Employee Compensation

COMPENSATION IN AN ORGANIZATION

ARIN BANDARI

COMPENSATION IN AN ORGANIZATION

ARIN BANDARI

Bristol University

BUS 545 - Dr. Fathiah Inserto

Bristol University

BUS 545 - Dr. Fathiah Inserto

Compensation is arguably the most important part of employment. We do what we do in order to be compensated for the work we perform. Many believe the word “compensation” simply means to get paid, this is not necessarily the case. Compensation may include several types of imbursements which can be direct or indirect, monetary or non-monetary (hrcouncil.ca, 2014). An efficient company would work to remain competitive and rewarding in an economy where a potential employer has many options to choose from (hrcounci.ca, 2014). Simply by establishing well-structure program for compensation, an organization can remain sustainable yet rewarding with good wages, benefits and rewards (hrcouncil.ca). This paper will look to examine the importance of compensation and its relation to the influence, consistency, competitiveness and equity that it can generate.

Influence of Pay and Equity Theory

It is safe to assume that there exists a direct relationship between an employee’s compensation and their overall job satisfaction: the higher the pay, the greater the satisfaction with the job (Kleiman, 2014). In actuality this perception is far from the truth, the reality is compensation is more directly associated with fairness of pay (Kleiman, 2014). We can look to professional sports to provide some context, a sports player generally demands more and more money, not entirely out of greed, but rather simply because he views himself as much more capable than players earning more (Kleiman, 2014). Equity theory provides a strong basis to explain the importance of equity when establishing pay scales. Equity theory “states that people form equity beliefs based on two factors: inputs and outcomes” (Kleiman, 2014, p.9). Inputs refers to the employee’s belief regarding their contributions...