Human resources are the most precious assets of any organizations. They are the corner stone of
any working place. They carry out everyday operations including the customer dealing,
managing the cash flows, running the machines, decision making, counseling of their
subordinates, and including many other vital functions of the organization. People make
machines and people run machines. Henry Ford, an American Industrialist pointed out the
importance of Human resources by saying: “Take my business, burn up my building, but give me
my people and I will build the business right back again”. Undoubtedly, these are the employees
of the organization who can take an organization towards prosperity with their hard work and
determination and they can also lead an organization towards the downfall if their needs are not
being identified and satisfied. Literature has identified various human resource management
practices which are considered to be the best practices for retaining and motivating human
capital in an organization. One of the early and foremost practices is compensation management
which deals with compensating the employees of any organization according to the duties they
perform and responsibilities they cope up with.
Human Resources are the key drivers of the prosperity and success of any organization. Unless
and until the organization does not offers salary, rewards and due benefits according to its
employees needs and wants, it would not be able to conquer the highest level of efficiency and
competence of the recruits.
Employee compensation includes all forms of pays given to the employees arising from their
employment (Dessler, 2008). Compensation management is one of the strapping feature that
organizations use to attract and retain its most valuable and worthy assets. Compensation
includes financial as well as non-financial rewards. Today’s employees not only require money
to fulfill their basic needs but they also necessitate various non-financial rewards and benefits,
often known as the Fringe Benefits. These fringe benefits include bonus, retirement benefits,
gratuity, educational and medical facilities etc.
The compensation management is considered to be a complex process which requires accuracy
and precision and if not carried out properly may lead to organizational concerns. An ideal
compensation policy encourages the employees to work harder and with more determination. It
also helps the organizations to set the standards that are job related, realistic and measurable.
Compensation policies should have a sound integration with other practices of HRM. One of the
indispensable functions of compensation policy of any company is to provide growth
opportunities to its employees and to create a vigorous competition among the employees in
order to have an urge to work more efficiently and proficiently.