Key words:

Compensation, Pay structure, Employee, pay, salary, benefits.

Human resource management is the branch of science that deals with the intact
employment bond of relationship and all the strategies, policies, decision making and
practices connected with the relationship. The success of most important human
resource actiities are interconnected to and are dependent on compensation policy and
practice. Compensation is the benefit employees get against their serices. !enefits are
defined as reward, incentie and motiation. There are two types of benefits direct and
indirect. "ndirect benefits can contribute almost upto #$% of employee compensation.
!efore designing compensation plan, it is ital to well define the &ob description and
ealuation appropriately that is a method for ealuating the significance or worth of a &ob
to the organi'ation relatiely so that indiidual(s performance can be compensated
effectiely. Pay sureys needs to be conducted before designing up pay structure so that
an idea of what is being paid to the employees by other employers in a particular
territory , industry or occupational group can be achieed. There are wages and salaries
gien to employee as a ma&or source of compensation wages are generally refer to
hourly compensation paid to operating employees here the main factor is time where as
)alary is income paid to an indiidual on the basis of time. Pay structures needs to be
easy to communicate and understand
There are two types of pay pay*for*knowledge and skill based pay. Pay for knowledge
inoles compensating employees for learning specific information and )kill*based pay
rewards employees for ac+uiring new skills. "t is ery necessary to properly
communicate the compensation and benefits to the employees to aoid the employer
and employee gaps. There are fle,ible compensation plans that allow employees to
choose and decide among aailable alternaties on how their financial compensation will
be allocated. There should be a proper grading system and pays need to defined
accordingly. Compensation plans aries depending upon the nature and structure of
organi'ation.
-s aligning H. with the oerall company(s goals is a key to success .alignment of pay
structures with company(s goals is also ery necessary. "f profit margin and customer
loyalty are the key determinates to profitability then these should be made part of the
bonus or commission structure. Compensation in its true way gies employees a big
picture and trust leel increases between employee and employer. Employers and
owners must create organi'ations where e,cellent performance proceeds to competitie
compensation for people of the organi'ation. - company is likely to plant seeds for high
turnoer, low productiity and long*term failure without compensation and rewards.
Compensation doesn(t merely mean salary but there are many different ways to
compensate employees. /on monetary benefits are great way to compensate
employees een if organi'ation if suffering from losses. Performance ealuation and
appraisals practices helps to classify the leel of performance performed by employees
oer a period of time. Performance appraisal is a method to proide feedback on
employee performance and rewarding them accordingly. Employee should beliee on
their efforts and trust organi'ation to recogni'e their effort.
0eakness in compensation plan can lead to more turn oer ratio and low employee
retention power as employee can easily switch to some other place because of the non*
satisfaction resulting from bad compensation.
)o, designing, implementing and communicating compensation and benefits to the
employee is the key to increase on human capital and hence it improes oerall
organi'ation(s performance and profitability.