HR Compensation and Benefits
In the context of this article, compensation and benefits (also referred to as C&B) usually go together and indicate a sub-discipline of HR focusing on employee compensation, benefits programs and policy.
What is Comlpensation?
Looking up the definition of the term compensation we’ll see something like:
- [1] compensation (n): something, typically money, awarded to someone as a recompense for loss, injury, or suffering as in “seeking compensation for injuries suffered at work”
- [2] the money received by an employee from an employer as a salary or wages.
This site in general and this article in particular is about definition #2 mentioned above. It’s about compensation and rewards plan, compensation data, compensation methodology, compensation practices, sales compensation, executive compensation and more. The topics are limited to the field of human resources (HR) and compensation but at the same time quite broad.
That’s said, this site is not about worker compensation, which is a state-mandated program consisting of payments required by law to be made to an employee who is injured or disabled in connection with work.
Compensation and Benefits
In the context of this article, compensation and benefits (also referred to as C&B) usually go together and indicate a sub-discipline of HR focusing on employee compensation, benefits programs and policy.
Compensation and benefits can be tangible (such as how much an employee gets paid and how much health, dental and vision insurance coverage is offered at what price), but there are also intangible rewards such as recognition, work-life balance and career development. Combined both the tangible and intangible aspects, these are referred to as total rewards. Thus, the term compensation and benefits refers to the discipline as well as the rewards themselves. Sometimes, HR professionals prefer using the term rewards instead of compensation because of its broader meaning.
Components of Employee Compensation & Benefits
- Fixed pay: This is a fixed monetary (cash) reward (wage or salary) paid by an employer to an employee. The most common form of guaranteed pay is base salary.
- Variable pay: This is a non-fixed monetary (cash) reward paid by an employer to an employee in addition to the fixed pay above and is normally based on the employee’s performance, the company performance etc. The most common forms of variable pay are bonuses and incentives.
- Benefits: These are programs an employer uses to supplement employees’ compensation, such as paid time off (PTO), medical insurance, company car and other perks.
- Equity Pay: This is usually in the form of shares of the company often given or offered at a discounted price. Employees are expected to make money out of them by the appreciation of the stock price and the growth of the company.
The Importance of Compensation and Benefits
One of the biggest factors why people join companies is in the compensation and benefits, salaries, perks, incentives etc which is given to them. Apart from the company’s reputation and job profile, the money offered as a salary and other perks are pivotal in attracting people to work for the organization. The more the compensation and benefits offered to employees, the more likelihood they’ll accept the job offer and become loyal, motivated to work and do well.
On the other hand, companies which offer lesser salaries will likely to 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.