A compensation is all the income in the form of money, goods directly or indirectly received by employees in exchange for services rendered to the company. -Drs. Malayu S.P Hasibuan- A compensation is anything that constitutes or is regarded as an equivalent or recompense. -Andrew F. Sikula- Introduction of Management Compensation

compensation is a reward in the form of financial and nonfinancial firms given in reply to the services of the employee. The objective is to direct, manage and supervise the conduct of the employee in order oriented vision of the company. Our conclusion…

SPM Compensation Management The Relationship between Management Control System and Compensation Management

 Extrinsic Rewards (Financial): - Direct Rewards - Indirect Rewards Type of Management Compensation Cassandro Mary Hamel

 Intrinsic Rewards (Non Financial): employee ownership, provide freedom of action & visionary leadership to employees opportunities Personal growth Quality of life 1. employee satisfaction 2. enhance professional career Type of Management Compensation

 Allowance - Life insurance - Paid leave - Pension fund - Workers compensation Type of Management Compensation Mathis and Jackson  Salary - Base pay - Wage  Not fixed income - Bonus - Commission - Incentive program - Stock options

Source: Veithzal Rivai (2004:358)

1.Material compensation not only in the form of money, such as salaries, bonuses, and commissions, but all forms of physical reinforcer. 2.Social compensation closely linked to the need to interact with others. 3.Activities compensation is able to compensate the compensation aspects of the job he did not like being given an opportunity to perform a particular activity. Three Types of Management Compensation Michael and Harold (1993: 443)

In compensation, the rate or amount of compensation should really be considered because it will determine the level of compensation lifestyle, self-esteem, and the value of the company. Compensation has great influence in the withdrawal of employees, motivation, productivity, and employee turnover. (Benardin and Russell, 1993: 373)

Why do we need Compensation Management? 1. To get good quality employees 2. Maintain current employees 3. Ensure the justice (internal and external equity) 4. Award for desirable behaviour 5. Control cost 6. Obey the regulation 7. Facilitate understanding Werther, Davis, McGraw-Hill Human resource management 5 Sub edition (1995)

Factors that affect Compensation Martoyo, S., 2007, Manajemen Sumber Daya Manusia, BPFE, Yogyakarta, hal If supply is bigger than demand, the compensation will be small and vice versa. Supply and demand of employee If company’s ability is better so the compensation will be bigger Ability of company If the labor union is stronger so the compensation will be bigger Labor Union If employee’s productivity is high then the compensation will be bigger Productivity of employees Government set the law of minimum salary for employees Government with law

The higher cost of living, the higher the compensation will be given Cost of living Employee with higher position will get the bigger compensation because of authority and responsibility Employee’s Position Employee’s with higher education and working experience will get bigger compensation Education and Working Experience If the national economic is in boom condition so compensation will be bigger because it’s near to the full employment condition National Economic Condition If the type of job is hard and high risk so the compensation will be bigger because it needs more skill and accuracy Type of Job

Some of Examples

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