Compensation

Human Resource Management

Compensation
• The act or state of compensating, as by rewarding
someone for service.
• Monetary and non-monetary benefits provided to
employees in exchange of their services provided
to the organization.
• Pay
• Promotions
• Desirable work assignments
• Smile
• Recognition
• Work freedom
How is compensation used
Compensation is a tool used by management for a
variety of purposes,
• Attract, Recruit and retain qualified employees.
• Increase or maintain morale/satisfaction.
• Reward and encourage peak performance.
• Achieve internal and external equity.
• Reduce turnover and encourage company loyalty.
Categories
• Among several ways to classify rewards, the main
two categories are,
• Intrinsic rewards
• Extrinsic rewards
• Financial & Non - Financial
 Intrinsic vs Extrinic
• Intrinsic rewards
• Intrinsic rewards are
personal satisfactions one
derives from performing a
job.
• These are self initiated
rewards
• Feeling pride in one’s work,
a sense of accomplishment
or simply enjoying being a
part of a work team.
• Extrinsic Rewards
• Extrinsic rewards in
contrast includes
money, promotions and
benefits.
• They are external to the
job and comes from an
outside source as
management.
 rewards

intrinsic extrinsic

Non-
Financial
Financial

Performance Membership
Benefits
based based
Intrinsic Rewards
• Participate in decision making
• Greater job freedom and discretion
• Empowerment
• Interesting work
• Opportunities for personal growth
• Diversity of activities
Extrinsic – Financial Rewards
• Performance based
• Piece work
• Work paid for according to the amount produced.
• Any type of employment in which a worker is paid a
fixed piece rate for each unit produced regardless of time.
• Commission
• The payment of commission as remuneration for services
rendered or products sold.
• Incentives
• A payment or concession to stimulate greater output or
investment
• Hardship payment.
Extrinsic – Financial Rewards
• Performance based
• Performance bonuses
• Compensation beyond normal wages and is typically awarded
after projects completed by the employee over a specific period
of time.
• Merit pay plans
• Merit pay involves giving employees a permanent pay raise
based on past performance.
• Often the company's performance appraisal system is used to
determine performance levels and the employees are awarded
with a raise.
Extrinsic – Financial Rewards

• Membership based
These rewards are allocated in return of
employee's membership in an organization such that
it goes to all employees irrespective of their
performance.
COLA
Cost of living allowance (COLA) Periodic increase in
wages or salaries, to compensate for loss in purchasing
power of money due to inflation.
Extrinsic – Financial Rewards
• Benefits
• Protection programs
• Health & Life Insurance
• Medical & OPD
• Pay for time not worked
• Leaves, Casual, Sick, Annual leave, Leave encashment,
Compensatory leaves
• Perks
• Cars, 5- star hotels.
Extrinsic – Non Financial Rewards

• Preferred office furnishing

• Preferred lunch hours
• Assigned parking spaces
• Preferred work assignments
• Business cards
• Personal assistant
• Impressive titles
QUESTION & ANSWERS
THANK YOU