Compensation and benefits Strategy

 

Compensation and benefits


                                             Figure 1:compensation & benefits


Compensation and benefits are crucial functions of human resource management. A rewarding compensation and benefits plan attracts high-performing candidates and helps foster staff motivation, retention and a positive workplace experience.


Differences between compensation and benefits

 

          Figure 2:Difference between compensation & benefits


Compensation

Compensation is the money an employee receives in exchange for their labor, which could be a salary, wages, commission, and bonuses. This money is subject to taxation. HR uses compensation to attract top talent and boost retention rates.


Figure 3: compensation system

Benefits

Benefits are extra perks or rewards that an organization provides to an employee, and they may have a financial value, but the employee doesn’t receive any cash directly. This includes health insurance, stock options, gym memberships, flexible working hours, ‘SUMMERE FRIDAY,” learning and development opportunities, and retirement savings plans. Some benefits are exempt from taxation

  

                                   Figure 4:Employee benefits

Benefits with a monetary value

Certain benefits have a monetary value, but team members don't receive compensation in cash. Examples include:

  • Disability insurance
  • Dental and vision insurance
  • Health insurance
  • Life insurance
  • Paid gym membership
  • Retirement benefits
  • Stock options
  • Student loan repayments
  • Worker's compensation plan

Benefits with no monetary value

Some benefits with no monetary value include:

  • Family leave: This benefit includes extended leave allowance for bereavement, maternity and paternity leave.
  • Flexible working schedule: An organization can offer flexible work hours and the option to work remotely for a few days a week as long as team members complete their assignments on time.
  •    Paid time off: Depending on the length of service, organizations may allow team members to schedule paid days off for some personal time.
  • Training and development: Employers develop training programs to enable team members to learn specific skills or gain knowledge to improve their performance.
  • Use of company equipment: Some companies provide access to computer equipment, cellphones and tablets for the duration of a candidate's service contract.

 

Why is compensation and benefits important
   

                            
                                       Figure 5: compensation & benefits importance

Excellent compensation and benefits packages can differentiate a company from other employers in the marketplace. A business hires people to achieve its organizational goals, and candidates can join companies to earn money and advance their careers. Companies that develop a competitive and well-designed compensation and benefits strategy may enjoy these benefits

Attracting high-performance candidates and improving retention

Motivated team members

Increased loyalty and engagement

Improved productivity

Enhanced workplace experience

 

What is HR’s role in compensation and benefits?
 


                                 Figure 6:HR'S role in  compensation & benefits

 

Formulating compensation philosophy

An effective compensation philosophy draws upon competitive market and financial data, but will also serve as an anchor for "cultural fit" of the organization and key talent, which is based on attitudes, opinions and levels of commitment, engagement and satisfaction.

Determining compensation strategy

HR also plays a role in determining the practical approach the company takes toward compensation and benefits for employees. For example, rules for base salary and employee benefits, the company’s position compared to the market, and more.

Creating an employee benefits strategy

Creating an environment and structure that people love to work in and feel appreciated and valued is how to attract, retain, and nurture your employees. Having a winning employee benefits strategy  in place is integral to this and a part of HR’s job.

Addressing compensation issues

If you ignore compensation issues at your organization, it will quickly lead to unhappy, unmotivated, disengaged employees, which in turn affects productivity and morale and leads to increased turnover. This is why HR and/or the compensation and benefits team must be committed to uncovering and addressing any compensation issues in the business. 

Involvement in compensation planning 

HR is also responsible for compensation planning which requires taking a strategic approach to balancing the financial interests of the company and its goals with attracting, retaining, developing, and rewarding employees.

 


Conclusion

To effectively manage compensation and benefits, organizations must strike a balance between competitive pay and benefits packages that align with their industry and organizational goals while also adhering to legal and ethical standards.

 

 

Reference

 

AIHR,2024 Compensation and Benefits

https://www.aihr.com/blog/compensation-and-benefits/

 

Dublino,J Feb 2024 15 Benefits and Perks That Will Keep Your Remote Employees Happy

https://www.business.com/articles/perks-benefits-for-remote-workers/

 

Bester,V 2023 What Are Compensation and Benefits? (A Complete Guide

Indeed career guid

https://www.indeed.com/career-advice/pay-salary/compensation-and-benefits#:~:text=People%20are%20a%20vital%20asset,of%20people%20in%20a%20company.


Reda.J,2024  Gallagher, Developing An Effective Compensation Philosophy That Attracts, Motivates, Retains And Develops Top Talent

https://www.ajg.com/us/news-and-insights/2018/12/developing-an-effective-compensation-philosophy-that-attracts/#:~:text=An%20effective%20compensation%20philosophy%20draws,of%20commitment%2C%20engagement%20and%20satisfaction.

Comments

  1. Imalka EkanayakeMarch 24, 2024 at 9:44 AM

    Very interesting topic. We all working with the expectations of rewards. Nicely explained.

    ReplyDelete
  2. Dilshard Hameed March 28, 2024 at 7:25 AM

    Compensation is the most best part for employee

    ReplyDelete
  3. Shehan PriyashanthaMarch 29, 2024 at 6:27 AM

    Well Organized Blog

    ReplyDelete
  4. Tharuka LiyanaarachchiApril 5, 2024 at 8:36 AM

    This blog provides a comprehensive overview of compensation and benefits in HRM, covering their definitions, differences, importance, and HR's role in managing them effectively. It emphasizes the significance of developing competitive compensation and benefits packages to attract, retain, and motivate high-performing employees.

    ReplyDelete
  5. AIApril 15, 2024 at 8:05 AM

    This article covers a wide range of valuable points related to compensation.God work.

    ReplyDelete

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