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Compensation Strategy Challenges | * Human resource want to increase the performance, to retain key employees, bring new skilled talents to the company and they want to keep costs under a strict control. * Finding, motivating, developing and keeping employees is a key component of business success * The compensation components cannot be managed discretely, they have to be a part of the overall strategy - the company has to define the competitive compensation strategy.Compensation Strategy * Compensation systems in organizations must be linked to organizational objectives and strategies. But compensation also requires balancing interests and costs of the employer with the expectations of employees. * A compensation program…show more content…
* Indirect Financial Compensation (Benefits) - All financial rewards not included in direct compensation such as paid vacations, sick leave, holidays, and medical insurance. * Nonfinancial Compensation - Satisfaction that person receives from job itself or from psychological or physical environment in which person works. | Motivating Employees through Compensation | 1. Expectancy Theory: * a theory of motivation that holds that employees should exert greater work effort if they have reason to expect that it will result in a reward that they value. Employees also must believe that good performance is valued by their employer and will result in their receiving the expected reward. 2. Pay Equity Theory: * Equity is balance between the inputs an individual brings to a job & the outcomes they receives from it. * Employees inputs includes experience, education, special skills, efforts and time worked. * Outcomes includes pay, benefits, achievement, recognitions, and any other rewards. * Inputs and outcomes are in different units, and are hard to compare to each other directly. * Equity theory suggest that individuals determine whether they are being fairly treated by comparing their own inputs/outcomes ratio to the input/outcome ratio of others. | Pay Equity Theory | * Three element of equity can be distinguished: external, internal & individual.1. External equity: refers to comparison of similar jobs in different

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