Employee Compensation

Employee Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men.

Land, Labor, Capital and Organization are four major factors of production.

Every factor contributes to the process of production/business. It expects return from the business process such as Rent is the return expected by the Landlord. Similarly Capitalist expects Interest and Organizers i.e Entrepreneur expects profits. The labour expects wages from the process. It is evident that other factors are in-human factors and as such labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos. Labour therefore expects to have fair share in the business/production process. 


“PEOPLE” are the most important and valuable resource every organization has in the form of its employees. Dynamic people can make dynamic organizations. Effective employees can contribute to the effectiveness of the organization Competent and motivated people can make things happen and enable an organization to achieve its goals.


Organizations have now started realizing that the systematic attention to human resources is the only way to increase organizational efficiency in terms productivity, quality, profits and better customer orientation.


HR can help deliver organizational excellence by focusing on learning, quality, teamwork, and through various employee friendly strategies.



Advantages of Fair Compensation System:

Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following:

Ø      If an ideal compensation system is designed, it will have positive impact on the efficiency and results produced by workmen.

Ø      Such system will encourage the normal worker to perform better and achieve the standards fixed.

Ø      This system will encourage the process of job evaluation. It will also help in setting up an ideal job evaluation, which will have transparency, and the standards fixing would be more realistic and achievable.

Ø      Such a system would be well defined and uniform. It will be apply to all the levels of the organization as a general system.

Ø      The system would be simple and flexible so that every worker/recipient would be able to compute his own compensation receivable.

Ø      Such system would be easy to implement, so that it would not penalize the workers for the reasons beyond their control and would not result in exploitation of workers.

Ø      It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers.

Ø      Such system would help management in complying with the various labor acts.

Ø      Such system would also bring about amicable settlement of disputes between the workmen union and management.

Ø      The system would embody itself the principle of equal work equal wages. Encouragement for those who perform better and opportunities for those who wish to excel.

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