What three functions are salaries meant to perform?

Salaries should attract capable employees, motivate employees to improve performance, and retain capable employees.

One of the major problems facing most employers in both public and private sector is how to motivate their employees in order to improve performance. Economics is largely based on the assumption that monetary incentives improve performance. It is generally believed that effect of monetary incentives is unambiguously positive a large monetary incentive improves employee performance.

Compensation management is one of the most important elements of personnel management. It includes economic rewards in shape of wages and salaries as well as in different forms of non-wage economic payment known as fringe benefits, indirect compensation or supplementary pay.

The subject of Compensation and for that matter Indirect Compensation is of great importance because it affects the wellbeing of the individuals in the concerned organizations.

Refer the the following research papers which aim to ascertain the relationship between monetary incentives and its impact on employee performance:

The Impact of Indirect Compensation on Employee performance: an Overview by Mashal Ahmed & Abu Bakar Ahmed

Monetary Incentives Motivates Employees on Organizational Performance by Igbaekemem Goddy Osa

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