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

opportunitiesPersonal growth

Quality of life1.

employee satisfaction2.enhance professional career3.

4.

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 compensationclosely linked to the need to interact with others.

3. Activities compensationis 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 employees2. Maintain current employees3. Ensure the justice (internal and external equity)4. Award for desirable behaviour5. Control cost6. Obey the regulation7. 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. 128-129.

• 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 biggerAbility of company

• If the labor union is stronger so the compensation will be biggerLabor 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 givenCost of living

• Employee with higher position will get the bigger compensation because of authority and responsibilityEmployee’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

ThankYo

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