) Managing Compensation
Establishing strategic compensation programs requires an assessment of organizational objectives in relation to specific employment goals—employee retention for continued growth, compensation distribution to ensure employees feel treated fairly, communication of compensation methods to increase employee understanding of organizational objectives, and adherence to a budget for cost efficiencies, for instance. Compensation must reward employees for past efforts (pay-for-performance) while motivating employees’ future performance. Internal and external equity of the pay program affects employees’ concepts of fairness. Compensation consists of three main components. Direct compensation encompasses employee wages and salaries, incentives, bonuses, and commissions. Indirect compensation comprises the many benefits supplied by employers, and non-financial compensation includes employee recognition programs, rewarding jobs, organizational support, work environment, and flexible work hours to accommodate personal needs.