ABSTRACT
Employers compensate their employees to motivate them to work (Aft, 1985). Therefore a study of compensation theory starts with motivation theories. Compensation is divided into financial compensation and non-financial compensation. Financial compensation includes pay and benefits. Non-financial compensation includes a variety of things people value and want to receive through their work. Organizations use both financial and non-financial compensation to attract the quality and quantity of employees needed, retain these employees and motivate them towards organizational goal achievement. A fair and market-related financial compensation plays a key role in the organization’s ability to attract, retain and motivate employee performance. A well-structured, flexible
When you have completed this chapter you should be able to:
1. Discuss the role of compensation in human resource management. 2. Discuss the requirements for an effective compensation system. 3. Describe external and internal influences on compensation. 4. Explain the factors that affect the pay level decision. 5. Discuss job evaluation as a human resource management activity, and
describe the steps in the implementation of a job evaluation project. 6. Evaluate different pay incentive schemes.
