Compensation benefits

Bureau of Labor Statistics, U.

Compensation benefits

On top of this, employees can also get some benefits from their employers. Whilst compensation and benefits are two terms that are often used interchangeably, it can be noted that they are different since they do not refer to one thing.

The main difference between compensation and benefits lies in the aspect related to monetary value. Compensation refers to pay or the exchange in monetary terms of the work performed by the employee and is paid by the employer.

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This can be in the form of wages, salary or tips. On the other hand, benefits refer to the exchange in value to the employees as part of their packages for the work that has been performed.

Compensation benefits

In other words, benefits do not involve money but are presented in form of value. However, there are also other key factors that differentiate compensation from benefits.

Key Characteristics of Compensation Compensation refers to all forms of pay to employees arising from their work and this is offered in monetary value. There are various key features that differentiate compensation from benefits. Some of these features determine the level of compensation Compensation benefits gets for his services rendered to the organization.

Types of compensation There are different types of compensation packages for different employees depending on their nature of work. These include the following: Basic compensation Some companies offer basic salaries as compensation to their employees. People who belong to the same grade get equal basic Compensation benefits.

However, people who have high qualifications and are in possession of advanced skills and experience often get higher pay compared to their counterparts with lower levels of education as well as experience and skills. Performance related compensation There are different types of compensation plans and some are performance based.

For example, pay can be adjusted to reflect some performance measure and that can be individual productivity, work group or departmental productivity.

In most cases, annual performance bonuses based on corporate profitability are also used as performance based compensation strategies for senior executives. Piece-rate compensation plan Alternatively some companies offer their workers compensation that is based on piece- rate plans where they do not get a base salary and are only paid for what they have produced.

This is also known as commission based compensation in other circles. This applies to vendors in particular where they get a certain percentage of the total revenue they generate per day.

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It is like the more revenue you generate, the more money you earn. Therefore, no sales no pay for the day. Compensation schedule Some companies prefer to pay their employees on monthly basis while others can choose either weekly or fortnight payment days.

Some companies calculate the pay for their employees on an hourly basis. Aspects such as experience as well as levels of qualifications are mainly used to determine the compensation rate for each employee within the organization.

Significance of compensation Compensation is very important in the organization. It is specifically designed to attract as well as to retain talent within the organization. It also focuses on utilizing employee energy to gain competitive strategy while at the same time trying to control costs at desired levels.

Attractive compensation helps to improve job satisfaction among the employees. This is advantageous to the organization since this leads to low absenteeism and low turnover since satisfied workers are willing to stay in their respective organizations. Key features of Benefits During the current period, it can be noted that employees expect to earn extra apart from cash alone.

This is known as benefits and some people prefer to call them fringe benefits and they are non-monetary form of compensation.

Benefits are offered on top of the cash pay to the employees in a bid to improve the welfare of the employees as well as to motivate them.

Types of benefits packages There are different types of benefit packages and employees have the opportunity to choose benefit packages that suit their needs.

Some benefits are required by law and these include sick and holiday pay as well as unemployment compensation. On the other hand, it can be observed that employees can choose their desired benefit packages from the following: Performance Workers receive benefits regardless of their performances.

In other words, benefits are not performance based but membership based. The other notable aspect about employee benefits is that they usually do not affect the performance of the employees though in some case they can lead to low satisfaction and lead to absenteeism and ultimately turnover if they are insufficient.

Care should be taken when designing the benefit package since this can impact the employees if the benefits are not satisfactory. It is also important to consider associated costs.Explore our site to know more about our compensation and benefits search offerings.

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