ISSN 1822-6760. Management theory and studies for rural business and infrastructure development. 2010. Nr. 5 (24). Research papers.

CRITICAL ISSUES FOR COMPENSATION AND INCENTIVES MANAGEMENT: THEORETICAL APPROACH Ramunė Čiarnienė, Milita Vienažindienė Kaunas University of Technology, Vilnius Co-operative College
For most people, pay is a primary reason for working. Indeed, compensation is at the core of any employment exchange, and it serves as a defining characteristic of any employment relationship. The study focuses on critical points of compensation and incentives management. The fundamentals of a good incentive program include the elements of vision, potential, communication and motivation and can be realized if incentive promises are fulfilled – by both employer and employee. The aim of the paper is to identify the most important attributes of compensation and incentives management. Research method is the analysis and synthesis of scientific literature, logical, comparative and graphic representation. On the base of analysis, authors of this paper present the model of incentive system for positive employee attitudes and behaviors. Keywords: compensation, employees, incentives, management.

Introduction Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. Pay may be received directly in the form of cash (e.g., wages, merit increases, incentives, cost of living adjustments) or indirectly through benefits and services (e. g., pensions, health insurance, paid time off). Programs that distribute compensation to employees can be designed in an unlimited number of ways, and a single employer typically uses more than one program (Milkovich, 2008). Frequently, incentive programs do not go the distance because they were weak from the start. The development of an effective