Direct Compensation Strategy

The term “compensation” simply refers to the pay paid specifically for work done and other benefits apart from pay that employees collect as part of their job or based on contractual agreement with an organization (Otobo, 2007). Employers want human resource to increase their performance, they want to retain efficient, effective and skilled employees, bring new talents to the company and still minimize cost. Compensation cannot be managed in isolation, it has to be part of the organization’s overall strategy meaning that a competitive compensation strategy as all organizations have different forms of compensation strategy that attract employees. Aligning organization’s overall strategy with compensation, makes compensation an effective means

They include; base pay, bonuses, perks, incentives and commissions (Dessler, 2008). Osibanjo et al (2014), described direct compensation as an “individual entitlement”. When organizations define the task or activities to be performed and an employee performs it, he expects to receive something in return as the price for his effort. These direct compensation are used by employees to fulfill basic needs needed for their day to day lives. Since employees want to fulfill this basic needs without stress, they work more to get more (Lawzi, 1995). Direct compensation is used by most organizations to attract and retain talented employees and to increase performance level (Falola et al. 2014; Ogunbameru,

Salary is that fixed monthly or annual financial payment given to employees. Basic pay can be determined by the market worth of an individual. One looks at the position and not the person. Wage on the other hand, could be weekly or daily financial payment paid for work or services rendered, which is usually given to casual workers (Adeniji, et al., 2012). Nwachukwu (2000) and Ogunbameru (2004) described wage administration as the ability to develop a strategic pay system and to ensure right implementation and continuous maintenance. Wage and salary administration centralizes on the main on a competitive, just and equitable pay system (Atchison, 2003). Organizational policies, job description and content, nature of demand and supply of labour in the labour market and the knowledge, skills and abilities of an employee’s helps in the determination of base pay (Armstrong, 2008). It is also vital in the actualization of internal and external equity which in turn makes an employee remain in an organization (Dessler, 2008). 2.1.1.3 Indirect