To survive in a complex, competitive global economy all organization (public and private) must be able to focus on the effective and efficient supply of goods and services. A key factor in promoting effective delivery of goods and services is provision of a performance base compensation system to the employees. The dictionary word of compensation is reward for service Amendment for loss sustained and the neutralization opposing process. Many authors have defined compensation which are mentioned below:
1. Dale Yoder: “Compensation is paying people for work.”
2. Edwin B Flippo: “The function of compensation is defined as the adequate and equitable remuneration of personnel for their contributions to the organizational objectives.”
3. Benham: Compensation is the value of work of the employees according to the agreement between employer and employee.
4. John Dunlop has explained the concept of compensation / wages from three stand points: a. wages determined the standard and volume of services of employees of market. B. Compensation influences distribution of employment of industries, firms and professional organizations by impact on cost and c. Compensation has performed some important activities like supply of active media through which technological facilities have been scattered through the economy.
5. R. S. Schular: Compensation is such an activity through which organization on the basis of its ability and within law reasonably assesses the contribution of employees directly and indirectly for the distribution of financial and non financial remuneration.
From the above definition we can say that compensation is a reward. It is given by the employer and received by the employees. So a mutual understanding must be present between the parties.
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