¶ … drive decision making about compensation is known as the compensation philosophy of a company. In general terms a compensation philosophy details that reasons and the ways of the choices it has and the decisions taken based on the choices to pay employees and other stakeholders. While such compensation philosophy differs from organization to organization, it company tries to formulate a compensation philosophy so that it is able to attract the best talent available in the market and retain the best talent. The sentiment or the philosophy for compensation is expressed in the settlement or compensation packages given to employees or o the stakeholders (Armstrong & Stephens, 2005).
There can be several types of philosophies that result in several types of compensation. Some companies follow the percentile-based compensation philosophy that is based on percentiles spells out where wages will fall in relation to the regional wage markets and comparable to the best practices in a particular industry. For example, if a company pays its employees at the 50th percentile of the regional wage market means that its employees will earn more than 50% of the general market rate.
Other businesses follow the principle of specific numbers for compensation and have their compensation packages graded according to various parameters like experience, education, etc.
Some other companies follow the compensation package breakdown where the package includes all the compensation that the company would be liable to pay and employee or a stakeholder (Gerig Meyer, n.d.).
Nonspecific compensation philosophies generally describe and follow policies of compensations that would motivate and inspire employees to strive towards excellence such as rewards or bonuses to top performers without clearly stating the amount for the same.
In this paper we discuss the compensation philosophy of Tesco Plc, one of the oldest and largest retail traders of the world. We choose this company as their philosophy for compensation is interesting and is well thought out to attract and...
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