Compensation is the process of providing adequate, equitable and fair remuneration to the employees. It includes job evaluation, wage and salary administration, incentives, bonus, fringe benefits, social security measures etc.

Job Evaluation: It is the process of determining relative worth of jobs:

1. Select suitable job evaluation techniques.
2. Classify jobs into various categories.
3. Determining relative value of jobs in various categories.

Wages and Salary Administration: This is the process of developing and operating a suitable wage and salary programs. It covers;

1. Conducting wage and salary survey.
2. Determining wage and salary rates based on various factors.
3. Administering wage and salary programs.
4. Evaluating its effectiveness.

Incentives: It is the process of formulating, administering and reviewing the schemes of financial incentives in addition to regular payment of wages and salary. It includes:

1. Formulating incentive payment schemes.
2. Helping functional managers on the operation.
3. Review them periodically to evaluate effectiveness.

Bonus: It includes payment of statutory bonus according to the Payment of Bonus Act, 1965, and its latest amendments.

In India the employees drawing above certain compensation are not covered under the Bonus act. However, the employer pays them suitable lump sum variable amount depending upon their level in the organization which is called ex-gratia. This is not compulsory on the part of the employer but acts as an incentive to the employee.

Fringe Benefits: These are the various benefits at the fringe of the wage. Management provides these benefits to motivate the employees and to meet their life’s contingencies. These benefits include:

1. Disablement benefit
2. Housing facilities
3. Educational facilities to employee and children.
4. Canteen facilities.
5. Recreational facilities.
6. Conveyance facilities.
7. Credit facilities.
8. Legal clinic.
9. Medical, maternity and welfare facilities.
10. Company stores.

Social Security Measures:

Management provides social security to their employees in addition to the fringe benefits. These measures include:

1. Workmen’s compensation to those workers (or their dependents) who involve in accidents.
2. Maternity benefits to women employees.
3. Sickness benefits and medical benefits.
4. Disablement benefits / allowance.
5. Dependent benefits.
6. Retirement benefits like provident fund, pension, gratuity etc.

Practicing various human resources policies and programs like employment, development and compensation and interaction among employees create a sense of relationship between the individual worker and management, among workers and trade unions and management.

It is the process of interaction among human beings. Human relations is an area of management in integrating people into work situation in a way that motivates them to work together productively, co-operatively and with economic, psychological and social satisfaction. It includes:

1. Understanding and applying the models of perception, personality, learning, intra and inter personal relations, intra and inter group relations.
2. Motivating the employees.
3. Boosting employee morale.
4. Developing the communication skills.
5. Developing the leadership skills.
6. Redressing employee grievances properly and in time by means of a well formulated grievance procedure.
7. Handling disciplinary cases by means of an established disciplinary procedure.
8. Counseling the employees in solving their personal, family and work problems and releasing their stress, strain and tensions.
9. Improving quality of work life of employees through participation and other means.

Lot of thinking and comparison with competitive organizations goes into fixing the compensation of employees particularly for middle management and above levels by the management. Some organization pays certain amount annually to key executives which are not a part of the regular pay and allowances. By doing this the incentive acts to deliver enhanced performance but also ensure the loyalty of the key executive to remain with the company.

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