How does compensation affect other functional areas of human resource management?

Compensation is a key area of human resource management. HR is tasked with the responsibility of recruiting, training and hiring employees. They must factor the compensation within the available budget so that the can motivate and retain skilled workers besides hiring. Compensation is not a rigid decision that is affected by external forces such as market only. Every organization has its compensation plan that is embedded within HR strategy (Pitts, 2014).

However many organizations execute compensation plan and policy. HR considers compensation a crucial area more than other areas because the entire performance system is dependent on compensation. The process of hiring the best employees and retaining them is an integral area in the HR (Pitts, 2014). HR is also involved in motivating and maintaining trust within employees. However, they must maintain a compensation system that covers all these concepts without the knowledge of the employees themselves. The HR must organize the limited resources to fix the system and create value for the organization.

Successful organizations conduct a routine appraisal and plan in terms of compensation. HR also links the compensation with the level of performance. One intricate concept of compensation is that it must satisfy all the employees because it is highly visible. It is crucial for the HR to communicate effectively regarding issues concerning pay with employees. The HR should also set it performance policy and align it with compensation.

Various issues result from the HR role regarding compensation. HR department is at the center of understanding the dynamics and creating effective policies regarding compensation. HR sets out crucial decision and policies on compensation. Finally, HR must align compensation to match the ultimate goal of the organization. 

References

Pitts, R. A. (2014). Incentive Compensation and Organization Design. Personnel Journal, 53(5), 338-344.