Modern trends in Compensation

Modern trends in compensation

Compensation means the basic returns that an employee obtains from his/her work. Every organization offers a good compensation to attract and retain the ablest employees on the actual work floor.

Compensation in present days to be studied is a need for achieving competent employees to bring effectiveness in day to day operation of the organization. It must be complete and at the satisfactory level of employees. Many studies have been taking place in recent few past years regarding compensation. Those current issues about compensation management are

Skill-based pay:

Compensation to employees is made on the basis of skills. Skill makes the person competent to perform the job. The basis of the job is moving away from job base to competency based. Competency is a person’s skills, knowledge, and behavior that enable performance. Job-based pay considers the value of current job based on job title. Under this method, skilled, semi-skilled and unskilled employees are grouped and compensation is made to them affording to their competency.

Broad banding:

Reduced number of ranges of salary into a low number of the range is called broad banding. Generally, several grades are divided into three bands like clerical bands, professional bands, and managerial bands. It provides flexibility for employee’s assignment.

Comparable worth or pricing method:

Pricing job is an equity pay. The brand of compensating employees is to be on the basis of the value of job which gets the certain price. The main objective of developing this trend is to overthrow the inequity between male and female with respect to their compensation. It avoids races and class discrimination to their compensation. Under this method, the weight of each job is determined by considering its factors and certain value is given and on the basis of value, compensation is determined.

Cafeteria approach:

The important current trend in compensating employees is cafeteria approach that consists of pay plus benefits and services. The employee picks benefits and services as per needs within the limit of the pay package.

Variable pay plans

Variable pay plans are also a current issue in compensation management. The use of variable pay system is increasing. This system is based on improving production and sharing of prosperity.


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