A) INTRODUCTION

5.1 The compensation concept implies that in designing and implementing a compensation plan various elements of a compensation system, including employee benefits, should be taken into consideration. These elements include needs and aspirations of the work force and prevailing market practices especially that of competitors.
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5.2 Contemporary compensation management recognizes the significance of the monthly cash take-home and lays emphasis on the total compensation package as an important determinant of employee motivation and superior performance. At the same time the compensation package should also be tax efficient.

5.3 The compensation needs and desires vary from individual to individual depending on a number of factors. Generally, compensation satisfactory to most employees would be if it:
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• Provides an appropriate standard of living for the employee and his/her family;
• Recognizes the employee’s performance through some kind of incentive compensation;
• Provide protection against medical expenses for the employee and his or her dependants;
• Provide protection against loss of income in the event of an employee’s death or permanent disability;
• Provide retirement and certain other benefits, such as provident fund; and
• Possibly make available a tax efficient compensation structure.

B) MAIN COMPONENTS OF COMPENSATION
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5.4 Different components of compensation package include the followings:

• Basic pay
• Monthly allowances
• Cash compensation and non-cash benefits
• Annual compensation and incentive schemes
• Medical benefits
• Terminal benefits
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