Compensation and Benefit Systems: building market-competitive compensation systems

Considerations when building a market- competitive compensation system Compensation refers to the rewards offered to an employee in exchange for their services offered to the organization, in the form of direct non-financial compensation, indirect financial compensation and non financial compensation. An effective reward system leads to better productivity and competitiveness. Factors to consider include; Equity Internal equity will exist as a result of fairness in the rewards accompanying the responsibilities performed as compared to other employees performing similar tasks and responsibilities in the organization. External equity is achieved by remunerating the employees fairly as compared to other employees of different organizations. Organizational objectives and goals The compensation system should be able to understand employees` needs as well as being in line with the set objectives of the firm. Comparison is made to th...