DeVry University
HRM-430
Week 3 Assignment

Compensation embodies both the intrinsic and extrinsic rewards employees obtain for accomplishing their jobs. Collectively, both intrinsic and extrinsic compensation refer to a company’s total compensation system. Innate compensation replicates employees’ psychological mind-sets that stem from accomplishing their duties. Extrinsic compensation consists of both financial and nonfinancial benefits. Organizational development professionals promote intrinsic compensation through effective job design. (Martocchio 4)
Compensation is based on the following:
• market study regarding the value of comparable jobs in the marketplace,
• employee contributions and achievements,
• the accessibility of employees using comparable skills in the marketplace,
• the need of the employer to appeal and retain a certain employee for the value they are recognized to add to the employment relationship, and
• the profitability of the company or the funds available in a non-profit or public sector setting, and thus, the ability of an employer to pay market-rate compensation.

“Compensation moreover comprises payments such as bonuses, profit sharing, overtime pay, recognition rewards and checks, and sales commission. Compensation can also consist of non-monetary perks such as a company-paid car, stock options in certain instances, company-paid housing, and other non-monetary, but taxable, income items.” (Heathfield)
Overview of Compensation Philosophy
A compensation philosophy is basically a formal account detailing the company’s view regarding employee compensation. For all intents and purposes, it clarifies the reasoning behind employee pay and generates a basis for consistency. “Employers can benefit from being transparent about their compensation philosophy and having an official pay strategy.” (SHRM.org, 2012)
A well-made