Direct and Indirect Compensation

Managing Human Capital

Table of contents
  1. Introduction
  2. Literature review
  3. Critical analysis
  4. Conclusion

₺If Employees undervalue the cost of benefits, why should a company not drop benefits and simply add more direct compensation₺. Do you agree or disagree with this statement? Explain using relevant organisational examples.
Organizations need motivated employees and a key motivator for them is compensation. Competent people can only be acquired by organization if it is offering good salary and other rewards and benefits to compensate employee’s creativity and abilities. Human resource department is continuously working to develop excellent reward packages to get best out of employees’ skills and talents.   Compensation package is most important tool to enhance motivational level of employees. Business is standing on four pillars of Ms, i.e. men, material, machine and money and men is most considerable factor without which organization cannot go forward. These four Ms contribute in the procedures of organization and in return to their contribution, they need return. Compensation and benefits are given to employees as a return to their services.   People seek good employment just to receive better and competent compensation. Compensation package not only to fulfil materialistic needs and requirements, it also fulfil other needs like social needs or self esteem needs. If employees are not satisfied from organization compensation system then they try to leave organization or if they are new then they reject the job offer from such organizations. To develop competitive packages for employees, organizations add direct and indirect compensation in salary package.   Both of these are essential parts of compensation package.
Monetary benefits which are given to employees in return to their services are known as direct compensation. Usually, direct compensation includes salary, allowances and bonuses which are given directly to employee. This...