Motivation for exams, concentration on study, and academic development: Concept of Compensation in the Organizations

Concept of Compensation in the Organizations

Money is the key motivator for the reason to seek employment. This article is to provide an understanding of the challenges of compensation, salary, wages, or incentives management for the organization.

An individual can be exercised any time during the period as per the terms subject to schedule. If the company pertains to the share for the time that it’s encouraging to stay in the company for fully committed to success.

Table of Contents

1. Introduction

2. Wages and Salary Administration

3. Managing wages

3.1. Reinforcement and expectancy theory

3.2. Equity theory

3.3. Internal, External, Individual

3.4. Agency theory

4. Compensation strategy

4.1. Bonus, 4.2. Profit-Sharing

4.3. Stock Option 4.4. Commission

5. Classification of wages

5.1. Minimum wage

5.2. Fair wages

5.3. Living wages

6. Conclusion

Introduction

The compensation, salary, or wages are used for payment to employees basically, but wages are used for contractual employees, which are calculated as per the number of hours or daily basis, they are called laborers. Some laborers on a particular scale depend on the labor law.

Compensation is the cash reward to the employees for their services, it can be defined as the salary, wages, and incentive, and compensation is the remuneration that is paid for a fixed period that depends on the number of working hours per day.

Wage & Salary Administration

Compensation management or salary and wages administration revolves around designing and management policies and methods of disbursing employee’s compensation.

Salaried often implies a status distinction, because those who are on salary, are generally professional, administrative and executive employees, whereas wages are designed as hourly non-supervisory. If they are absent for any reason, sickness payment may be deducted. Lower level salaries basis employees also paid overtime for extra working hours.

A compensation or salary system is designed on an employee’s skill and knowledge that is required for a specific job. The following factors are helpful for the effectiveness of employees. The major objective of an organization is to use employees as the minimum salary or wages, and maximum benefits.

Attracting and retaining talent is the organizational need; talented employees are required by the organization for the best performance to complete the project.
Motivate employees to perform effectively, employees are motivated by the compensation as a bonus, incentive, etc. In the organization, a type of working together culture is creating the type of culture.

Managing Wages

The purpose of wage and salary administration is to establish and maintain wages and salary programs. Wages and salary administration are concerned with the financial aspects of an organization’s need for motivation and rewards.

Some important theories that support the design of a wages system are, Salary is defined as a fixed periodical payment to the people for manual or mechanical work. Pay refers to the payment of service. Wages are commonly known as the price of labor. Labor is always known as the law of supply and demand. Few theories are described as follows.

Reinforcement and Expectancy theory

This theory is based on the assumption that the employees will do the same thing repeatedly for which he was acknowledged, and the employees are motivated to do the particular thing for which he expected for that performance he will be rewarded. For example, a computer operator will do the operating work only, he will be paid for the particular performance.

Equity theory

This theory is based on the equity or uniformity in the pay structure of the employees’ remuneration. If any employees think he is not being paid fairly, or not performing well, as a result of low productivity the remuneration system will comply with three types of equity.

Internal equity

In this equity, employees perceive the different pay for the different jobs based on the nature of work. One must feel the differential among the BBB fair.

External equity

In this equity, one feels fairness for the same kind of job is not fair. What is the other organization paying for a similar job?

Individual equity

In this equity, one feels the different payment of the same line and same kind of job is not fair. An individual with more experience is being paid high remuneration than the fresher feel irrespective of a similar job.

Agency theory

In this theory employees and employers, both are the stakeholders of the company if the employees get increased remuneration but the employer used to minimize the remuneration. Both should decide in such a way the interest of both parties can be fixed.

Compensation Strategy

Compensation strategy is an important activity of the organization, affordable reasonable competitive, and structured. Your compensation strategy must be best for the business. The incentive is the remuneration being paid to the best employees, this attracts bonuses, Profit sharing, and stock options. There are three types of incentives.

See - What is a strategic compensation

Bonus

Bonus is on the performance basis goal, employees are rewarded, and goal must be involved with business and realistic. The payout must be a large profitability annual result and successful completion of the project.

Profit-sharing

Profit-sharing is the predetermined percentage of profit shared with all employees; the profit-sharing bonus is shared with employees once a year.

Stock option

An individual receives the option to buy shares of the company for a set price for a specific period. Individuals can be exercised any time during the period as per the terms subject to schedule.

If the business does not grow, share of the holder option by financial benefits.

If the companies pertain the share for a long time it is encouraged to stay in the company for fully committed to success.

Commissions

The commission is common for the sales and marketing people, for the sales of products, strong incentive paid for the individual interest, to invest the maximum efforts. The commission is calculated as the percentage of maybe 5% on the sale of the particular products, Commission is based on the state salary or salary + commission, and especially commission is based on the target.

See - Compensation Trends in India

Classification of wages

As per the international labor organization, wages are classified as under:

The amount necessary for mere subsistence, the amount necessary for health and decency, and the amount necessary to provide a standard of comfort.

In India wages are classified as under:
Minimum wage
Fair wage
Living wage

Minimum wage

The minimum wages are the wages that provide sustenance to the worker's family, efficiency for the family member, and medical care.

Fair wages

The wage above minimum wage, this depends on the products of labor, the level of the national income, and its distribution.

Living wages

As a fair wage and the ultimate goal of a wage policy. One which is not able to earn or provide the essential need of food d shelter, in other words, to provide for the standard of leaving, ensure food health, and others.

Conclusion

The compensation, salary, or wages are being used for payment basically, but wages are calculated as per the number of hours or daily basis. Compensation strategy is an important activity of the organization, affordable reasonable competitive, and structured.

See - What is a strategic compensation

Bonus is based on the performance goal, employees are rewarded, and the goal must be involved with business and realistic. The payout must be a large profitability annual result and successful completion of the project. Profit-sharing is the predetermined percentage of profit shared with all employees; the profit-sharing bonus is shared with employees once a year.

Your compensation strategy must be best for the business. The incentive is the remuneration attracted by us, Profit sharing, and stock