Compensation is something, most usually money, which is given to the employees of an organization or company as payment or reparation for their service towards the organization or because of their loss incurred due to any organizational activity. PF/Gratuity is a part of _____________________ compensation, a. Total variable component, where the total salary depends on the rating received during evaluation, 4. 3. Examples are career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions. Indirect Compensation, c. Performance compensation d. None of the above, 7. Compensation management is one of the major concern in HRM. A sound wage and salary system considers the legal challenges imposed by the government and ensures employers comply. This creates a peaceful relationship between the employer and the employees. The technological development, automation has been affecting the skill levels at faster rates. In particular, there has been a marked increase in the use of pay-for-performance (PrP) for management and professional employees, especially for executive management and senior managers. It is designed to abide with the various labor acts and thus does not result in conflicts between the employee union and the management. Most organizations have compensation strategies and policies that cause wages and salaries to be adjusted. Compensation is referred to as money and other benefits received by an employee for providing services to his employer. Some fixed component, along with a variable component (which is decided based on the rating of the employee and his meeting of the targets) All employers, irrespective of their profits or losses, must pay no less than their competitors and need to pay no more if they wish to attract and keep workers. Some fixed component, along with a variable component (which is decided based on the rating of the employee and his meeting of the targets), 3. Employees may quit when compensation levels are not competitive, resulting in higher turnover. It focuses on the personal encouragements of each individual to work. Direct Compensation b. If the compensation policy of the organisation proves to be best then the organisation can get well motivated, loyal, efficient workforce. It is naturally made up of salary payments and health benefits. It creates a base for happiness and satisfaction of the workforce that limits the labor turnover and confers a stable organization. Executive compensation for CEOs, managing directors, chairman etc. Here you can find MCQ in compensation management with answers which in the syllabus of Human resource management. Keep qualified personnel. Assure that rewards and salary costs handle changes in market rates or organizational change. Compensation packages with good pay and advantages can help attract and retain the best employees. In very simple terms, compensation is the results or rewards that the employees receive in return for their work. Top content on Compensation, HR Function and Workforce Planning as selected by the Human Resources Today community. Post was not sent - check your email addresses! Performance Appraisal - MCQs with answers - Part 1, Training & Development - MCQs with answers, Recruitment & Selection - MCQs with answers - Part 2, Recruitment & Selection - MCQs with answers - Part 3. Employees want to get as high as possible. A company's compensation scheme also informs a great deal about the firm's values and cultures. Chapter 2: Developing and Implementing Strategic HRM Plans, Chapter 3: Diversity and Multiculturalism, 5.2 Criteria Development and Résumé Review, 8.1 Steps to Take in Training an Employee, Chapter 9: Successful Employee Communication, Chapter 10: Managing Employee Performance, 11.3 Completing and Conducting the Appraisal, 12.3 Administration of the Collective Bargaining Agreement. It is important for an organization to consider its mission and vision and its strategies and then devise the compensation system such that all these components are inter-linked and aligned with each other. To retain and motivate employees, employee compensation must be fair. If pay levels are not competitive, some employees quit the firm. Compensation plan In HRM 1. “HR planning is critical to organizational strategy: We need subject matter experts and leaders to drive the strategy forward in evolving industries. A compensation scheme projects what the company expects of its employees. As you sit down to review the compensation package your company offers, one thing that stands out is that your compensation package no longer matches the core values of your organization. Indirect b. Psychologically, persons perceive the level of wages as a measure of success in life; people may feel secure; have an inferiority complex, seem inadequate, or feel the reverse of all these. a. Good performance, experience, loyalty, new responsibilities, and other behaviors can be rewarded through an effective compensation plan. Some of these allowances are as follows −. this Objective type questions will be useful for both graduate and post … 4. Compensation analysts must focus not only on equity but on competitiveness too. Browse the definition and meaning of more similar terms. This allowance is calculated as a percentage of salary. Demographic shifts and relative supply and demand relationships affect compensation. Finally, if the same or about the same general rates of wages are not paid to the employees as are paid by the organizations’ competitors, it will not be able to attract and maintain a sufficient quantity and quality of workforce. The creation of salary ranges and pay scales for different positions within an organization are the central responsibility of compensation management staff. Compensation includes payments like bonuses, profit sharing, overtime pay, recognition rewards and sales commission, etc. Compensation Management b. The other alternative is to pay higher wages if the labor supply is scarce and lower wages when it is excessive. Please share your supplementary material! As employees are relocated, compensation specialists are challenged to make adjustments that are fair to the employee and the company while keeping competitiveness in mind. This article has been researched & authored by the Business Concepts Team. The system should also ensure that the turnover rate remains low and the employees remain motivated. To determine basic wage & salary, c. To improve the performance d. To reward for job performance. Money is included under direct compensation. It is important for an organization to consider its mission and vision and its strategies and then devise the compensation system such that all these components are inter-linked and aligned with each other. Premium wages are sometimes needed to attract applicants working for others. Compensation can be in the form of cash or kind. Employees serve organizations in exchange for a reward. Both individual incentives and group incentives are applicable in most cases. Direct compensation comprises of the salary that is paid to the employees along with the other health benefits. a. It discovers a positive control on the efficiency of employees and motivates them to perform better and achieve the specific standards. Like any other price, remuneration is set at the point where the demand curve for labor crosses the supply curve of labor. Money as a Motivator: Can Money Motivate Employees? Employees often look at what a company pays rather than what it says. Compensation: Compensation is defined as money received in the performance of work and many kinds of benefits and services that organization provides their employees. Completely fixed (per month or year) Clearly, managing a firm's compensation policy is a complex task as it facilitates systematically administered and equitable salaries, reconciles employees' career aspirations with respect to earnings, aligns employees' personal objectives with those of the organization, and keeps the firm's costs under control. However, when it comes to an organization, be it private or public, compensations are further divided into the following −. This helps the employer not to worry about the costly loss of trained staff to a competitor. Compensation includes components like salary, wages, bonuses etc. HR planning plays a significant part in supporting strategy, as human resources are the biggest investment for any organization.