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Human Resources Management - Compensation And Productivity

Principal Compensation Issues and Management and Basic Concepts in Compensation - Compensation And Productivity

   Posted On :  13.06.2018 09:57 pm

The total of all rewards provided to employees in return for their labor is called by the generic term “Compensation”.

Principal Compensation Issues and Management and Basic Concepts in Compensation

The total of all rewards provided to employees in return for their labor is called by the generic term “Compensation”. Monetary compensation includes both direct and indirect components. Direct compensation consists of the base wage and incentives. Job-based pay and competency-based pay are two methods of determining the base wage or salary. Indirect compensation includes benefits that are mandated by law and those that employers provide voluntarily. Social security, unemployment compensation, and workers’ compensation are benefits that employers provide. Allowances for house rent or to meet escalating cost of living, insurance and vacation pay are commonly offered benefits and perquisites that are not required by laws. Factors like minimum wage specified by legislation, the market rate for different qualifications, an organization’s ability to pay and the compensatory factors other than pay that an organization could offer to its employees are some of the determinants of compensation levels.

Wage and Salary


Wage and Salary is together known as pay. While wage specifies the worth of the job, salary specifies the worth of the person. Salary is usually paid on a monthly basis while wage could be paid daily, weekly or fortnightly. Wage is usually associated with manual work and comes with provisions for overtime work, while the word salary is used to refer the remuneration for white-collar staff, professionals and managers. Wages and salaries have also been used interchangeably. Both wage and salary help to achieve effective employee performance.
 
Wage is the part of total production that is the return to labor as earned income as distinct from the remuneration received by capital as unearned income. Wage freeze refers to a temporary fixing of wages at a certain level, especially during economic difficulties. The term “Real Wage” represents the purchasing power of the money given as wage. Fair wage is a wage that is commensurate with a person’s effort. Subsistence wage is the barest minimum possible wage required to be earned by a person in order to sustain his or her life. Wage scale is a graduated scale of wage rates for different levels of work.
 
The components of pay usually consist of a Basic part, Dearness Allowance, House Rent Allowance and City Compensatory Allowance. Besides these, organizations may also provide reimbursements of educational and medical expenses of the employees and their dependents. Some also pay commissions and incentives to their employees. Perquisites include vehicles, phone rentals, home-furnishing costs, newspapers and magazines, paid domestic help or drivers, membership in clubs, accommodation in guesthouses and so on.
 
Pay scale is the numerically expressed statement about the beginning minimum and the final maximum basic pay and the annual increments and the subsequent slabs after which the rate of increase in the basic would be different. For example, a pay scale of “9,000 – 400 – 11,000 – 600 – 14,000” implies that the salary starts with a basic of Rs. 9,000/- followed by an increment of Rs. 400/- every year until 9,000 becomes 11,000. From then onwards, there would be an increment of Rs. 600/- in the Basic Pay until one reaches Rs. 14,000/- which is the final limit of the present scale. Beyond this year, the person may be considered for being placed on a higher pay scale or, the pay scales of the entire organization could be reformulated.
Tags : Human Resources Management - Compensation And Productivity
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