Compensation
“Compensation is the total of all rewards provided employees in return for their services.” (Mondy) Direct financial compensation is the pay an employee receives in the form of wages, commissions, and bonuses. Compensation is used by management to recruit and retain qualified employees.
The availability and cost of qualified applicants is sometimes determined by market forces beyond an employer’s control. An employer may set compensation levels for new employees, but must compete with other employers seeking to hire for the same position from the same applicant pool.
A compensation system needs job descriptions, salary ranges and/or structures, and written procedures. Job descriptions define the responsibilities, requirements, functions, and duties of a position. Job analysis is the process used to establish and document employment procedures such as training, selection, compensation, and performance appraisal. The system for comparing jobs for the purpose of determining compensation levels is called job evaluation. Jobs can be ranked based on the level of skill, responsibility, and working conditions or they
can be classified into an existing grade or category structure where each job is assigned to the
grade or category with the closest match to the job. (HR-Guide)
Pay structures include several grades with each grade consisting of a minimum rate and
a maximum rate and a variance of rates in between. Salary surveys collect salary and market data within certain industries or regions. These surveys help a business or industry compare there own wage structure to others in the same region or industry. The Fair Labor Standards ACT (FLSA ) establishes the minimum wage. Covered nonexempt workers are entitled to a minimum wage of not less than $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40...