Human Resource Notes

Human Resource Notes

Compensation Administration

Employees exchange work for rewards. Probably the most important reward and certainly the most obvious is money. The goals of compensation administration are to design the lowest-cost pay structures that will attract, motivate and retain competent employees, and that also will be perceived as fair by these employees.

The basic purpose of wage and salary administration is to establish and maintain an equitable wage and salary structure. Its secondary objective is the establishment and maintenance of an equitable labour-cost structure, i.e., an optimal balancing of conflicting personnel interests so that the satisfaction of employees and employers is maximized and conflicts minimized. A sound compensation administration tries to achieve the following objectives:
a) For Employees
• Employees are paid according to requirements of their jobs, i.e., highly skilled jobs are paid more compensation than low skilled jobs. This eliminates inequalities.
• The chances of favoritism are greatly reduced.
• Job sequences and lines of promotion are established whenever they are applicable.
• Employees’ morale and motivation are increased because a wage programme can be explained and id based upon facts.

b) To Employers
• They can systematically plan for and control their labour costs.
• In dealing with a trade union, they can explain the basis of their wage programme because upon a systematic analysis of job and wage facts.
• A wage and salary administration reduces the likelihood of friction and grievances over wage inequities.
• It enhances an employee’s morale and motivation because adequate and fairly administered wages are basic to his wants and needs.
• It attracts qualified employees b ensuring and adequate payment for all the jobs.

Basically wage and salary programmes have four major purposes:
• To recruit persons for a firm.
• To control payroll costs;
• To...

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