COMPENSATION AND BENEFITS

 

Compensation and Benefits

                                            Figure 1: Compensation & Benefits

Human resources has a division called compensation and benefits that deals with paying employees and offering benefits. It involves figuring out how much an employee should be paid, as well as what perks should be provided. The management of employee benefit plans includes enrolling employees in benefit plans, handling claims, and informing employees of benefits. Compensation and benefits also include these activities (Quit Genius, 2023).

 Objectives of Compensation

The objectives of HRM are to maintain the greatest talent pool and ensure that workers receive fair and legal compensation for their labor. Employee performance and contribution to the success of the company will both be encouraged by a well-designed remuneration scheme (Edureka, 2022). The following considerations must be made while determining compensation in HRM in order to meet these objectives:

• The market value of the job
• The skills and experience needed for the job
• The employee’s performance
• The company’s financial health and profitability

Although managing compensation is a complex topic in HRM, understanding these basic objectives is a great place to start. But the significant objectives of compensation in HRM can be discussed in detail as follows:

·         Ensure Employees are Fairly Compensated

In HRM, compensation must have this as the primary objective. In addition to taking into account their abilities, experience, and training, employers should pay employees according to the market value of their position. Furthermore, they ought to be paid according to how well they perform.

·         Attract the Right Employees

Attracting top employees is a crucial objective for compensation in HRM. Companies must provide competitive pay and benefits packages in order to do this. Additionally, HR professionals must be able to sell the company's culture and values to prospective employees.

 Create a Reward Structure

The third objective of compensation in HRM is to design a reward system that inspires workers to give their best effort. This may be accomplished via a variety of strategies, including stock options, bonus schemes, and commission systems.

  Promote Loyalty

Employee loyalty promotion is the fourth objective of compensation in HRM. Not all employees are only interested in large compensation. Additionally, they want to feel important to the business and like valued team members.

·         Adhere To Legal Compliance

Following all legal compliance criteria is the ultimate objective of compensation in HRM. This covers things like anti-discrimination laws, equal pay laws, and minimum wage laws (Edureka, 2022).

                                Figure 2: Objectives of compensation

 

Compensation and benefits components

The whole benefits and compensation package for an employee consists of a number of components. Employee benefits may be provided in a number of ways. Most often, it is expressed as a CTC, or gross pay. The following list includes some of the many pay and benefit components:

·         Fixed pay

This is the employee's base pay plus any additional fixed payments made to them, regardless of any other circumstances. The job contract makes this explicit. This is the remuneration, salary, or wage that a worker or employee will unquestionably get throughout the duration of their employment with the firm.

·         Variable Pay

This is the extra compensation given to the employee in accordance with their performance, the performance of the firm, etc. Variable compensation encourages employees to perform even better because it depends on each employee's performance.

 

·         Equity Pay

Employees receive shares in the company, sometimes at lower prices. The company's expansion and rising stock prices are projected to generate profits for the employees. This is often awarded to senior managers who have worked for the business for a long time.

·         Medical

The majority of businesses now include medical benefits in their compensation packages. Health insurance, free checkups, on-campus medical facilities, and other medical services help to keep employees healthy and engaged.

·         Insurance

As mentioned in the preceding point. These days, health insurance is included in the bundle. Numerous businesses also provide insurance for parents and siblings, often at discounted rates. Even additional insurance may be incorporated.

·         Accommodation

Even some businesses provide accommodations for workers. This might take the form of a workspace given by the firm, or the employee may claim the rent and lease payment in accordance with the company's regulations and procedures (MBA Skool, 2022).

            Figure 3: Compensation and benefits components

Conclusion

The term "compensation and benefits" refers to the salary or other remuneration as well as other financial and non-financial advantages provided to employees by a company. A crucial component of HRM is compensation and benefits, since they maintain employee motivation. It assists in rewarding workers based on their performance and deeds and encourages workplace excellence.

 

References

Edureka, 2022. Edureka. [Online]
Available at: https://www.edureka.co/blog/compensation-in-hrm
[Accessed 2 May 2023].

MBA Skool, 2022. MBA Skool. [Online]
Available at: https://www.mbaskool.com/business-concepts/human-resources-hr-terms/4032-compensation-a-benefits.html
[Accessed 2 May 2023].

Quit Genius, 2023. Quit Genius. [Online]
Available at: https://www.quitgenius.com/hr-glossary/compensation-and-benefits#:~:text=Compensation%20and%20benefits%20are%20two,attract%20and%20retain%20talented%20employees.
[Accessed 2 May 2023].

 

 

 

Figure 1: Compensation & Benefits. 1

Figure 2: Objectives of compensation. 3

Figure 3: Compensation and benefits components. 4