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Define compensation and total compensation

What is compensation? Explain. What is total compensation? How might one apply both the expectancy and the equity theory in the endeavor of developing a compensation system? Why is each important (or what are the repercussions if one or both are not considered)? What information would one need in order to develop an effective compensation system and how would you collect this needed information? Why?

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What is compensation? Explain.

Compensation can be defined as the Direct and indirect monetary and nonmonetary rewards given to employees on the basis of the value of the job, their personal contributions, and their performance. These rewards must meet both the organization's ability to pay and any governing legal regulations.

Reference: http://www.answers.com/topic/compensation

What is total compensation?

The term "total compensation" is used by many employers to describe not only salary and wages, but also all the plans, programs, benefits and opportunities that become available to you through your employment, such as:

cash compensation - salary and other pay
health and wellness plans and initiatives - benefit plans
retirement savings - pension plans
other work-life benefits, such as tuition waiver, on-site daycare, downtown location, etc.

Reference: http://www.ryerson.ca/hr/working/about/tcp/

How might one apply both the expectancy and the equity theory in the endeavor of developing a compensation system? Why is each important (or what are the repercussions if one or both are not considered)?

Expectancy theory plays an important role in developing reward and incentive systems. Expectancy theory focuses on the links between effort and reward. This is most important for persons who are managers and leaders in organizations.

The theory stresses that rewards and incentives alone are not the main important ingredients for motivating people in the workplace.

Whilst some rewards may be linked to efforts, some rewards may come regardless of effort. Some rewards may be linked in a probabilistic way i.e. people will weigh up how likely it is that they will receive a reward. This may be the case because not ...

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