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Elements Of Compensation

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In the current state of hyper competition in the business world, human resource is one of the most important factor determining the survival of a company. One of the reasons for this is human talent is not easy to copy, unlike products and processes. As such, companies must strive to attract and retain talents. Furthermore, companies need to encourage better performance amongst their existing employees. A component of human resources management which could aid companies in achieving these objectives is compensation.
There are three main elements of compensation: direct, indirect, and nonfinancial compensation (Snell and Bohlander, 2013). Direct compensation includes wages, salary, incentives, bonuses, and commissions. Nonfinancial compensation …show more content…

There are five levels in a person’s hierarchy of needs, starting from the bottom: physiological, safety, love/belonging, esteem, and self-actualization. (Maslow, 1943). In order to increase employees’ motivation, companies should strive to help them meet their higher-level needs, namely esteem and self-actualization. One of the ways employees can meet their self-actualization need is to have complete control over their job (Lussier and Achua, 2010). By giving employees the freedom to take time off whenever they want, employees are given complete control over their work and this will boost their motivation, and in turn their …show more content…

Many companies consist of different departments with different functions and employees of different job scopes. For example, in a bank, there will be product side and relationship side employees. Some employees’ job is relation-based, for example relationship managers in private banking. In this case, customers mostly prefer to talk to their own relationship manager. As such, if relationship managers were allowed to take as much unannounced time off as they need, clients’ satisfaction may drop and it could mean lost business for the company. However, for employees whose work is investment product design, taking the vacation time they need to de-stress may be advantageous for the employer, given the quality of their work increases. Because of the different nature of these employees, it could be difficult for employers to offer them the same benefits. However, if they were offered different benefits, there may be perception of inequity, and if employees perceive organizational decisions and managerial actions to be unfair or unjust, they are likely to experience feelings of anger, outrage, and resentment (King,

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