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Compensation encompasses all forms of monetary and non-monetary rewards provided to employees, serving as a means to attract and retain talent while supporting employee well-being. A well-structured compensation strategy is essential for ensuring pay equity, motivating performance, and aligning with business goals. It involves direct compensation such as salaries and performance incentives, as well as indirect benefits that enhance employee satisfaction. Effective compensation design considers legal compliance, market competitiveness, and transparency in communication.
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References
Chapter 5_ Compensation and Benefits.pdfClass Notes
Memorization
What we have learnt
- Compensation includes both ...
- A good compensation system ...
- Non-financial benefits cont...
Final Test
Revision Tests
What we have learnt
- Compensation includes both direct pay and indirect benefits.
- A good compensation system balances equity, competitiveness, and compliance.
- Non-financial benefits contribute significantly to employee satisfaction.
- Regular benchmarking and transparent communication are essential.
- Fair, ethical, and performance-linked pay builds trust and motivation.
Key Concepts
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Term: Compensation
Definition: All forms of monetary payments and non-monetary rewards given to employees in exchange for their work.
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Term: Direct Compensation
Definition: Monetary compensation that includes salaries, bonuses, commissions, and allowances.
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Term: Indirect Compensation
Definition: Non-monetary benefits such as health insurance, paid leave, and retirement plans.
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Term: Internal Equity
Definition: The principle that employees should be paid fairly in comparison to their co-workers in similar roles.
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Term: External Competitiveness
Definition: The alignment of pay rates with prevailing market rates to attract talent.