Running Head: COMPENSATION METHODS
Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction. It’s a tool used by management for a variety of purposes to further the existence of the company. Compensation may be adjusted according to the business needs, goals, and available resources. Compensation may be used to:
• 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.
• Modify (through negotiations) practices of unions.
Recruitment and retention of qualified employees is a common goal shared by many employers. To some extent, the availability and cost of qualified applicants for open positions is determined by market factors beyond the control of the employer. While an employer may set compensation levels for new hires and advertise those salary ranges, it does so in the context of other employers seeking to hire from the same applicant pool.
Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that must be reached between the monetary value the employer is willing to pay and the sentiments of worth felt be the employee. In an attempt to save money, employers
may opt to freeze salaries or...