The process of compensation management is to establish & maintain an equitable wage & salary structure & an equitable cost structure .it involves job evaluation, wage & salary survey, profit sharing &control of pay costs.
Two important functions of compensation
· Equity function
· Motivation function
Equity is based on past & current performance& motivation with which the work has been performed in the past & current performance.
Nature and Purpose of compensation management
The basic purpose of compensation management is to establish and maintain an equitable reward system. The other aim is the establishment and maintenance of an equitable compensation structure, i. e, an optimal balancing of conflicting personal interests so that the satisfaction of employees and employers is maximised and conflicts minimised. The compensation management is concerned with the financial aspects of needs, motivation and rewards. Managers, therefore, analyse and interpret the needs of their employees so that
reward can be individually designed to satisfy these needs. For it has been rightly said that people do what they do to satisfy some need. Before they do anything, they look for a reward or pay-off.The reward may be money or promotion, but more likely it will be some pay-off-a smile, acceptance by a peer, receipt of information, a kind word of recognition etc.
Let’s Talk About The Significance of Compensation
From individual standpoint -remuneration is a major source of an individual’s purchasing power. It determines his or her status, prestige & worth in society. From enterprise standpoint- compensation is a crucial element in the cost of production, which is expected to permit adequate profits leading to increasing in new capital, expansion production, and capacity.
From a national point of view –dissatisfied workforce hampers equitable distribution of aggregate real income among various group involved .it causes inflation.