Definition of Compensation
Agarwala (2007) defined compensation as the sum total of all forms of payments and rewards provided to the employees for performing tasks to achieve organizational objectives.
Organizational Rewards
Non-compensation rewards
Non-monetary like healthy job environment
Features of Compensation
Management. Fairness. Motivation. Flexible. Competitiveness. Cost.
Internal Factors
Financial ability. Compensation policies. Recruitment and selection policy. Promotional policy. Job descriptions. Job evaluation. Employers designation and position. Employees relative contribution.
External Factors
Compensation policies in the industry. Legal conditions. Economic conditions. Market competition. Trade unions. Global considerations.
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Methods of Compensation
Straight salary. Straight commission. Combination plans
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Straight Salary
Advantages
Sense of security. Stability of income. Resists high turnover of sales people. Simple to understand.
Disadvantages
Restrains additional initiative. Selling expenses not related to sales volume. Equal treatment to high and low performing employees.
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Straight Commission
Advantages
Great motivator. Differentiates high and low performers. Provides unlimited opportunity to earn. Selling costs related to sales volumes.
Loss of control. Salespeople focus on easy selling items. Salespeople lack sense of belongingness. No/little attention to after-sales service.
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Disadvantages
Combination Plans
Salary and commission. Salary and bonus. Salary plus commission and bonus.
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Medical benefits. Retirement benefits. Company stock options. Leave travel concessions. Paid vacations
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SCS has been defined as the right selection of the compensation tool, developing it in line with the compensation objectives and application of it with an aim to attain broad strategic pursuits of the compensation.
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Goals of SCS
To distribute compensations equitably. To design compensation packages that fulfill personal and organizational goals. To correlate performance and compensation. To put control whenever performance deviates from benchmarks. To reward employees who achieve set standards. Oxford University Press 2011
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