Why Compensation management plays a major role in the organization
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Employee’s compensation plays a major role in the company, as it is the heart of both employees and employers. In other words it the rewards paid by the organization in turn to the work done by the employee for the organization. Compensation plays a vital role in Human Resouce management, in which employee’s satisfaction increases and thus improving the organizational effectiveness. A compensation given by the organization do not always in the form of money. The Compensation may be different forms like a House allowance, Vehicles, bonus, profit sharing, overtime pay, recognization rewards, compensation rewards etc. compensation packages encourage the employees to give more productivity to the organization.

Learn more about this technology Workday Online Training in Hyderabad in this overview

Objectives of Compensation policy:

It Abides the  legal requirements

Appraise (or)reward to the employee with respect to the work done (or) experience of the employee.

Maintain compensation levels and differentials under  review and wage costs

Manage compensation at the time of inflation


The need for compensation management:

As a result In certain situations like inflation, if the company gives the compensation to the employee, then, there is a chance for him to stick to the company for a long time. The  importance of compensation management given below:

It provides compensation to the employee in regard to the work done by him for the welfare of the company. Compensation management increases the productivity of the employee by awarding the applicable compensation. With this we get happiness and satisfaction of workers at the time of inflations and festivals which provides a unity among workers in order to work more.

It makes the people have a positive opinion of the company and makes them work more.

Compensation types:

Compensation management are two types.

 Direct compensation:  Generally It known as the amount paid by the organization in the form of salary to the employee. As a matter of fact It known as responsibility of an organization to give direct compensation to the employee as per their experience and designation in that company.

Indirect compensation:  It known as the compensation given to the employee specifically because of his/ her specific work done to the organization and the amount offered will be rewarded as per the company rules according to his work/ service/experience.

The compensation may given wholly at the end of service  (or)  periodically based on the company standards.  This compensation is based on several components. Let us discuss some of them:

Wages and salary:

However Many people think that wages and salary were same.But actually, wages are the payment paid by the employer to the employee on the daily basis whereas salaries were paid to the employees on the monthly basis.


Not to mention Allowances are the additional payment given to the people with certain specified rules and regulations for a specific purpose Basic upon the basic pay, we have various types of allowances.Let us discuss some of them

Dearness Allowance: It paid with respect to the percentage of basic pay. Its intention is to save the employee income when the employee regular expenses increase.

House Rent Allowance: When the company does not provide a house for its employees, it will pay the House Rent Allowance (HRA). This is calculated as the percentage of salary

City Compensatory Allowance: Cost of living is a bit high in metropolitan when compared to the other cities.So the company pays the extra amount to the employees who live in Cities so as exist with the normal city people

Transport Allowance: people who were far to the offices need to travel a  lot to their offices. At the same time company provide TA along with basic allowances


Generally these variable pays given to the employees with proportional to the work done by the employee to the organization.

Fringe Benefits:

Especially it contains additional benefits like hospitalization, Medical care, accident care, uniform, and recreation.

If all these benefits provided by the employee, he get more satisfied with the allowances provided by the company and be stuck with the company for a long time.

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Recommended Audience :


Project Manager

Analytics professionals.

ETL professionals.

People Who interested in maintaining the data

Prerequisites :

It is good to have Knowledge of HR-related subjects like MEFA. But it is not mandatory and there is no necessity for the Knowledge of Programming Language.

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