Explain the compensation function of Human Resource Management.

Meaning — The compensation function refers to providing equitable and fair remuneration to employees for their contribution to the attainment of organisational objectives.

Activities of the Compensation Function:

1. Job Evaluation — It is the process of determining the relative worth of a job. Through job evaluation, the value of each job in the organisation is assessed in relation to other jobs, providing a rational basis for setting wage differentials.

2. Wage and Salary Administration — It implies developing and operating a suitable wage and salary programme. Wage and salary surveys are conducted to determine the wage and salary structure for various jobs in the organisation.

3. Bonus — It involves payment of bonus under the Payment of Bonus Act, 1965, as well as non-statutory bonus and other incentives.

A well-designed compensation system attracts competent employees, motivates them to perform well, retains valuable personnel and ensures legal compliance.