Compensation and Benefits

What is compensation.....?

Compensation typically refers to the monetary payment awarded to an individual in exchange for their services. In the workplace, a broader compensation definition includes the whole of what is earned by employees-that is salary or wages in addition to the commission, bonuses, and any incentives or perks that come with the employee’s position (Black, T. 2018).

Figure 01

Executive compensation is a narrower term that refers to financial remuneration paid to senior executives, most commonly the CEO. Compensation at this level often includes a range of options such as company stock and bonuses. Executive pay has risen in the past 10 years relative to that of the average employee’s salary.

Figure 02

Compensation Planning....

Compensation plan is a development of a compensation strategy that supports a company's business strategy, operating objectives and employee needs. Compensation planning also incorporates how employees are paid, how and when they are eligible for raises and bonuses along with other benefits by the company (Charthop, 2021).

Compensation can include a variety of elements, including:

• Health insurance
• Equity
• Retirement plans
• Time off
• Bonuses
• Flexible work hours
• Growth opportunities
• personalized coaching
• On-site services
• Subsidized transportation benefits
• Fitness stipends
• Catered meals

Figure 03

Importance of Compensation...

smart employers know that keeping quality employees requires providing the right compensation and benefits package. Compensation includes wages, salaries, bonuses and commission structures. Employers shouldn't ignore the benefits portion of employee compensation and benefits, because the benefits sweeten employment contracts with the priorities that most employees need. People are always looking to put themselves in the best possible position financially. Those who are worth a specific salary amount often know their value and will seek a position that pays accordingly. Do research on what your competitor's compensation and benefits packages look like. Make sure you offer a similar package to your potential employees so that you attract the best candidates for your company. Hiring the right candidate the first time reduces recruiting costs and helps free up business owners for other tasks (Leonard, K. 2019).

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Impact of Employee Compensation on an Organization..

Compensation is what employees receive in exchange for their contribution to the organization. Compensation refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. It also defines compensation as “the combination of all cash incentives and the fringe benefits mix that an employee received from a company which constitutes an individual’s total compensation.” Compensation is a reward system that a company provide to individuals in return for their willingness to perform various jobs and tasks within organizations(Suri, S. 2016). 

References...

Black, T. (2016), Hoe to create a compensation plan.

Charthop. (2021), Compensation planning: what is and why you need it.

Leonard,  K. (2019), Importance of compensation in the workplace.

Suri, S. (2016), Impact of employee compensation on organizational effectiveness.