COMPENSATION “Compensation is all the income in the form of money, goods directly or indirectly received by employees as a reward for services rendered to the company” (Malayu S.P. Hasibuan, 2002:54)

OBJECTIVES OF COMPENSATION Attract employees Maintain competent employees Motivate employees

COMPONENT OF COMPENSATION Compensation Non Financial IndirectDirect Salary Insentive Wage Unmandatory Facility Work Flexibility Work Environment Job Financial Mandatory

Non Financial Compensation Non Financial Compensation is the satisfaction one receives from the work itself or the environment where the person works Job Interesting tasks Challanges Responsibility Recognition Sense of achievement Work Environment Good policies Capable manager Competent employees Pleasant co- workers Decent status symbol Working conditions Work Flexibility Flexible hours Compressed work week Division office Working from home More work Fewer hours

Financial Compensation Wage Principal payments received on the basis of hours worked by employees such as production and maintenance Salary Fixed periodic payments received by the employee clerical, administrative, managerial & professional Insentive Extra salary provided by the organization. Incentive programs tailored to productivity, sales, profits or cost-cutting efforts Fasility Pleasure given to employees of the organization such as a company car, club memberships, special parking places Direct Compensation

Indirect Compensation Mandatory Benefit Covering compensation of employees Family and medical leave Social security Unemployment benefits Unmandatory Benefit Fee of not worked time Health care Life insurance Retirement plan Employee stock option plan Unemployment benefits Additional Service employees Premium paid

Justice in Compensation Justice Theory is a theory of motivation that people assess their performance and attitudes by comparing their contributions to the work and the profits they gain from it with the contribution and benefit from others that are comparable they choose and that in reality may resemble or may not resemble them

Justice in Compensation External Justice Financial Justice Internal Justice Team Justice Employee Justice

Factors Affecting Compensation Pricing Organization Labor Market Job Employee

Compensation Policies Organization Poltics Ability to pay Pay Leader Pay Follower Organizational level who decide the paid amount Organization decide the max amount Organization

Labor Market is potential employees who are in the geographic area of origin of the employee recruited Compensation Survey FeasibilityCost of Life Unions Economic Condition Legislation

Job Job Analysis Job Description Job Evaluation Job Pricing

Employee Performance- based Skill-based Competence- based SeniorityExperience Organization membership Potential Political influence Fortune

SALARY SURVEY Used to decide the salary level to be applied Can be done through: 1.Questionnaire 2.Newspaper or magazine 3.Internet 4.Survey institution Used for: 1.Put a price on the benchmark job 2.To know whether the company pays too high or medium or low, even below the range 3.Collect data about insurance, sick leave, and vacation Institutions are often conducted the survey include: SWA magazine, Hay Consultant, BPS, etc

WORK PRICING Payment level Wage curve Fee range Limitation extension The single tariff system Adjusted pay levels

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