Compensation Practice

BUS 409: Compensation Management

What is compensation practice? Compensation practice is how organizations are using employee compensation as motivation to move their business forward. It’s becoming more and more dificult to appeal and retain workers in today’s constricted job market. Over the years, we find that almost half of companies came to an agreement that the durable job market has increased their turnover rates. In the meantime, generating a list of explanations for why establishments should regulate their compensation approach. To retain employees onboard in this market, it’s not enough to concentration on any single component you’ll need to get inventive with every single level you currently have in your compensation strategy to provoke the performances and outcomes you want. According to, public personnel management, while previous efforts have tested a variety of ways in which performance management influences individual, group, and organizational outcomes (Campbell, 2015; G. Lee & Jimenez, 2011; Poister, Pasha, & Edwards, 2013; Rummler & Brache, 2013).

Public Trade Companies

Many of the major establishments in the United States are publicly traded, with their shares sold through the New York Stock Exchange or NASDAQ. The company that’s being researched is Automatic Data Processing (ADP). ADP delivers business outsourcing resolutions. It functions through the following segments: Employer Services and Professional Employer Organization Services. The Employer Services segment propositions professional subcontracting and human capital management results, including payroll, benefits management, talent management, human resources management, time and attendance management, insurance, retirement and compliance & payment.

ADP is the place where you come to challenge yourself, share open-handedly, take risks, and create revolution. Compensation is currently professed by employees as reasonable if based on systematic components. Several compensation structures have been established to regulate the worth of positions. These systems operate many comparable components including job descriptions, salary ranges/structures, and written procedures. ADP’s compensation strategy often includes people that are provided with base pay to participate with the company and ensure their continuous participation. In other positions, base salary alone will be given to an employee to work at the level essential for them to keep their job. The best practices they are applying are setting a pay range and consider perks and benefits. With setting a pay range ADP is able to regulate a minimum and maximum that the company is willing to offer. Offering attractive benefits and perks that make their workplace striking to employees. Compensation-related challenges they are facing is that they do not have a regular incentive program. An incentive is something that makes someone want to do something or work harder. The current way ADP employees earn a bit of extra money is recruiting new employees.


The importance of compensation best practices is a continuing and noticeable part of their overall HR strategy. Every so often, establishments feel that they are compensating workers equally or competitively. The certainty is nonetheless that they do not have a strong basis for this belief. ADP applies compensation practice very well and this causes a positive impact to the company and its stakeholders because ADP has a well interconnected compensation plan. Once the compensation viewpoint is recognized and examined by executive management, it is critical that HR and management team communicate it to the wide-ranging employee population. It is recommended that employees fully recognize the principal of the strategy and approach, how it correlates to their positions and what this means as they promote up through the organization.

“Compensation is one of the primary reasons for employees to search for

employment. Employee gets reward for his services and hard work that put for the

betterment of an organization. He may be compensated in different ways e.g. through

salaries, holidays and bonuses etc. All forms of payments or rewards given to employees

which arise from their service is called compensation” (Dessler, 2005).


Establishments rely on three economic possessions when leading operations: land, labor and capital. Land signifies the physical possessions used to yield goods or services. Labor is the human resource an establishment uses to yield goods or services. Capital is the money used to obtain physical properties or human labor. The ways in which laws, labor unions, and market factors impact the company’s compensation practices for example, The National Labor Relations Act encourages establishment of unions. This regulations conditions state that workers have the right to establish, arrangement, join or contribute in labor establishments and use cooperative negotiating through representation. This guarantees that workers are suitably represented and restricts unlawful employer practices. Unionized labor regularly increases the earnings establishments pay across the board to their workers. While high-producing employees may be capped at how much they can earn in compensation, underperforming employees are usually given wages above the market rate for their skills and production levels. Establishments that bargain realistic compensation and above-average benefit packages to workers possibly will be able to dodge employee efforts to arrangement a union. Treating employees with respect and pride in the workplace can also guarantee that workers trust the organization and won’t be driven to jolt a union.

Traditional bases for pay.

Job-based pay, market-based pay, knowledge/skill-based pay, and experience-based pay are all approaches of pay distribution. Which one is the right one? Any of them can be a practical technique, depending on the establishment’s requirements and goals. One of the most shared approaches is job-based pay. Traditional pay arrangements set wage levels in a narrow group with unvarying yearly increases, resulting in 3 to 4 percent wage growth annually. Raises are inevitable for promotions, merit, cost of living, etc. This “base pay” arrangement is one that most individuals are acquainted with. Every so often, it consists of a set salary or wage, a set schedule for merit increases, and a set benefits package. The effectiveness of traditional bases for pay at the company, ADP, that was researched is that this the easiest approach to manage, meaning each occupation has a level rate of wages with no modification for an worker’s skill/knowledge, measurement of service, or performance of the job. Each position has a fixed rate of pay for all occupants, however a training rate could be a possibility with this technique.

Compensation Practice.

Compensation programs and practices compares pay practices from ahead, revealing that formal compensation agendas should include written values, wage structures and dynamic performance management even amongst small establishments. Between establishments with worldwide procedures, 47 percent say all personnel universal commonly partake in the same agendas even though some flexibility is provided to countries or regions to make partial revisions to company programs.


Campbell, J. W. (2015). Identification and performance management: An assessment of change oriented behavior in public organizations. Public Personnel Management, 44, 46-69.

Ismail, Muhammad1, et al. “Exploring Relationship between Compensation Practices and Motivation of Secondary School Teachers in Sargodha.” Journal of Educational Sciences & Research, vol. 6, no. 1, Spring 2019, pp. 79–89. EBSCOhost,

Dessler,G. (2005). Human Resource Management.10th ed. Prentice-Hall, pp. 390

Petro, Sylvester. “Employer Unfair Practices Under the Taft-Hartley Act–1.” Labor Law Journal, vol. 3, no. 4, Apr. 1952, p. 243. EBSCOhost,