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Hr Compensation

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| Compensation | Defining compensation, compensation philosophy, and critical components of a compensation. strategy. | |

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Introduction Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. (Hr guide 2000) Compensation is a financial tool used by companies in every industry as an incentive when recruiting new employees. It is also used with existing employees to induce performance and as a reward for good appraisals. It is used to spur employees to take an active interest in their development. Finally is often factored into labor management relations and even employee terminations. The bottom line is that a company uses compensation to achieve its strategic goals and plans. This paper will discuss compensation philosophy, the critical components of a compensation strategy, and will give example of an effective compensation practice/policy.
Compensation Philosophy All companies with employees must determine how and what to pay their workers and when to offer things like raises, bonuses and other incentives. (wisegeek.com 2009) Compensation is often packaged in many forms. To put it simply, compensation is the plan on how employees will be paid throughout different cycles of their careers. At the beginning of their career when they are being recruited companies offer wages, benefits, and other financial perks such as bonuses to recruit the best, most qualified candidates for the position that needs to be filled. There are various merit increase programs depending on the company that will determine wage increase after the employee has worked for the company for a specific amount of time. Many companies offer stock options and 401k retirement plans as well that are considered a form of compensation. Compensation is can be different from one company to the next but they all are designed

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