The Importance Of Social Compensation

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1.0 INTRODUCTION Most people defer the term compensation to what a person is paid. Even though this is true, compensation also includes direct rewards, indirect reward along with the benefits each employee is provided with as a reward for their contribution to the certain organization. The total sum of employees in return for their work includes three major components to it. As mention above, direct compensation refer to monetary benefits offered in the form of salaries, wages, bonuses and commissions provided at regular and consistent intervals. However, indirect compensation refers to non – monitory benefits offered and provided to employees as grant for services provided by them to the organization. It is understood to be a part of social…show more content…
Compensation is the value of work of employees according to the agreement between employer and employee. (Benham, 2011) It helps to play the most effective role in organization to reduce the employee’s dissatisfaction, and also to motivate and the better performance of employees. So, it is very important to have a good compensation plans. According to Maslow’s hierarchy of needs suggests that people have similar types of needs from low level basic to the need for achievement like job satisfaction and fulfilment being the best motivating…show more content…
Job worth is determine how well it contributes towards the organization i.e. how much worth the job is. In other words, we can say it is job evaluation.

After the job analysis is completed, the pay structure is needed to be decided for the employees in the organization. It refers to the process of deciding the amount of payment in the organization. In order to estimate the compensation package for a profile, the process first deals with the internal and external analysis of the pay structure. Pay structure determines an employee’s worthiness in the organization. It helps in finding out the employee’s role and his/her status. This leads to fair treatment for all employees.
There are mainly two types of pay structures that are followed in almost all the organizations.
• Internal equity
• External equity
Internal equity deals with the job position in the organization. Its goal is to provide a balanced compensation equal to the job profile compared to the compensation to junior and senior level. Here, equality is ensured using job ranking, job classification, level of management and level of the status in the
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