Ultimately, the reason why nearly anyone does any job is to receive some sort of compensation. Whether this come in the form of salary, benefits, or perks, you will not have anyone do anything if it weren’t for an exchange of some sort taking place.

Compensation can be a great motivator in many different applications when used in the correct way. This could be a promise of increased salary with a promotion, incentivizing good work at your current level. Having higher compensation than your competitors could also be a tactic to pull away top end talent from these companies and gaining a competitive advantage when it comes to knowledge.

The reverse of high compensation is also true. Having low wages is a disincentive to work hard. Many minimum wage workers will not go above and beyond what is expected of them because there is no compensation to gain form the extra effort they put in. Low wages also makes it difficult to hire, which has been very apparent over the past few years where you will see many places that hire hourly workers have been struggling to find workers to help keep operations running.

Overall, compensation is a very powerful tool for either direction that your company is planning on implementing it. It is something that can either work for you, or make you work harder for. Being able to incentivize your workers to perform better work is always a benefit, however managing this with your profit margin is where things begin to get difficult.

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