Compensation is a better descriptor for the return on the effort employees will receive. This encourages thinking about the whole financial package an individual will receive. This is as opposed to the base salary or wage, which may only indicate part of the potential earnings. Compensation may come in the form of bonuses, share offerings, additional superannuation or even equity in the business.
Setting up a compensation plan is important as it will motivate employees to stay focused and work to their highest capabilities, it will also maintain each employee loyal. Organisations must therefore invest in providing competitive compensations for their employees.