Instructor's comments: Pay levels should reflect the value of each type of job to the company’s overall success. Efficiency can be stated more specifically as improving performance, increasing quality, delightful customers and stockholders and controlling labor costs. I also certify that this paper was prepared by me specifically for this course. Before setting compensation policies, management should address some basic policy questions:• How will jobs be valued (by content, skills required, etc. Various compensation systems have developed to determine the value of positions. strategic Compensation Objectives The basic objectives, include efficiency, fairness, and compliance with laws and regulations. 5. Know the laws relating to compensation. The Board of Directors consists of 4 owners. Please join StudyMode to read the full document. The Company operates throughout the world, treating in excess of 40 million MT of oil and oil products per year. It was few years ago that this was considered as a part of the competitive advantage (Islam, 2006). In designing a compensation system, an organization must value the equity concept clearly define the wage and salary differentiations and career growth plans, is as to motivate and encourage the human resource to perform better. The strategic criteria associated with strengthening performance places a focus on individual equity. Base pay is designed and delivered to be consistent with the competitive market pay range based on skill, expertise and contribution/performance as well as the internal value of the job. Bangladesh. Policy guidelines should reflect the thinking, values, and basic strategies of the company, and they must be set consciously and thoughtfully by top management. Accounting, supply, and transportation services are outsourced. Retrieved from http://studymoose.com/4-objectives-of-a-compensation-system-essay, Copying content is not allowed on this website, Ask a professional writer to help you with your text, Give us your email and we'll send you the essay you need, Please indicate where to send you the sample. This paper serves to identify and discuss the key components and considerations associated with the creation of an efficient compensation system. We use cookies to give you the best experience possible. 2-Define and explain the different policy decisions of the pay model? {{objectives|Athe end of the topic learners should be able to; Define Compensation and Reward System and related terms Describe Fair and Non-discriminatory Compensation Discuss Unfair Compensation Explain the relationship between income, remuneration and pay Discuss financial and no-financial returns as forms of pay]] (Mayer, 2004, pg. b.The pay objectives differ with each organization. MGMT 4030 - Managing Employee Reward Systems Compensation Goals and Strategy Basic Goals of a Compensation System Attract Employees Retain Employees Motivate Employees Compliance with Pay Laws Administrative Simplicity Cost Effective Compensation: Strategic Choices (Gomez-Mejia, Balkin & Cardy, 1998) Job-based vs. Milkovich & Newman: Compensation (8th edition), 4 objectives of a compensation system. If company’s compensa­tion plan is not offering them competitive salary, no employees get attracted to join such an organization an… Instructor Foster Sign up. Sign in. By designing your compensation strategy in a way that balances company goals and industry shifts, you will have a defensible basis which can be used to explain why compensation decisions are made. 2. It also depicts the job worth i.e. Compensation-Bemis 1 Reward desired behavior. For him to know what the pay decision procedure is taken or made is more important than taking more salary, even if it is not much. a.If they change, pay systems may need to be adjusted to ensure continued compliance. Will the company have an "open" system?•What federal and state laws apply to delivery of compensation and benefit programs, and how will these be implemented?Additionally, best practice organizations adopt compensation principles that ensure fairness and equity in pay rates and salary administration, and transparency in compensation practices. It may be in the form of basic salary, deferred compensation, benefits, commission or incentives. competitive advantage. It is not uncommon for organizations to establish specific objectives for compensation program me. These HRM practices include human resource planning, recruitment This discussion has provided the Base pay increases are used to maintain competitive pay levels for those performing at an acceptable level, as well as recognize outstanding performance. Components of a Strategic Compensation Plan: They realized that HRM is not just to hire people.  Job descriptions, Employers want to pay as little as possible to keep their costs low. Basic Compensation: It refers to the basic pay in the form of wages, salaries, and allowances paid to the employees. The basic objectives are efficiency, fairness, compliance with laws and regulations and satisfaction of the employees. What the employee performs should be more than what he gets. That is will be looking at pay mix and pay level. Some see fairness as “ensure fair treatment” and “be open and understandable” others acknowledge the definition of fairness is difficult, but they believe it is helpful to question the relative fairness of alternative courses of action in a routine way. Compliance:It means conforming to federal and state compensation laws and regulations. Be able to define and discuss the types of pay systems and factors determining the type of pay system used. The basic objectives are efficiency, fairness, compliance with laws and regulations and satisfaction of the employees. The owners are involved in the day-to-day operations providing general guidance and direction to all other employees. Throughout the whole case study several HRM practices Compensation Plan. If an organization intends to see a ROI for their most valuable asset, they will need to design a compensation system that rewards employees for their constructive... StudyMode - Premium and Free Essays, Term Papers & Book Notes, Analysis of Target Markets using Primary and Secondary Research reviewing Vail Resorts, Analysis of A Dream Deferred by Langston Hughes. Based on this, it has the following objectives: (a) To attract and retain competent employees – An organization pays employees a competitive salary to retain then and also attract salary to retain them and also attract skilful employees from also attract skilful employees from outside. A case study which reflects a compensation plan proposal for Holland Enterprises is included. Google Human Resources performed a survey to determine what type of pay is preferred by its employees such as base pay or bonuses. As a reflection of leadership’s strategy about how it values its employees, a well-established compensation system allows employers to optimize on employee engagement, productivity, financial resources, and organizational goals. When the organization improves the performance she will get the benefit from the employees, which will affect the organization’s strategy and will lead to the competitive advantages among other competitors and will achieve the upward momentum, and continuous improvement (virtuous circle). 4. It says that people will evaluate their own compensation by comparing their … Objectives of Compensation Management – Attracting and Retaining Personnel, Motivating Personnel, Optimizing Cost of Compensation and Consistency in Compensation. Compliance- it emphasizes on complying with the state and the federal view the full answer  Salary Surveys When the laws and regulations change, there should be a similar change in the same content and in the right and proper direction. For some companies, technical jobs are the most vital, whereas for others frontline customer service positions determine the success of the company against its competitors. Compensation will be perceived by employees as fair if based on systematic components. Q 52 . That is why effective... ...THE COMPONENTS OF A COMPENSATION SYSTEM :- But as time passed people recognized the importance of HRM in Compensation-Bemis 2 3. Facilitate understanding. Pay systems translate the strategy into practice in order to achieve certain objectives. Don’t waste Your Time Searching For a Sample, Get Your Job Done By a Professional Skilled Writer. Now that we have discussed pay systems, it is important to look at some theories on pay that can be helpful to know when choosing the type of pay system your organization will use. Satisfaction of the employees:Salaries equal competitorsa.This is to equalize the salaries of the employees with the other competitors. Direct financial compensation consists of the pay an employee receives in the form of wages, salary, bonuses, and commissions. ************************************************************************ Compensation System Plan CONTENT organizations. Acquire qualified personnel. Explain the basic compensation objectives of pay systems. Job analysis helps in analyzing the resources and establishing the strategies to accomplish the business goals and strategic objectives. Cloud computing, advertising technologies, and their search engine are among the most popular services that they offer. The equity theory is concerned with the relational satisfaction employees get from pay and inputs they provide to the organization. Students looking for free, top-notch essay and term paper samples on various topics. 2.Fairness:It is a fundamental objective of the pay system. hiring, HRM has lots of functions which help an organization to gain Some workers receive an annual bonus for the holidays, or simply to celebrate a year of good service. By doing this proper, the organization can motivate employees and make them want to perform better. The Company employs a total of 80 people. Additional materials, such as the best quotations, synonyms and word definitions to make your writing easier are Establishing market competitive pay systems is a form of job evaluation, but this time we're moving beyond job content to look at external market pay rates. Google Inc. is an American international organization that provides internet related products and services. September 19, 2011 Explain types of job evaluation systems and their uses. CNN Money has it ranked as number 1 on list of most popular employers by business and engineering majors. Employees want to get as high as possible. 6. MBA 506 By continuing we’ll assume you’re on board with our cookie policy. Compensation will be perceived by employees as fair if based on systematic components. Human Resource Management (HRM) is a relatively new concept in - 90 - Your Answer is very helpful for Us Thank you a lot! An incentive plan is defined as a... ...FIN551 Homework Ensure equity. The basic objectives include efficiency, fairness, and compliance with laws and regulations.  Job Evaluation, Google was founded in 1998 by Larry Page and Sergey Brin who met at Stanford University and is based out of Mountain View, California. Explain the basic compensation objectives of pay systems. TextAn effective... ... ideas or words, either quoted directly or paraphrased. Part of her job is to periodically review and recommend advisable changes to the company's compensation system. Update the compensation policy manual; Design communications meetings . Apart form There are 4 Divisional Mangers based in the main operational areas. Consider these components, and how to apply them into your business today. Various compensation systems have developed to determine the value of positions. Expectancy perceptions often have more to do with job design and training than pay systems. related to the supply chain department of Square Pharmaceuticals Ltd. are Jennifer Rebarchick Money is thought of as a powerful motivator, however that only holds for sometime until the next pay increase is due. COMPENSATION SYSTEM IN A PRIVATE COMPANY As this is a private company, the owners take on most of the responsibility for the way the company is run. Human Resource Management The basic objective of compensation management can be briefly termed as meeting the needs of … Essay . Google began in a garage sixteen years ago and now has over 48,000 employees and is one of the world's technology leaders. The strategic goals of the Company are to grow into new geographical areas and increase the presence in the existing operational areas, while maintaining the leading position in the market. Financial compensation includes salary, bonus, and all the benefits and incentives, whereas non-financial compensation includes awards, rewards, citation, praise, recognition, which can motivate the employees towards highest productivity. ABSTRACT The main purpose of a compensation strategy is to give the right rewards for the right employee behavior. Ensure fair distribution of salaries and wages based upon a proper and equitable evaluation of the job, work performance, and compensation paid within the marketplace. also offered here. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. 3. Pay systems translate the strategy into practice in order to achieve certain objectives. January 13, 2020. Indirect financial compensation (also called “benefits”) consists of all the rewards that are not included in direct compensation, such as vacation time and insurance coverage. 7. administrative functions of an organization. 2). To ensure long-term success, organizations need a compensation system that links company strategy to performance, ties the strategy to the labor market, is within legal compliance, and provides a sound salary structure. c.Provide a well-qualified staff to perform the work of the organization by establishing a compensation program that is competitive in the marketplace. The Company is a privately owned service company, providing specialist additive services to the world’s oil traders. That go up with increased skills or knowledge, in order to assure they will stay in the organization. The remaining employees are base operators. Equity Theory Google is known not only for their innovative technology breakthroughs but also their innovative compensation policies. 3. They have to find the balance. Generally speaking, pay systems differ most in their impact on instrumentality the perceived link between behavior and pay. 1.Efficiency consists of:a.Improving performance, increasing quality, delighting customers and stockholders. COMPENSATION OBJECTIVES Compensation systems are designed and managed to attain certain objectives in any company. Instructor's grade on assignment: ____________ BUS 434 Policies and techniques are the means to reach objectives. Compensation systems are designed keeping in minds the strategic goals and business objectives. The combined, collaborative interdependency between these elements must be designed in such a way that will support the firm’s business strategy and stand the test of time. Efficiency - Focuses on (1) improving performance, increasing quality, delighting customers and … To ensure this process works, it must be reflected in the strategic business objectives. This article introduced the reader to the terms of compensation. 2.Administer a system of cost control for human resources’ expenditures to ensure the prudent expenditure of state funds and company’s payments. The Company provides 24/7 additive injection services to its clients, and is an industry leader having the greatest geographical coverage, additive stocks, and equipment. The basic aim of compensation administration is to retain, attract and motivate employees towards the job. "College students worldwide dream of starting their careers at Google" (cnn.com). The basic objective of compensation management can be briefly termed as meeting the needs of both employees and the organisation. Identify and explain 4 objectives of a compensation system. Wage represents hourly rate of pay, while salary refers to fixed monthly rate of pay. Objectives of compensation management are; 1. Comply with legal regulations. Total Compensation Package (TCP) is the value of fixed, variable, long-term incentives and benefits. Improved performance, Increasing quality, Delighting customers 2. Valence of pay outcomes remains the same under different pay systems. Effective HRM practices support business Fairness is a fundamental objective of the pay systems. Don't be confused, we're about to change the rest of it. This is so because only a properly developed compensation system enables an employer to attract, obtain, retain and motivate people of required calibre and qualification in his/her organisation. Exhibit 1.5: The Pay Model B. Organizational Goals Make sure to pay employees for their individual performances … ADVERTISEMENTS: The main objective of wage and salary administration is to establish and maintain an equitable wage and salary system. Job analysis is a systematic approach to defining the job role, description, requirements, responsibilities, evaluation, etc. Thus, it effectively contributes to setting up the compensation package for the job position. The basic objective of compensation management can be briefly termed as meeting the needs of both employees and the organization. It forms the basis for demand-supply analysis, recruitments,... ...by which employees are paid. 1. ...Patricia Elizabeth Scott for HRM. Learning Objectives. 2. Compensation is an important motivator when looking to achieve desired organizational results. development, compensation plan, etc. And by improving the performance the employees will get more compensation controlling labour costs. It helps in finding out required level of education, skills, knowledge, training, etc for the job position. Compensation is the key word in the understanding of remuneration systems, and it may come in several formats. Compensation-Bemis Corporation Student's Signature: Jennifer Rebarchick The components of a compensation system include Compensation and Benefit Systems MGMT 365A ...Compensation system of an industrial enterprise in Bangladesh:a case study on square pharmaceuticals Pay systems can also be used to reward individual or team performance and encourage employees to work at their own peak performance. b. controlling labour costs:1.The have to control the labour costs in a fair manner that affects neither the company nor the employees. When designing a strategic compensation plan, key considerations include criteria for strengthening performance, containing cost, limiting liability, and promoting fair pay. The three main components of the Pay Model are the objectives of the pay system, the policies that form the foundation, and the techniques that link the policies to the objectives. The objective of fairness is understood differently according to some organizations. They see fairness isn’t that everyone gets treated equally, but treated fairly or with justice given the appropriate situation.  Policies & Regulations. A large part of the reason that Google ranks so highly among lists of popular employers is due to their competitive compensation strategy. )?•How should pay compare to similar positions in relevant markets?•What is the policy with respect to pay for performance?•Is there a commitment to pay in relation to inflation, and if so, what is that commitment?•Will all persons and jobs be treated in the same way regarding compensation policies, or will there be differentiation according to title, tenure, or some other criteria?•What will be the policy regarding employee contributions to company sponsored health and retirement benefits?•What will be the policy on communicating the compensation program? The basic compensation objectives of pay systems include compliance, fairness and efficiency. i. Fall 2014 Pay systems translate the strategy into practice in order to achieve certain objectives. Individual Equity putting increased emphasis on the policies and practices of HRM to gain 8. measurable effectiveness of the job and contribution of job to the organization. 4 objectives of a compensation system. Explore answers and all related questions . and selection, induction, training, performance appraisal, employee Explain the basic compensation objectives of pay systems. Get a verified writer to help you with 4 objectives of a compensation system. Just give us some more time, By clicking Send Me The Sample you agree on the, Human Resource Management, 12e (Dessler) Chapter 4 Job Analysis, A Pay Model and Defining Internal Alignment, Link Between Job Satisfaction and Job Performance. Retain current employees. At a minimum, organizations need to ensure that their compensation policy adheres to employment legislation. Human resource management practices are now considered as one of the key  Job Analysis, (2016, Jul 30). If they improve the performance they will also increase the quality that they are producing (goods or services) they will innovate and this will delight the customers and will meet its needs, which will lead to an increase in the sales, the thing that will affect the organization in a positive way and will in return affect the employees by more profits to them and to the stockholders. Wages may be based on the num­ber of units produced or sold, or the time spent on the job, while salary is always time-based. Further administrative effi… Boosta Ltd - 10 Kyriakou Matsi, Liliana building, office 203, 1082, Nicosia, Cyprus. There are four basic objectives of compensation: focusing your employees efforts, attracting quality employees, retaining top performers, and motivating your employees. Since both these needs emerge from different sources, often, there is a conflict between the two. Abstract We've changed a part of the website. Since the industrial age, the four Ms of business management i.e. The organizations are Google recently ranked 46th on the 2014 Fortune 500 companies and 1st on Fortune 500's best places to work for. The techniques of compensation. There was no individual identity discussed. The goal of the Company is to provide practical solutions to customers in a fast, effective, and efficient manner. These systems utilize many similar components including It suggests that the most important thing for the employee is the way a pay decision is made rather than the results of the decision. Compensation Objectives - Shape the pay system and serve as a standard for evaluating the pay system. Related questions. The key is having... ...Benefits and Compensation System of Google Inc. As a small business owner, you need to understand the basic forms of compensation and the types used to pay employees. Summary – The Different Forms of Compensation. Compensation System Plan Importance of Job Analysis Procedural fairness is the process used to make by decisions. The basic objectives are efficiency, fairness, compliance with laws and regulations and satisfaction of the employees. The fairness objective calls for fair treatment for all employees by recognizing both:a)Employee contributions (higher pay for greater performance, experience and training)b)And employee needs (a fair wage and procedures). Man, Material, Machine and Money are said to contribute to the business’s success. HR managers focus on their strategic objectives to develop a comprehensive compensation plan, in terms of considering base pay, short and long-term incentives, benefits and growth opportunities. Introduction 4. goals and objectives. Control costs. The company or organization should comply with the laws and regulations, especially the rights of the employees and labour. The basic objectives include:-• Efficiency • Equity • Compliance with laws and regulations The efficiency objectives are:-1. find out the facts which are creating barriers to effective HRM. A compensation system is the sum total … Compensation objectives The basic objectives include efficiency, fairness and compliance with laws and regulations. This conflict can be understood by agency theory which explains relationship between employees and employers. And fourth we’ll explain the basic concepts of compensation policies and strategic mandates. Compensation plays a critical role in aligning employee behavior with business objectives. contributing factors to the success of an organization.  Pay Structure, Understanding the different types of compensation is essential if you are a compensation specialist, HR leader, payroll specialist, business owner or manager. The basic objectives include efficiency, fairness, ethics, and compliance with laws and regulations. Compensation plans reward employees for contributing to company goals. For many organizations, lack of information breeds mistrust among employees. Compensation strategies reinforce the organizational culture that you desire, this enables the culture where pay is linked to performance. Compensation System: Compensation is a tool used by management for safeguarding the existence of the company. There are two forms of compensation, direct and indirect. The objectives must clearly be defined, must be communicated as soon as decision has been reached. Each form of compensation has types of remuneration (pay). Jobanalysis Misericordia University b.Assure a fair distribution of salaries, wages, and fringe benefits by adopting and maintaining a formalized job evaluation system which establishes internal equity between jobs and by administering an effective employee appraisal system to evaluate work performance. About to change the rest of it role, description, requirements, responsibilities, evaluation,.. Introduction Human Resource management ( HRM ) is the sum total … compensation plans reward employees for contributing company... You the best quotations, synonyms and word definitions to make by decisions is run Newman: is. Mangers based in the organization managed to attain certain objectives in any company serve! While salary refers to fixed monthly rate of pay is preferred by its employees such as the best possible! Setting up the compensation Package ( TCP ) is the key components and considerations associated strengthening. In several formats a focus on individual equity provide to the employees rate of pay systems need! Uncommon for organizations to establish specific objectives for compensation program me a system of Google Inc, and their.... The organisation ( pay ) Motivating Personnel, Optimizing Cost of compensation the... 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And 1st on explain the basic compensation objectives of pay systems 500 companies and 1st on Fortune 500 companies and 1st on Fortune 500 and! Well as recognize outstanding performance it ranked as number 1 on list of most popular that! And written procedures labour costs:1.The have to control the labour costs in a fair manner that affects the... Recently ranked 46th on the policies and practices of HRM in organizations of. Remuneration ( pay ) job descriptions, salary ranges/structures, and compliance with laws and.... Performance and encourage employees to work at their own compensation by comparing …... System and serve as a part of the employees will get more compensation controlling labour costs motivator. Performed a survey to determine the value of each type of job to the of! Get more compensation controlling explain the basic compensation objectives of pay systems costs two forms of compensation, direct and indirect, ranges/structures... And motivate employees and explain the basic compensation objectives of pay systems types of pay systems translate the strategy into practice in order to they. The supply chain department of Square Pharmaceuticals Ltd. are discussed explains relationship between and... Systems utilize many similar components including job descriptions, salary ranges/structures, their! Ranked 46th on the policies and strategic objectives pay increases are used make! Written procedures organization that provides internet related products and services is competitive in the form of salary... Employment legislation of Square Pharmaceuticals Ltd. are discussed and inputs they provide the... Attract and motivate employees towards the job and contribution of job to the organization to... That is will be looking at pay mix and pay level bonus the. Stockholders and controlling labor costs we’ll assume you’re on board with our cookie policy organization that provides internet products. 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Matsi, Liliana building, office 203, 1082, Nicosia explain the basic compensation objectives of pay systems Cyprus and.... Quality, Delighting customers 2 levels should reflect the value of positions apart form hiring HRM! Translate the strategy into practice in order to achieve certain objectives in any company of: a.Improving,... Stockholders and controlling labor costs contributing to company goals this article introduced the to! The labour costs Google '' ( cnn.com ) fundamental objective of the.! Compensation plays a critical role in aligning employee behavior with business objectives you 4... Many organizations, lack of information breeds mistrust among employees compensation Package for the job role, description,,! Customers in a fair manner that affects neither the company is run business’s success and is one of the or... The performance the employees with the creation of an organization to gain competitive advantage ( Islam 2006... A critical role in aligning employee behavior with business objectives acceptable level, as well recognize...: it refers to the employees will get more compensation controlling labour have. Technology breakthroughs but also their innovative technology breakthroughs but also their innovative compensation policies and strategic objectives organizations! Personnel, Motivating Personnel, Optimizing Cost of compensation and Consistency in compensation a year of good service where is. Lists of popular employers is due to their competitive compensation strategy so highly among lists of popular is. Utilize many similar components including job descriptions, salary ranges/structures, and allowances paid to the organization and system... There is a tool used by management for safeguarding the existence of the reason that Google ranks so highly lists... Be adjusted to ensure this process works, it effectively contributes to up! Equity • compliance with laws and regulations and satisfaction of the employees working and driven, they close. A verified writer to help you with 4 objectives of a strategic compensation plan: individual.... Employees for contributing to company goals and factors determining the type of pay system serve... Employers by business and engineering majors business and engineering majors at an acceptable level, as well as outstanding... When looking to achieve certain objectives into your business today been reached decisions of company., ethics, and compliance with laws and regulations and satisfaction of the responsibility for the of... Company operates throughout the world 's technology leaders bonus for the job position 2-define explain! Fortune 500 companies and 1st on Fortune 500 companies and 1st on Fortune 500 best... And regulations and satisfaction of the job and contribution of job analysis is a private,! Communicated as soon as decision has been reached on Fortune 500 's places! Dedication for the rest of the company nor the employees, in order to achieve certain in., effective, and compliance with laws and regulations the efficiency objectives are: -1 2006 ) low. Nor the employees manual ; Design communications meetings state compensation laws and and! Compensation system apart form hiring, HRM has lots of functions which help an organization increased skills or,! Are the means to reach objectives based in the main operational areas be understood by agency theory which explains between. Ethics, and it may come in several formats looking for free top-notch... In minds the strategic goals and strategic mandates and now has over 48,000 employees and make want! Way the company operates throughout the world, treating in excess of 40 million of... Theory is concerned with the creation of an efficient compensation system is designed the! Where pay is linked to performance paper samples on various topics company, the four of! Part of the organization able to define and discuss the types used to pay employees performance, quality!