Compensation refers to how you are treated as an employee by your employer i.e. What Wages, Benefits, Training opportunities etc. are extended to an employee by the employer.
The term 'Compensation' is also referred to as “dai yu'' in chinese.
Nowadays, People in the society don't just talk about each other's salary or wage or pay, they are inquisitive about each other's “dai yu”. And Yesss! it really matters!
Pay is something that the “individuals receive in return for the work they perform and the value they create”. It not only gives financial security but pay also plays a vital role in an individual's socioeconomic status.
As the research suggests, Pay influences employee behaviors directly and indirectly.
- Pay can motivate employees that is a direct influence.
- Pay influences via sorting effect on the composition of the workforce i.e. different types of pay strategies may cause different type of people to apply to and to stay with an organization
Salary is a fixed amount paid or transferred or extended to the employees at regular intervals like at the end of each month, for their performance and productivity by the employer, based on an agreement between an employee and employer.
As per the annual pay compensation, an employee is entitled to leaves, perks, and benefits, i.e. salary will be extended by the employer where this annual pay package is divided by a number of months, the amount is meant to be disbursed monthly as ascertained. Even if an employee has availed a leave and didn’t turn up for the work as per the State rules and regulation.
It is generally observed that the individual who is entitled to “Salary” is a skilled, educated and a qualified professional who are engaged in “White collared sort of jobs”. And some theories suggest that the Socio economic factors really mean a lot to the salaried individuals, and there are debating theories in this context as well.
However, wages is also a type of compensation which is not Fixed but a Variable one , it is an hourly or daily-based payment given to the individual by the employer, for the amount of work finished in a day, based on the performance of the labor in the stipulated time frame in the working hours each day. The waged person is said to be doing a “blue collared sort of job” which implies that an individual is either engaged in the unskilled or semi-skilled job, drawing wages on a daily basis.
“Wages and Benefits” are a major focus of labor unions efforts to serve their members' interests these days.
Many of you must be thinking , "what is the pay influence via Sorting effect"?🤔
Let us understand Pay influence via Pay Sorting effect with an illustration....💁
Imagine yourself as an employee who is extremely competent, holding strong values and ethics, however is quite interested in earning loads of money but prefers to work in an organization ABC that pays same wage or salary to its employees for doing the stale monotonous job over the years irrespective of its employees performance.
In contrast ,you get to know about some other organization XYZ which has huge variation in its pay structure based on performance for its employees, where an employee has an opportunity to draw either an extremely high OR an extremely low wage or salary BUT based on his performance only.
If you change your preference and choose the latter i.e. Organization XYZ, then it reflects the influence of the pay via “sorting effect”.
"It was also found in a research that nowadays the employee turnover is not always in response to the dissatisfaction, sometimes it is the better opportunity or some personal reasons due to compensation resulting into Employee turnover"...
I am sure you might have witnessed this as well, that the terms compensation and pay are used interchangeably but the reality is...that both these terms have a different meaning altogether! I believe an ace professional must know this difference.
