The Pros And Cons Of Compensation

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Compensation can acts as a retention drivers. Compensation includes base pay/ salary, long-term and short-term incentives, interest and others employee benefits. It can be in monetary form or non-monetary form. “Compensation is a statistical term used in balance of payments statistics, national accounts and sometimes in corporate accounts as well.” (Chan et al., 2012) According to Gerhart, B.A. and Milkovich, G.T. (1992), stated that employee compensation is a key role to establish the relationship between employers and employees. For employees, compensation like salary and wages can provide them health and income security. On the other hand, employers treat the compensation decision as a cost of business operating and the ability for them…show more content…
Compensation and rewards, financial or otherwise, should be value and perceive as the fundamentals in employee retention. This is because compensation and rewards has been recognized for their unique qualities to contribute to high morale organization well-being. Dunnette, Avery and Banas (1973); Schneider, (1972) and Wanous (1976) [as cited in Rusbult (1983)], provided an indirect support by established that it is logical to expect that even in the early work stage, job rewards like high pay, autonomy and variety should be salient to employees. Compensation and rewards can become a powerful tool in influencing the employees’ performance in individual level as well as group level (Wan,…show more content…
and Pierce J.L., (2004) view that “pay is considered as a motivator as well as employee retention technique”. The close relationship between compensation and rewards and employee retention also directly supported by Milkovich and Newman (2004), who state that these variables were considered one of the most important and significant factor in retention. Besides, from a research by Moncraz, Zhao and Kay (2009) also provide evidence as compensation acts as a key and critical factor to reduce managerial turnover as well as increasing commitment. Ihsan and Naeem (2009) indicated that compensation and fringe benefits vital in retention of employees. Recognition from bosses, team members, coworkers and customer enhance employees’ loyalty to retain in the organization (Walker, 2001). Silbert (2005) forwarded the view that “reward is important because it has an enduring impression on employees which, in turn, gives the employees an impression that they are valued in the organization”. From a survey study in U.S (2013), the researcher found that employees are consistency indicated that the reasons for them to choose a job is based on the benefit offerings by the organizations. In a MetLife study of employee benefit trends, it found out that 41.1% of employers considered retention as their top employee-benefits objective. From the study, it indicated that the most often cited tool that the employers use to retain employees is
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