Friday, 23 November 2018

The theory of compensation

One of the goals of human resources management. Namely ensuring the Organization has a workforce motivate and high-performing, and equip with the means. To face the changes that can meet the needs of workers. In an effort to support the attainment of the workforce have the motivation and high -performing, i.e. by way of fulfilling her needs.

The compensation system is also potentially as one of the most important means of shaping behavior and affect performance. Nevertheless, many organizations neglect the potential with a perception that "compensation is no more just a cost should be minimize." Unwitting several organizations that ignore important potential and have a perception wrong has put the system precisely. As a means of increasing the behavior that is not productive or counterproductive.


As a result, appears a number of personal issues such as low employee motivation, poor job performance, high turnover, irresponsible behavior and even employee dishonesty are believe to stem from a disproportionate compensation system.

"An important driving factor that causes human beings to work is the need in man to be met" in other words. Departing from the desire to meet the needs of human life, work by selling power. Thoughts and also the time to the company in the hope of getting compensation (remuneration).

Key parts

Compensation is generally a key part of solving how to make members do in accordance with the wishes of the organization. This compensation system will help create a willingness among qualify people to join the Organization and perform the necessary actions of the organization. In general, it means that employees have to feel that by doing so, they will get the important needs that they need. Where in it including social interactions, status, respect, growth and development.

In his Compensation in Canada defines a compensation system is part of the (partial) of the reward system only deals with part of the economy. However, since the existence of the belief that an individual's behavior influence by the system. In a wider spectrum then the compensation system cannot be separate from the overall reward system provided by the organization.

Types of rebates

While the reward itself is all the things that provide organization to meet one or more individual needs. As for the two types of rebates are:

  • Extrinsic compensation, satisfying the basic needs for survival and security and also social needs and recognition. The gratification is obtain from the factors that exist around the employees around her work, such as: wages, supervision, coworker and State of work.

  • Intrinsic compensation, that meets the needs of a higher level, for example for pride, appreciation, as well as growth and development which can be obtain from the factors inherent in the employee's work that, like the challenge of employee or a job interest provide, level of diversity/variety in the work, the existence of feedback, and the decision-making authority in the work as well as the significance of the meaning of the work for the organizational values.

"Compensation is everything receive employees as retribution for their work" so through such compensation of employees can increase the work achievement, motivation and job satisfaction as well as increasing needs of life.

Issues of compensation

The issue of compensation is not only important because it is the main thrust of a person becoming an employee, but also a large influence on the spirit and excitement of working of employees. Thereby, each business entity must be able to establish the most appropriate compensation, so as to achieve the purpose of propping up businesses more effectively and more efficiently.

How much compensation is grant must be such that it is able to bind its employees. This is very important because when components that are provide to employees is too small when compare to other business entities, then this can cause employees move to another business entity.

In its development of its own compensation system has three principal components, namely:

  • The Basic Wage (base pay), is a component of basic wages for most employees, and is generally base on a count of time, such as hours, days, weeks, months or a year.

  • The wages base on performance (performance related pay), deals with monetary reward with base sizes or it is a wage base on the size of the performance of an individual, group or organization.

  • Indirect Wages employee benefit known as "advantage for employees" consists of goods services non-cash items or services that directly satisfy a number of specific needs of employees, such as income (income security assurance Security life insurance) include health protection, including medical & dental plan and retirement.

A form of compensation provide to employees can be group into 2 (two), namely. (1) financial compensation, and (2) non-financial compensation,

The Financial compensation (financial compensation)

Financial compensation means compensation is realize by some money to employees is concern. Financial compensation for implementing differentiate into 2 (two), namely:

  • Direct Financial compensation (direct financial compensation) Compensation payment is directly shape financial money employees receive directly in the form of salary/wages, economic benefits, bonuses and commissions.

  • The salary is retribution paid periodically to keep employees and has a definite guarantee. While the wage is retribution paid to workers with an agree treaty base on the payout.

  • Indirect Financial compensation (indirect financial compensation) Compensation is not directly financially including all financial award does not include direct compensation. Form of indirect compensation includes the labor insurance program, social aid. The payment of the cost of pain (medical treatment), leave of absence and others.

Non-financial compensation (compensation of non-financial)

Non-financial compensation is retribution given to employees are not shape like money, but intangible facilities. This type of compensation is distinguish into 2 (two), namely:

  • Non-financial the job (work related compensation). Non-financial compensation on this work can be an exciting job, opportunities for growth, training, authority and responsibility, appreciation for his performance. This form of compensation is an embodiment of the fulfillment of the needs of self-esteem and actualizing.

  • The Non-financial job environment (environmental work related to compensation). Non-financial compensation on this work environment can be a supervision of competence. (competent supervision), working conditions that support (comfortable working conditions).

The magnitude of the received compensation of employees reflect the title, status, and level of fulfillment. That is enjoyed by the employee and his family. If the employee receive compensation is getting bigger, meaning his term the higher. The better the status, and the fulfillment of the needs that it enjoyed more and more anyway. Thus the better the employees job satisfaction and work would be good.

Existence of adequate compensation

The existence of adequate compensation can make the employees motivate to work well. Achieving feats as expect, and the company can raise the level of employee satisfaction.

"Compensation or retribution is generally aim at the interests of the company and its employees"

The interests of the company by awarding compensation i.e. obtains work achievement of employees. Whereas the interests of employees over compensation is receive. That can meet the needs and desires and become his household economic security. For the company, compensation is a major factor in staffing.

Human resources policies are associated with considerations for determining the compensation of employees. The size level of compensation is very concern. With the level of education, level of position, and the work of employees.

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