Beach's Definition: "Establishment and implementation of sound policies and practices of employee compensation."

Meet needs of both employees and organization (often conflicting).
Agency Theory: Employers (principals) and employees (agents) try to fix compensation in their own favor.
Compensation management balances these.
1. Attracting and Retaining Personnel: Attract and retain qualified individuals, especially in managerial/technical roles.
2. Motivating Personnel: For higher productivity.
Alfie Kohn's arguments against traditional incentives: Punish, rupture relationships, ignore reasons, discourage risk-taking, undermine interest.
3. Optimizing Cost of Compensation: Link performance and compensation to optimize costs.
4. Consistency in Compensation:
- Internal: Based on job criticality and performance (higher compensation for higher-level jobs/performers).
- External: Similar compensation for similar jobs across organizations (reduce disparity).

Organisation’s Strategy: Overall strategy drives compensation strategy.
Compensation Policy: Derived from organizational strategy, specifies basis for base pay, incentives, benefits.
Job Analysis and Evaluation: Job analysis defines job description/specification; job evaluation determines relative job worth.
Analysis of Contingent Factors: External (market, cost of living, laws, unions) and internal (ability to pay, employee performance, skills).
Design and Implementation of Compensation Plan: Incorporates base pay, incentives, benefits, perquisites; communication and practice.
Evaluation and Review: Dynamic process; evaluates results (employee satisfaction, productivity); reviews and revises if needed.

(i) Time Wage System: Payment based on time spent, irrespective of work done.
(ii) Piece Rate System: Payment based on work done, irrespective of time taken.
(iii) Premium plans/bonus and profit sharing schemes: Used with either of the above.

Worker paid hourly, daily, weekly, or monthly rate.
Payment for time worked, not output.
Suitable for highly skilled, unskilled workers, apprentices; where quality is important, output hard to measure, close supervision possible.
Advantages: Easy, simple, assured payment.
Disadvantages: No incentive for more production, no distinction between efficient/inefficient, idle time paid, uncertain labor cost per unit, requires strict supervision.
(a) Flat Time Rate: Oldest; fixed rate based on employment time.
(b) High Day Rate: Higher than average wage rate; attracts efficient workers, aims for pre-determined standards. Increases produ