• A reward given to employees for their performance is called compensation.
• Employee compensation is the process of paying and rewarding people for the contributions they make to an organization.
• Compensation is a broad term which includes pay and benefits such as insurance, retirement savings, and paid time off from work.
• Compensation represents the total package of rewards—both monetary and nonmonetary.
• Compensation is insurance paid by companies to provide benefits to employees who become ill or injured on the job. Through this program, workers are provided with benefits and medical care, and employers have the assurance that they will not be sued by the employee.
• Generally, something received in return for something else. Wages and other financial benefits earned from labor.
• A recompense or reward for some loss or service.
• Something (such as money) given or received as payment or reparation (as for a service or loss or injury).

Compensation may be used to:

• Recruit and retain qualified employees.
• Increase or maintain morale/satisfaction.
• Reward and encourage peak performance.
• Achieve internal and external equity.
• Reduce turnover and encourage company loyalty.
• Modify (through negotiations) practices of unions.

Components of a compensation system:

• Job Descriptions job descriptions define in writing the responsibilities, requirements, functions, duties, location, environment, conditions, and other aspects of jobs.
• Job Analysis The process of analyzing jobs from which job descriptions are developed. Job analysis techniques include the use of interviews, questionnaires, and observation.
• Job Evaluation A system for comparing jobs for the purpose of determining appropriate compensation levels for individual jobs or job elements. There are four main techniques: Ranking, Classification, Factor Comparison, and Point Method.
• Pay Structures Useful for standardizing compensation practices. Most pay structures include several grades with each grade containing a minimum salary/wage and either step increments or grade range.
• Salary Surveys Collections of salary and market data. May include average salaries, inflation indicators, cost of living indicators, salary budget averages.

A) INTRINSIC COMPENSATION Task identifies,Task significance,Autonomy,Feedback,Decision making,Recognize Supervisory,Interesting work, Skill verity

B) EXTRINSIC COMPENSATION.

1) Monitory
seniority pay.merit pay.Colas.incentive pay.pay for knowledge.Commission.Bonuses.Increments.Piece rates.Base pay.

2) Non monitory

a) Legal required benefits. Social security act of 1935, Unemployment insurance,Old age, supervisor and disability insurance,Medicare,Family and Medicare leave act 1993.Fair labour standard act 1939, Minimum wage. Overtime provisions.Equal pay act of 1963.Children labour provision, Civil rights act 1964,Age discrimination in employment act 1967,Pregnancy discrimination act 1978, Disability act 1990.

b) Discretionary benefits
• protection programs
  Disability insurance,Life insurance,Pension programs,Health protection programs, Indemnity plans,Health maintenance organization,Vision insurance,Dental insurance.
• Paid time off
  Holidays, Vocations, Sick leaves, Personal leave, Funeral leaves, Rest period(break), Lunch period
• Service
  Employee Assistance programs,Family assistance,Tuition Reimbursement, Transportation services, Out placement assistance, Wellness programs.