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The objective of this chapter is to review the general practices and principles of compensation management. We’ll briefly review new trends in compensation management, the common offerings, and explore what the future holds.

Understanding compensation is a key to understanding compensation management. The compensation policies are driven by each company’s philosophy of how best to compensate their people. The complexity of compensation programs drive the complexity of compensation management and in turn drives the compensation systems. Compensation management and compensation administration are used synonymously in this book.

What is compensation?

The dictionary defines compensation as, “Something, such as money, given or received as payment or reparation, as for a service (or loss). “ So for the purposes of the book, we’ll assume that an employee works for an employer by providing a service (their job), and the employer, in turn, compensates the employee.

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