Role of Compensation in Organisation

Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)

Professor Al-Qurmoshi Institute of Business

Management Hyderabad

Role of Compensation in Organisation

To attract capable employees to the organization To motivate them toward superior performance To retain their services over an extended period of

timeTo establish a positive corporate reputation To increase or maintain morale/satisfaction To achieve internal and external equity To reduce turnover and encourage company

loyalty

Role of Compensation in Organisation (Contd.)

Compensation plays a very important role in attracting the best talent in the organization, as well as, retaining them for a long time.  

It helps in creating a solid human resource base in the organization which enhances the productivity, efficiency and overall quality in the organization.

A sound human resource infrastructure with employees possessing proper set of skills for right job, is critical to the success of any organization and

It is perfectly achieved via a suitable compensation plan  

Role of Compensation in Organisation (Contd.)

In order to avoid high attrition levels, compensation plays a key role in retaining the top talent in the organization.

To maintain high standards of productivity and service, the organization must motivate employees.

A suitable compensation, incentives and rewards program is the key motivator in any organization today.

In order to motivate employees and boost their morale to achieve desired performance levels and goals, compensation plays a key role

In order to achieve more incentives and compensation, employees raise their performance levels.

 

Role of Compensation in Organisation (Contd.)

In the absence of appropriate compensation plans, employees will not be motivated to perform efficiently and will always look for changing the current organization.

Organizations should reward employees for their specific contributions to the achievement of the organizational goals and objectives.

In today’s dynamic business environment where innovation and efficiency is the key, compensation is a crucial tool to reward the best performing employees for their important role in success of the organisation.

Role of Compensation in Organisation (Contd.)If there is an appropriate compensation system, it will

encourage normal worker to perform better & achieve the standards fixed.

It would not penalize the workers for the reasons beyond their control and would not result in exploitation of workers.

It will raise the morale, efficiency and cooperation among the workers.

It would embody itself the principle of equal work & equal wages and would provide satisfaction to the workers.

It would help management in complying with various labour acts

It would bring amicable settlement of disputes between the workers’ union and management.

It would provide encouragement for those who perform better and opportunities for those who wish to excel.