Criteria of a Successful Compensation Policy

Compensation management creates a system of rewards that is equitable to the employer and employee alike. Patton (1977) suggests that in compensation policy, seven criteria should present to ensure effectiveness. They are:

i) Adequate: Minimum governmental, union, and managerial levels should be met.

ii) Equitable: Each person should be paid fairly in line with his or her effort, abilities, and training.

iii) Balanced: Pay, benefits, and other rewards should provide a reasonable total reward package.

iv) Cost-effective: Pay should not be excessive, considering what the organization can afford to pay.

v) Secure: Pay should be enough to help an employee feel secure and aid him or her in satisfying basic needs.

vi) Incentive providing: Pay should motivate effective and productive work.

vii) Acceptable to the employee: The employee should understand the pay system and feel it a reasonable system for the enterprise and himself or herself.

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