√ Definition of Compensation, Purpose, Benefits, Types, Systems, Factors and Methods
Definition of Compensation, Purpose, Benefits, Types, Systems, Factors and Methods – On this occasion we will explain about compensation. Which includes the meaning of compensation, the purpose of providing compensation, the benefits of compensation, types or types compensation, compensation systems, compensation factors and compensation methods which will be discussed in full and easily understood.
Definition of Compensation, Purpose, Benefits, Types, Systems, Factors and Methods
For more details, please see the review below carefully.
Definition of Compensation
Compensation is a reward whether in the form of money or non-money given to employees in a company or organization. Meanwhile, according to KBBI (Big Indonesian Dictionary), compensation is compensation in the form of money or non-money (in kind, which is given to a company or organization.
Compensation Purpose
According to Hasibuan The purpose of providing compensation is as follows:
-
Cooperation Association
The existence of compensation will establish a formal cooperative bond between the Employer and the employees. An entrepreneur is obliged to pay compensation in accordance with the agreement that has been agreed upon, while employees must carry out their duties as well as possible. -
Job satisfaction
With remuneration or compensation, employees can meet their physical, social and selfish needs so that they get job satisfaction from their position. -
Effective Procurement
If the compensation program is set sufficiently large, recruiting qualified employees at the company will be easier and lighter. -
Motivation
If the compensation provided by the company is relatively large, it will be easier for a manager to motivate his subordinates. -
Employee Stability
If a compensation program is based on fair and proper principles and competitive external consistency, employee stability is guaranteed because turn-over is relatively small. -
Discipline
Employee discipline is getting better, if the reward or compensation is big enough. They will be aware of and comply with applicable regulations. -
The Influence of the Labor Union
A good compensation program affects labor unions so that they can be avoided and employees will concentrate on their work. -
Government Influence
The compensation program is in accordance with the applicable Labor Law so that government intervention can be avoided. According to Handoko (2001: 156) the purpose of providing compensation is as follows:- Get qualified or qualified personnel
- Retain existing employees
- Guaranteed justice
- Reward the desired behavior
- Control costs
- Fulfillment of legal regulations
Compensation Benefits
-
As an Economic Transaction
With compensation for employees, organizations or companies will produce more with better quality. Meanwhile, employees fulfill their needs by earning income. -
As Psychological Transactions
A job is a picture of the psychological contract between an employee and the organization which each individuals trade some of the skills the organization needs for pay and sources of satisfaction other. -
As a Social Transaction
Compensation as a social transaction is because the collection of people and work is something that is important in the relationship between individuals and organizations. -
As Political Transactions
As a political transaction because it is related to the use of power and influence -
As Ethical Transactions
Which describes ethical transactions in terms of fair compensation for people and work.
Types / Types of Compensation
In general, compensation can be divided into several types or types, as follows:
Direct Financial Compensation
Namely in the form of salaries and wages (basic payment), achievement payments, incentive payments (bonuses, commissions, profit/gain sharing and stock options) and deferred payments (savings programs and purchase annuities share)
Indirect Financial Compensation
That is the type of compensation in the form of a protection program (health insurance, life insurance, labor insurance), outside wages working hours (holidays, holidays, annual leave and maternity leave) and all facilities such as vehicles, office space, parking
Non-Financial Compensation
Namely the type of compensation in the form of work (interesting tasks, challenges, responsibilities, achievements) Work environment (healthy policies, competent supervision, good work environment comfortable)
Compensation System
According to Hasibuan (2011: 124) the compensation system in general is as follows:
-
Time System
In the time system, the amount of compensation (salary and wages) is determined based on time standards such as hours, weeks, months. The advantage of the time system is that wage administration is easy and the amount of compensation to be paid is fixed. The downside is that even lazy workers get compensation paid according to the agreement.
-
Result System (Output)
In the results system, the compensation paid is always based on the number of results completed, not on the length of time it took to complete. This system cannot be applied to permanent employees (time system) and types of work that do not have physical standards such as for employees and administration.
The advantages of this system can provide opportunities for employees who work earnestly and perform well to get greater remuneration.
-
Wholesale System
The wholesale system is a way of providing wages by determining the amount of service based on the volume of work and the length of time it takes to complete it. Determination of the amount of compensation is based on a wholesale system which is quite complicated and takes a long time to work on, as well as the many tools used to complete it.
So that in the job contract system you can get big or small compensation depending on the accuracy of their calculations.
Compensation Factor
Factors influencing compensation policy include:
-
Requests And Offers
In practice, the law of demand and supply results in the existing wages. If there is something that results in an increase in employer demand for employees, there will be a tendency to increase compensation and vice versa. -
Labor Unions
The increase in trade unions is partly due to the fact that the importance of employees has not received the same attention that is given to other components of the company -
Ability To Pay
If firms are affluent and able to pay then there will be a tendency to charge higher prices to the labor force as a whole -
Productivity
Using a widespread index of productivity as a breakdown in compensation -
Cost of living
Adjustment of compensation to the cost of living is not a fundamental solution to reasonable compensation. -
Government
The government enacts standard labor laws that determine minimum wages and standard work output for all companies.
Compensation Method
Implementation of compensation has a compensation method which is divided into two, namely:
-
Single Method
The single method is a method that determines the base salary based only on the last diploma of the employee's formal education. Based on this, the level of base salary and class of a person is determined based on the diploma that is used as the standard. -
Plural Method
The plural method is a method in determining basic salary based on several considerations such as diplomas, nature of work, informal education, and even family relations also determine the base salary somebody.
Thus has been explained about Definition of Compensation, Purpose, Benefits, Types, Systems, Factors and Methods. Hopefully it can add to your insight and knowledge. Thank you for visiting
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