Compensation management is about designing and administering pay so that employees feel it is fair, competitive and linked to performance/skills, while the organisation can control cost and comply with laws.
This topic is highly scoring because many answers can be presented as:
You should be able to:
Compensation is the total reward an employee receives for work performed.
It includes:
Simple exam line: Compensation = pay + perks + benefits.
A good compensation system aims to:
Key principles:
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Wages vs salary:
Thus, wages are time-based and variable, while salary is fixed for a period.
Wage concepts:
Order: Minimum < Fair < Living.
Human Resource Management (HRM or HR) is the strategic approach to the effective management of people in a company or organization such that they help their business gain a competitive advantage. The overall purpose of human resources (HR) is to ensure that the organization is able to achieve success through people.
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Compensation management is about designing and administering pay so that employees feel it is fair, competitive and linked to performance/skills, while the organisation can control cost and comply with laws.
This topic is highly scoring because many answers can be presented as:
You should be able to:
Compensation is the total reward an employee receives for work performed.
It includes:
Simple exam line: Compensation = pay + perks + benefits.
A good compensation system aims to:
Key principles:
Exam tip: Write in two columns (internal vs external).
These are classic exam definitions.
Remember: Minimum < Fair < Living.
Typical steps:
Flow: Job analysis → Job evaluation → Wage survey → Pay structure → Implementation → Review
Common components (varies by organisation):
Simple pay structure model: Gross pay = Basic + Allowances + Incentives/Bonus
Incentives are extra payments/rewards to motivate higher performance.
Types:
Another exam angle:
Job evaluation is a systematic process of determining the relative value of jobs (not people) to create a rational pay structure.
Objectives:
Common methods:
Mini method table:
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Job evaluation determines the relative value of jobs to create a fair pay structure.
Job evaluation focuses on jobs, not employees, and supports a rational and equitable wage structure.