Compensation objectives

Meaning

    The term compensation Administration or wage and salary administration denotes the process
of managing a company's compensation program:

   

 The goal of compensation administration is to design cost effective pay structure that
will attract, motivate, and retain competent employees.

Employee compensation may be classified into  two types- base compensation and
supplementary compensation

  Base compensation refers to monitory payments to employees in the form of wages

and salaries

‘Wages’ implies remuneration to workers doing manual work.

‘Salaries’ is usually defined to mean compensation to office, managerial, technical and

professional staff.

Base compensation should be noted here is a fixed and non incentive payment on the
basis of time spent by an employee on the job

Supplementary compensation signifies incentive payments based on actual performance

of an employee or a group of employees

Objectives:
A sound plan of compensation administration seeks to achieve the following objectives:

- To establish a fair and equitable remuneration offering similar pay for similar work

- To attract qualified and competent personnel

- To retain the present employees by keeping wage levels in tune with competing units

- To control labor and administrative cost in line with the ability of the organization to
pay

- To improve motivation and morale of employees and to improve union management
relations- To project a good image of the company and to comply with legal needs
relating to wages and salaries
straight salary method

  

Salesperson compensation method in which only a fixed salary (but no commission) is paid. The
amount received by a salesperson is a function of time worked and not of performance as
reflected in sales volume. This method is used where (1) the firm is aiming at long term presence
in the market instead of short-term sales volume, (2) the firm is aiming at thorough
familiarization of a new market or geographic area, or (3) the performance of each salesperson is
difficult to measure.

Salary Plan a salesforce compensation method in which salespeople are paid a straight salary; a
salary plan approach provides security and stability but may not provide the incentive associated
with commission payments. See Straight Salary.
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