Components of Compensation paid to Employees Essay

A rigorous review of compensation and all its components Compensation is what is paid to an employee, whether in the form of wages, salary or incentives by the employer for a specific amount of time, skill and effort made available by the employee in fulfilling specific job requirements (Biesheuval, 1984). Compensation is important in organisations as it conveys information to an employee about their relative importance to the organisation and provides a scale to identify how much recognition they are receiving for their contribution (Harley and Stephenson, 1992). Compensation shows employees how much they are appreciated and worth. The most important differentiating element between jobs is the effort involved in performing a job†¦show more content†¦Ã¢â‚¬ ¢ Free housing in hostels. †¢ Social and recreational services such as a gym. †¢ Company car. †¢ Expense allowance etc †¢ Unemployment insurance has been made compulsory by the law and allows people to have a minimum wage to live on while they are looking for further employment should they become unemployed (Venter, 2003). Other types of compensation are reward programs where employees receive public recognition for their work. E.g., employee of the month competitions or even just receiving acknowledgement in the form of a thank you can boost employee morale (Pierce and Gardner, 2002). This is called intrinsic compensation as it is related directly to the nature of work (Harzing and Van Ruysseveld, 1999). Other forms of intrinsic compensation: †¢ Interesting work †¢ Good career prospects †¢ Corporate image †¢ The role of the external environment Labour market conditions, area wage rates, industry wage rates, government taxes, collective bargaining agreements, and the cost of living are all external factors that need to be taken into account when determining wages (Sherman and Bohlander, 1992). Organisations have little or no control of these factors. A South African specific factor is that due to apartheid many previously disadvantaged races such as Blacks, Coloureds and Indians were excluded from the labour force or under paid. These inequalities need to be addressed in terms of theShow MoreRelatedAssignment1202 Words   |  5 PagesCompensation Management in corporates amp; components of compensation | By Regu Krishnan   Dy. 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