Title Vii

Compensation Decisions

Noel Huggett

noel.r.huggett@us.army.mil

HRM-590 Human Resource Management

Prof. Carlos Jon

October 21, 2012

Compensation Decisions

While compensation is no longer the leading factor in the retention of employees, it does play a significant role in whether or not an employee stays with the organization or not. Equity and fairness in the pay scale is necessary because it is important for each employee to feel that they are indeed receiving equal pay for equal work. Employees do equate the work they do with what they make and do the measurement of the two. The role of the compensation decisions affect the organization’s ability to recruit highly qualified employees because many individuals make decisions on whether or not to work for an organization based on “word of mouth” and in this area the best promotion comes from current employees who will refer and/or encourage other qualified individuals to join the team. However, if current employees are not happy with their rate of compensation they will be hesitant to bring others onboard.

General Compensation

The general compensation policy is use to define the organization’s philosophy on the compensation plan, and define how compensation increases for all job classification will be determined. The general compensation policy normally addressed:

* Objectives of the policy

* Statement of compensation policy

* Basis for determination of salary and salary changes

* Salary surveys

* Internal alignment

* Review of performance and salary

* Procedures

Many organization address issues such as Overtime, Performance Evaluation, Employee Classifications, and all matters pertaining to employee benefits are addressed under separate policies rather than including them with compensation. An organization’s compensation policy is use specifically to drive its compensation practices. While the compensation strategy is...