Compensation and performance appraisal

Compensation is everything an employee receives for work: wages, bonuses, allowances, perquisites and benefits. It must be fair internally (similar jobs, similar pay), competitive externally (or people leave), and linked to performance (or effort drops). Worked example: two jobs graded equal by job evaluation but paid very differently will breed resentment even if both rates are above the market — internal equity matters as much as the absolute amount.