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Compensation may be defined as money
received in the performance of work, plus
the many kinds of benefits and services
that organisations provide their
employees.
r=irect Compensation (Money)

rIndirect Compensation (Benefits)

r =emand and supply:- If the labour is in short supply, the
workers will offer the services only if they are paid well. On the other
hand, if the supply is more then workers available might get ready work
at cheaper rates.

r Bargaining Power: Where labour unions are strong enough to

force the hand of employers, the wages will be determined at a higher
level in comparison to other units where unions are weak.

r Cost of living:- Wages of workers also depends upon the cost of

living of the worker so as to ensure him a decent living wage.
r Comparative Wages:- Wages paid by the other firms
for the same work also influence the wage levels.

r Ability to Pay:- Those firms which are earning huge

profits may afford to pay high wages and can provide more
facilities to its workers in comparison to the firms earning
comparatively low profits.

r Productivity of labour:¢ igher productivity will

automatically fetch more profit to the firm, where in turn
workers will be paid high wages in comparison to other firms
with low productivity.

r ob Requirements:¢ If a job require higher skill,

greater responsibility and risk, the worker placed on that job
will naturally get higher wages in comparison to other jobs
which do not require the same degree of skill, responsibility or
risk.
r Äovt. Policy:¢ ëince the bargaining power of the
workers is not enough to ensure fair wages in all industries,
the Äovt. has to interfere in regulating wage rate to guarantee
minimum wage rates in order to cover the essentials of a
decent living.
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