Why it is so important to have a process for evaluating the compensation system?

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Ans)The compensation system comprises the total rewards provided to the employees for the labor and services they deliver to the organization. Compensation includes direct and indirect monetary benefits. 'Direct benefits' include wages, salaries, bonuses, commissions. 'Indirect benefits' include health insurance schemes, education benefits, etc. A well-defined process to have a balanced compensation system is of utmost importance because it gives the organization advantage of managing internal as well as external equity. If the organization runs a smooth and reliable process for the compensation system, it will attract the employees, gain their trust, and motivate them to stay with the firm for long. The Compensation system needs to be fair to all the employees. Hence a process to monitor the same is also equally important. It helps to reduce any bias that can create problems for the employees.

keosha answered 11 months ago

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