If you pick the right people and give them the opportunity to spread their wings - and put

compensation and rewards as a carrier behind it - you almost dont have to manage them. Jack Welch Most of us would have heard the term compensation in the context of getting paid for the work that we do. The work can be as part of full time engagement or part time in nature. What is common to them is that the reward that we get for expending our energy not to mention the time is that we are compensated for it. From the perspective of the employers, the money that they pay to the employees in return for the work that they do is something that they need to plan for in an elaborate and systematic manner. Unless the employer and the employee are in broad agreement (We use the term broad agreement as in many cases, significant differences in perception about the employees worth exist between the two sides), the net result is dissatisfaction from the employees perspective and friction in the relationship. It can be said that compensation is the glue that binds the employee and the employer together and in the organized sector, this is further codified in the form of a contract or a mutually binding legal document that spells out exactly how much should be paid to the employee and the components of the compensation package. Since, this article is intended to be an introduction to compensation management, the art and science of arriving at the right compensation makes all the difference between a satisfied employee and a disgruntled employee. Though Maslows Need Hierarchy Theory talks about compensation being at the middle to lower rung of the pyramid and the other factors like job satisfaction and fulfilment being at the top, for a majority of employees, getting the right compensation is by itself a motivating factor. Hence, employers need to quantify the employees contribution in a proper manner if they are to get the best out of the employee. The provision of monetary value in exchange for work performed forms the basis of compensation and how this is managed using processes, procedures and systems form the basis of compensation management. As the module progresses, readers would be introduced to other aspects of compensation management like the components of compensation management, types of compensation, inclusion of variable pay, the use of Employee Stock Options etc. The aspect of how skewed compensation management leads to higher attrition is discussed as well. This aspect is important as studies have shown that a majority of the employees who quit companies give inadequate or skewed compensation as the reason for their exit. Hence, compensation management is something that companies must take seriously if they are to achieve a competitive advantage in the market for talent. Considering that the current trend in many sectors (particularly the knowledge intensive sectors like IT and Services) is to treat the employees as creators and drivers of value rather than one more factor of production, companies around the world are paying close attention to how much they pay, the kind of components that this pay includes and whether they are offering competitive compensation to attract the best talent. In concluding this article, it is pertinent to take a look at what Jack Welch had to say in this regard: As the quote (mentioned at the beginning of this article) says, if the right compensation along with the right kind of opportunities are made available to

people by the firms in which they work, then work becomes a pleasure and the managers task made simpler leading to all round benefits for the employee as well as the employer. Reward system or management usually mean the financial reward on organization gives its employees in return for their labour. While the term reward system, not only includes material rewards, but also non-material rewards. The components of a reward system consist of financial rewards (basic and performance pay) and employee benefits, which together comprise total remuneration. They also include non-financial rewards (recognition, promotion, praise, achievement responsibility and personal growth) and in many case a system of performance management. Pay arrangements are central to the cultural initiative as they are the most tangible expression of the working relationship between employer and employee. Many papers examine the role of organizational culture i.e., the demand for monitoring compensation. Such investigations conclude that organizational culture places a significant role in determining the level of economic demands. Recent researches on industrial unrest rest indicate that reward criteria of the organisations both financial and non-financial rewards have tremendous influence upon the employees and employers performance. Why reward system is required? These components will be designed, developed and maintained on the basis of reward strategies and policies which will be created within the context of the organizations between strategies, culture and environment: they will be expected to fulfill the following broad aims; 1. Improve Organizational Effectiveness: Support the attainment of the organization's mission, strategies, and help to achieve sustainable, competitive advantage. 2. Support and change culture: Under pin and as necessary help to change the 'organizational culture' as expressed through its values for performance innovation, risks taking, quality, flexibility and team working. 3. Achieve Integration: Be an integrated part of the management process of the organization. This involves playing a key role in a mutually reinforcing and coherent range of personal policies and process. 4. Supportive Managers: Support individual managers in the achievement of their goals. 5. Motivate Employees : Motivate employees to achieve high levels of quality performance. 6. Compete in the Labour Market: Attract and retain high quality people. 7. Increased Commitment: Enhance the commitment of employees to the organization that will a) want to remain members of it, b) develop a strong belief in and acceptance of the values and goals of the organization and c) be ready and willing to exert considerable effort on its behalf. 8. Fairness and Equity: Reward people fairly and consistently according to their contribution and

values to the organization. 9. Improved Skills : Upgrade competence and encourage personal development. 10. Improved Quality: Help to achieve continuous improvement in levels of quality and customer service. 11. Develop team working : Improve co-operation and effective team working at all level. 12. Value for money: Pride value for the money for the organization. 13. Manageable: Be easily manageable so that undue administrative burdens are not imposed on managers and members of the personal department. 14. Controllable: Be easily controllable so that the policies can be implemented consistently and costs can be contained within the budget. Intrinsic rewards: Intrinsic rewards are less tangible, originate from persons or job itself and reflect Herzberg motivators. Example of such factors includes; * Variety in Job Content. * Sense of being a part of value adding process. * Believe that they are valuable members of a team. * Increased responsibility and autonomy. * Sense of accomplishment. * Participation in setting targets and opportunities to achieve them. * Feed back information. * Recognition. * Opportunities to learn and grow. Extrinsic rewards: Results from the actions of others, such as supervisions are more easily controlled by managers. Examples include pay, fringe benefits, praise and promotion. Meaning of reward to people Pay is frequently used as a motivator and reinforce on it can easily be differentiated and computed, linked, clearly and visibly to direct performance and is generally valued reward. While outlined the major components in the meaning of reward to people; * Short-term material enjoyment. * Long term security,

* Social status. * Recognition of personal achievement. Significant Reasons to develop better reward management system * To reduce the dissatisfaction of the employees on promotion criterion * To reduce the dissatisfaction of the employees on appraisal system. * To reduce the dissatisfaction of the employees on salary, bonus and other fringe benefits. * To improve the work performance * To improve the productivity * To reduce the level of occupational stress that arises from feeling of inequality on reward * To reduce the perceptional gap on reward management system and develop a culture of high performance. Organisational culture and reward management system Higher the job satisfaction members have at work higher the member's better adjustment with the work and work organisation. Here the culture of the organisation is an important factor, which conveys the policies, and practices widely held by the organisation. An organisational culture, which give importance to employees satisfaction at various level viz., psycho-social and economic needs, can develop better productivity and performance at work. It reduces the perceptional gap on the reward management and performance management system and ensures better involvement and commitment at work. A strong organisation culture, in which the employers take effort to reduce the perceptional gap in the reward management system and induce trust and confidence among the employees at work. The money is the most motivating factor among all employees at all hierarchy levels therefore reward management plays a very important role also in retaining employees and engaging themselves on the job. Another matt Reward Management Based on Chapter 19 of Human Resource Management in a Business Context by Alan Price published by Cengage Learning Objectives The purpose of this chapter is to: Investigate the relationship between the human resource function and payroll administration Outline the rationale behind different compensation packages Evaluate the link between pay and performance Pay and compensation

Pay is an important feature of human resource management - after all, it is the main reason why people work. It is a sensitive and controversial area that has been extensively debated at both practical and theoretical levels. In the US the term 'compensation' is used to encompass everything received by an employed individual in return for work. For example, Milcovich et al (2001: 6) state that: "Employees may see compensation as a return in exchange between their employer and themselves, as an entitlement for being an employee of the company, or as areward for a job well done" (original emphases). The reward or compensation people receive for their contribution to an organisation includes monetary and non-monetary components. Remuneration does not simply compensate employees for their efforts - it also has an impact on the recruitment and retention of talented people. The term 'reward management' covers both the strategy and the practice of pay systems. Traditionally, human resource or personnel sections have been concerned with levels and schemes of payment whereas the process of paying employees - the payroll function - has been the responsibility of finance departments. There is a trend towards integrating the two, driven by new computerised packages offering a range of facilities. These are described later in this chapter. There are two basic types of pay schemes, although many organisations have systems which include elements of both: Fixed levels of pay. Wages or salaries which do not vary from one period to the next except by defined pay increases, generally on annual basis. There may be scales of payments determined by age, responsibility or seniority. Most 'white-collar' jobs were paid in this way until recently. Reward linked to performance. The link may be daily, weekly, monthly or annualised. Payment for any one period varies from that for any other period, depending on quantity or quality of work. Sales functions are commonly paid on the basis of turnover; manual and production workers may be paid according to work completed or items produced. Catering staff typically rely on direct payment from satisfied customers in the form of service charges or tips (gratuities). Both methods work smoothly, provided that scales are easy to understand and the methods of measuring completed work are overt, accurate and fair. However, there has been considerable dissatisfaction with the management of pay on both sides of the employment relationship. In recent years, attempts have been made to remedy the situation through new systems and a greater reliance on performance-related pay. HR and payroll administration Technology and the pay unit Pay evaluation Market-driven criteria Motivation and performance

Pay and performance Flavour of the (last) month? Criticisms of PRP Summary Pay is a key element in the management of people. The importance of pay begins with pay administration that deals accurately and swiftly with payroll-related matters. Much of the information used by pay administrators is shared with the human resource function. Pay evaluation systems also impinge on human resource territory. Free market organizations are particularly concerned with performance-related pay as a motivating factor but this trend appears to be ideological rather than rational since practical PRP schemes that deliver the results intended are extremely difficult to construct. Current evidence shows that performance pay is likely to demotivate more people than it motivates.