What is Compensation & Benefits?
Compensation and benefits refers to tát the compensation/salary and other monetary and non-monetary benefits passed on by a firm to tát its employees in return for their services. Compensation and benefits is an important aspect of HRM as it helps to tát keep the workforce motivated are the most important hygiene factors. It helps give benefits to tát employees based on their performance and actions and brings the best out the employees at workplace. It is one of the core hygiene factors for the employee as well as the company.
Importance of compensation and benefits
Companies hire people individual to tát achieve their organizational goals and people join companies to tát earn money & build their career. One of the biggest factors why people join companies in the compensation and benefits, salaries, perks, incentives etc. which is given to tát them.
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Apart from the company's reputation and job profile, the money offered as a salary is pivotal in attracting people to tát work for the organization.
The more the compensation and benefits offered to tát employees, the more is their loyalty, motivation to tát work and vì thế well. However, companies which offer lesser salaries see a high attrition rate and less productivity from employees. All these factors help in making compensation and benefits an important factor in managing workforce. Salaries of employees are defined by several parameters lượt thích experience, education background etc.
In senior management, skills lượt thích team management, communication management, leadership, time management etc. are also considered while finalizing the pay package.
Compensation and benefits components
There are several components in the overall compensation and benefits plan of an employee. There can be several ways where benefits can be given to tát employees.
Mostly it is given in terms of a CTC or gross salary.
Some of the various components of compensation and benefits are mentioned below:
1. Fixed pay
This is the basic salary plus other fixed components paid to tát the employee irrespective of any other factor. This is stated clearly in the employment contract. This is the compensation or salary or wage which an employee or a worker will definitely get as long as he or she is an employee of the company.
Fixed pay is mostly the largest component of the compensation and benefits package offered by an organization to tát an employee.
2. Variable Pay
This is the additional compensation paid to tát employee based on employee’s performance, company performance etc. Since variable pay is based on the performance of an individual, it motivates the employees to tát perform even better.
3. Equity Pay
Employees are awarded shares of the company, often at a discounted price. Employees are expected to tát make money out of them by the appreciation of the stock price and the growth of the company.
This is mostly given to tát the senior management who have served the company for a long time.
Medical is part of the compensation package for most of the companies now. Medical includes the health insurance, không tính tiền checkups, medical facilities on campus etc. which keeps the employees safe as well as motivated.
It covers health insurance for the employees, dependents with option to tát extend or modify it as well.
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As discussed in the previous point. Medical insurance is part of the package these days. Many companies also offer insurance for parents and siblings as well or at subsidized rates. Even other insurance can be included.
Many companies even offer accommodation to tát employees. This can be either be in the size of a company provided place or the employee can claim the rent and the lease amount as per the company rules and policies.
Many companies even provide xế hộp or xe taxi facilities to tát employees to tát reach office.
Types of Compensation
Based on the seniority, responsibility and position of an employee, there are various types of plans:
1. Executive compensation for CEOs, managing directors, chairman etc. Mostly salaries and perks are decided by the committee.
2. Workers compensation is the salary and wages provided to tát employees and workers.
Difference between compensation and benefits
Both the factors are important in motivating employees for doing their work and paying them for the services they are doing for the company. However, there is a slight difference between compensation and benefits.
Compensation is completely related to tát the money which is being paid to tát an employee i.e. salary. bonuses etc. On the other hand, benefits are the non-monetary incentives given to tát employees lượt thích health benefits for which the employee doesn't have to tát pay.
Compensation and Benefits Example
A company offers a salary package to tát an employee which has both compensation structure and benefits plans. The compensation plan would entail the components lượt thích fixed pay etc. and benefits would include medical insurance and work from trang chủ etc.
Hence, this concludes the definition of Compensation & Benefits along with its overview.
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This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The nội dung on MBA Skool has been created for educational & academic purpose only.
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