COMPENSATION

MANAGEMENT
• Payment or compensation to labour for its services is popularly known as
personnel remuneration. This payment is variously called either wages or
salaries. Though in reality, the concept of wages and salaries are not much
different so far as their determination and significance are concerned; yet
it would be an interesting academic exercise to differentiate the two.
• Wages are usually associated with a payment made to workmen who are
actually engaged in physical production of goods and services; and
payment of wages being made on both bases-time rate and piece rate
systems.
• Salaries, on the other hand, represent a payment made to office
employees, managerial personnel and technical personnel like engineers,
cost accountants, etc.; and salaries usually being paid only on a time-basis
i.e. according to time-rate system of payment.
• Lantham has listed the following five factors
that have a bearing on the formulation of
wage/ salary levels:
• 1. Cost of living
• 2. Productivity
• 3. Prevailing wage rates
• 4. Ability to pay
• 5. Attraction and retention of employees.
• Significance of Employee Compensation
• The primary source of income to employees
• a source of motivation to employees
• attract and retain good personnel
• affect the purchasing power of money held by
the society.
• Components of Employee Compensation:
• Components of employee compensation could
be divided into two categories viz. basic
compensation and supplementary
compensation. Again supplementary
compensation comprises allowances and
perquisites or perks.