Objective of Compensation

Theories-of-Compensation

The objective of the compensation function is to create a system of rewards that is equitable to the employer and employee alike. The desired outcome is an employee who is attracted to the work and motivated to do a good job for the employer. Patton suggests that in compensation policy there are seven criteria for effectiveness. Compensation should be:

:-:Adequate Minimal governmental, union, and managerial levels should be met.
:-:Equitable Each person should be paid fairly, in line with his or her effort, abilities, and training.
:-:Balanced Pay, benefits, and other rewards should provide a reasonable total reward package.
:-:Cost-effective Pay should not be excessive, considering what the organization can afford to pay.
:-:Secure Pay should be enough to help an employee feel secure and aid him or her in satisfying basic needs.
:-:Incentive-providing Pay should motivate effective and productive work.
:-:Acceptable to the employee The employee should understand the pay system and feel it is a reasonable system for the enterprise and himself or herself.

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