation is Maslow’s hierarchy of needs.
2.2 Hierarchy of Needs Theory
The hierarchy of needs theory was developed by american psychologist Abraham Maslow in 1940s. This theory focuses on the psychological needs of employees. The basis of Maslow’s

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