What do you understand by compensation management? What are its components and need.

Compensation Management :

Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees.
Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness. 

Components of Compensation SystemCompensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows:
• Job analysis
• Salary structures
• Pay structure

Need of Compensation Management 

1. A good compensation package is important to motivate the employees to increase the organizational productivity.
2. Unless compensation is provided no one will come and work for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals.
3. Salary is just a part of the compensation system, the employees have other psychological and self-actualization needs to fulfill. Thus, compensation serves the purpose.
4. The most competitive compensation will help the organization to attract and sustain the best talent. The compensation package should be as per industry standards.