The definition of compensation can be interpreted as remuneration given by employer to workers / employees, because these employees have donated the energy, thoughts and time to the business development.
Basically, all companies provide compensation to its employees aiming to appreciate and give a reward for what they have done to a company in the case of energy, time, and thought.
Compensation is proven to be very effective because it can motivate employees achieving the best performance.
Compensation functions are:
1. Allocating human resources efficiently
2. Using human resources effectively and efficiently
3. Encouraging stability and economic development
Compensation purposes are:
1. Meeting the economic needs or providing economic security for employees
2. Connecting income, contributions, and employee productivity
3. Connecting income and the company's financial success
4. Maintaining a balance and fairness in compensation to employees
Without mutual compensation between companies and employees, there is reduction of employee performance, the production that does not meet the target and not harmonious relationship between employers and employees.
