The basic objective of compensation management can be briefly termed as meeting the needs of both employees and the organisation. Since both these needs emerge from different sources, often, there is a conflict between the two. This conflict can be understood by agency theory which explains relationship between employees and employers. The theory suggests that employers and employees are two main stakeholders in a business unit, the former assuming the role of principals and the latter assuming the role of agents.
Objectives of Compensation ManagementThe compensation paid to employees is agency consideration. Each party to agency tries to fix this consideration in its own favor.… Read the rest