Human Resources

Introduction

Human Resources have different functions to help an organization to operate smoothly.  Strategic planning conducted by HR allows the organization to keep up with competitors.  Part of strategic planning is to reexamine the compensation plan that the organization offers to employees.

Definition of Compensation

“Compensation is one of many human resources (HR) tool that organization use to manage their employees. For an organization to receive its money’s worth and motivate and retain skilled employees, it needs to ensure that it compensation is not an island by itself.”(www.hrcouncil.com) Compensation plans include intrinsic and extrinsic for employees to be rewarded based on their work performance on their job. Intrinsic is based on the employee’s behavior, attitude and mindset in results of their work performance.  Extrinsic is dealing with monetary and rewards the employees receive based on their knowledge, skills and job performance level.

Overview of compensation philosophy

Compensation philosophy is how an organization plans to pay the employees, as well as give employees raises and bonuses.  What helps an organization make these takes into consideration the internal and external environment factors?  The internal factors are the revenues of the company and future profits. Based on the employees will determine the need to reward or give bonus annually.  The external factors is the continual changes in the economy markets.  The need to strategic planning to forecast and the need hire base on the direction of the company. Without a compensation philosophy in place there will be nothing but confusing in the organization. HR would not know what is appropriate compensation and benefit to offer to employees and this can cause the organization to be lag in the market. The point of having a compensation philosophy is to have guide line that is in accordance with organization goals and vision. Being able to retain employees and attract new...