Compensation in HRM Essay

As a rule organizations take certain measures to minimize the employee turnover within the company because it directly increases costs of the company: it takes funds, time and efforts to find, select and hire good employees, and finally provide correspondent trainings and courses for them. One of the primary purposes of human resources management team is to create and support all the necessary conditions for employees that will decrease fluctuation of personnel and make them value their work places. This report targets compensation package of the companies including the services and benefits of the package.

Different companies offer diverse compensation packages and that is why people strive to work in some companies and avoid to work in others. Among the most widely applied tools there are the following:

  • Flexible premiums and fair wages – when performing identical tasks the wages should be equal, but higher productivity and enthusiasm should be rewarded on the corresponding level; in general salary policy should be clear and transparent – it means that employees should know why, whom and when the salary will be increased; all the duties and tasks performed by employees during the time off and in excess of planned rate should be compensated by the company, otherwise the employees will not be motivated to work hard;
  • Professional advancements – employees should be given a chance to show their abilities and best of them should hold the positions appropriate to their experience and professionalism; additionally, professional promotions should be provided in a timely manner before the employee will desert to another company;
  • Insurance – people like when their companies pay for their insurance and when they feel the company cares about them, they make more efforts in order to bring success to the company;
  • Health programs – companies can pay for the gyms, sport games and summer camps for their employees to keep them in a good form;
  • Educational programs – companies can provide partial or complete financial assistance to the employees which want to get a higher educational degree;
  • Psychological methods – all successes should be noticed and encouraged, all fails should be noticed but not always punished because after a fail there goes a raise and often it makes employee more experienced and skilled, so psychological support of successful and unsuccessful employees is a very important for the organization; moreover employees need to feel that the company values and trusts them;
  • Some other tools such as paid vacations and holidays, good working conditions, family support, assistance in the repayment of credits, accordance of lodging, retirement programs etc.

As far as the success of the company directly depends on the companies’ employees, their motivation, productivity and efforts compensation and benefits policies are very important factors of success or failure in modern market economies. Good, equal and considered compensation policy will make employees appreciate their work places and job candidates will strive to work in such company; good compensation policy will decrease company’s costs on hiring and training personnel, and increase its overall performance.


HR Guide to Internet: Compensation – outline and definitions. Retrieved 25 March 2005 from <>
HRM notes by Wilf H. Ratzburg. Compensation management. Retrieved 25 March 2005 from <>
Compensation planning for your employees from F. John Reff. Retrieved 25 March 2005 from <>
Department of human resource management. Employee benefits. Retrieved 25 March 2005 from <>