Difficulties In Compensation Management

Do you know the difficulties in compensation management on the part of the company?

When you attend a job interview, and the interviewers ask about your expected salary, you mention you want $3,000.

The company calls you to offer you the job for $2,800.

You wonder how does the company come out with the figure of $2,800 instead of $3,000.

When you reject the offer, and insist on $3,000. The employer may call back. If the job market is very bad, the employer may not call back.

In many cases, compensation management is an art, rather than a science.

Most companies use the trial and error

method in compensation management. That means when all job applicants ask for $4,000 as the starting salary, the company is very eager to offer you the job at $3,000. The problem is that the current employees are getting just $2,500.

The company keeps your salary a secret, and asks you to keep quiet.

If you cannot keep your big mouth shut, and tell everyone your salary, the existing employees will get very upset, and ask for pay increment.

The bosses have no choice, but to give them $3,000.

That is the way most companies handle compensation management.

While there are a few guiding rules, there is simply no scientific formula in compensation management.

Let us see what are some of the guiding rules in compensation management.

1. Civil service

Most companies will use the salary in the civil service as a guide.

They aim to pay slightly higher to compensate for the lack of job security in the private sector.

The government does not usually change the salary scale, since it is the largest employer in the country.

A slight change in salary means more income taxes on the rest of the population.

2. Industrial norm

Many bosses in the same industry know each other.

They will discuss with each other about the macroeconomic factors, and determine the maximum wages they can afford to pay.

If you come from one company in the logistics industry, you will find that the pay structure in other companies are


similar. You are unlikely to get a very high offer for the same job in the same sector.

3. Benefits

Many companies have better benefits in order to attract employees.

For example, if the company has a very good flexi benefits scheme to offer to new joiners, it is likely that they offer a slightly below market salary.

That means when the company allows you to work flexi hours, it is not likely to pay a very high salary.
Compensation management is always linked to benefits administration.

Most companies offer the compensation and benefits as a package.

4. Labor market

The labor market is a powerful driving force in compensation management.

When a company has no choice, but to pay a very high salary, it will have to increase the salary of the existing employees as well.

The company does not want all the employees to leave, just because the new joiner manages to get the market rate.

That is why it is always best to know your market value. You can call up a few headhunting firms to check the current market salary for persons of your expertise and working experience.

That does not mean you need to change job. It means you have the edge when you negotiate for a higher salary.

About me:

Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways.  



Article Written By scheng1

Article Posted on 70 views 0 comment

Please login to comment on this post.
There are no comments yet.
How To Save Water At Home
Psychology Of Life: Life Is Unfair