Compensation decision-making is often a complex and emotionally involving process that confronts the management of any organization (Timothy, 2009). Often it is used as a retention strategy whereby most valued employees are awarded reasonable compensation which makes them want to stay more.
So without further ado, let’s get into compensation meaning and how to determine it. Compensation is the total cash and non-cash payments that you give to an employee in exchange for the work they do for your business. It’s typically one of the biggest expenses for businesses with employees.
The Mechanics of Compensation Decisions. Employers have established a range of what they are willing to pay for a particular position. For example, a position with a target average annual salary of $55,000 might have the following range: