Compensation Management in Human Resources

Compensation Management

• Compensation refers to the remuneration received by an employee in return for their contribution, which helps in motivating employees.
• Importance of compensation:
  • Recruit and retain good employees
  • Increase and maintain morale and satisfaction
  • Reward and encourage peak performance
  • Reduce turnover and encourage company loyalty

Objectives of a Good Compensation Plan

• Internal equity: ensure more difficult jobs are paid more
• External equity: similar jobs in the industry get similar compensation
• Individual equity: equal pay for equal work

Types of Compensation

• Financial:
  • Wages and salaries
  • Benefits and services
  • Incentives
  • Fringe benefits
  • Perks
• Non-Financial

Concept of Wages

• Minimum wage: considers education, medical requirements, and amenities
• Fair wage: equal pay for equal work
• Living wage: not only bare essentials but also a degree of comfort

Difference Between Salary and Wage

• Wage earners are paid by the hour, while salary earners are paid by the year
• Salary earners usually receive paid time off when they are not working
• Wage earners often have to give up pay for time off
• Salaries are often calculated as packages
• Wage earners get paid more for working more than 40 hours per week
• Salary workers are rarely offered overtime pay

Human Resource Management (HRM)

• Primitive beginning in 1930s in Western countries
• No written records or documents, concept originated from Greek, Indian, and Chinese philosophies of managing human beings
• Scope of HRM:
  • Human Resource Planning
  • Design of the Organizational and Job
  • Selection and Staffing
  • Training and Development
  • Organizational Development
  • Compensation and Benefits
  • Employee Assistance
  • Union/Labor Relations
  • Personnel Research and Information System

Recruitment

• Process of continuing with the selection of placement of candidates
• Recruiting: discovering of potential applicants
• Definition: "Recruitment is the process of searching for candidates for employment" - Edwin B. Flippo
• Definition: "Recruitment is the activity that links employees to job seekers" - Edwin B. Flippo
• Types of recruitment:
  • Planned: needs arising from changes
  • Anticipated: movements in personnel; changes of trends
  • Unexpected: unexpected needs caused by resignation, deaths, accidents, illness, etc.

Selection

• Process of choosing qualified individuals to fill a position
• Part of recruitment: selecting the best candidates for a specific job

Job Analysis

• Nature of job analysis:
  • Job tasks
  • Job duties
  • Job responsibilities
• Use of job analysis information:
  • Recruitment and selection
  • Discovering unassigned duties
  • Legal compliance
  • Compensation
  • Performance appraisal
  • Training requirements
• Multifaceted nature of job analysis:
  • Recruitment
  • Selection
  • Placement
  • Counselling
  • Human Resource Planning
  • Job Evaluation
  • Job Design and Redesign
  • Performance Appraisal
  • Employee Safety
• Components of job analysis:
  • Job description: describing the job
  • Job specification: human qualities needed
• Who should conduct job analysis:
  • Job incumbents themselves
  • Supervisors
  • External analysts
• Steps in job analysis:
  • Decide how you'll use the information
  • Review relevant background information
  • Select representative position
  • Actually analyze the job
  • Verify job analysis
  • Develop job description and job specification
• Methods of collecting job analysis data:
  • Job performance
  • Personal observation
  • ...

This quiz covers the importance of compensation management in human resources, including its role in motivating employees, recruiting and retaining talent, and reducing turnover. It also discusses the objectives of a good compensation plan, including internal and external equity.