Compensation Managment
Compensation and Benefits in HRM
What is Compensation
Management.
Compensation
management involves the development, implementation, and administration of
policies and strategies related to employee remuneration, benefits, and
rewards. This crucial HR function directly impacts employee engagement,
motivation, and retention, making it a key determinant of an organization’s
overall success and sustainability
Compensation
and benefits refers to the compensation/salary and other monetary and
non-monetary benefits passed on by a firm to its employees in return for their
services. Compensation and benefits is
an important aspect of HRM as it helps to keep the workforce motivated are the
most important hygiene factors. It helps give benefits to 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
Source:
Importance of compensation and benefits.
Companies hire people individual to achieve their
organizational goals and people join companies to 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 them. part
from the company's reputation and job profile, the money offered as a salary is
pivotal in attracting people to work for the organization. The more the
compensation and benefits offered to employees, the more is their loyalty,
motivation to work and do 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
like experience, education background etc.
In
senior management, skills like team management, communication management,
leadership, time management etc. are also considered while finalizing the pay
package
Objectives of Compensation Management.
- Obtain the right talent
- Retain existing employees with the right bonuses and incentives
- Affirm equity
- Control the costs properly
- Abide by the legal rules
- Inculcate a good sense of communication and understanding.
- Motivate personnel for better productivity levels in the long run
- Salary and wage programs are to be managed with maximum effectiveness
- Compensation needs to have enough consistency.
- Make sure the compensation is also sufficient for the employee. They must be satisfied with the finances they receive at the end of the day for their hard work and dedication.
Types of Compensation.
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 employees.
Source:
1. Fixed
Pay - This
is the basic salary plus other fixed components paid to 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 an employee.
2.
Variable Pay - This is the additional compensation paid to 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 perform even
better.
3. Equity Pay - Employees are awarded shares of the company, often 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.
This is mostly given to the senior management who have served the
company for a long time.
4. Medical - Medical is part of the compensation package for most of the
companies now. Medical includes the health insurance, free 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 extend or modify it as well.
5. Insurance - 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.
6. Accommodation - Many companies even offer accommodation to employees. This can be
either be in the form 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 car or taxi facilities to employees to
reach office.
Conclusion.
It is very vital to follow and practice a proper compensation and
benefit plan in an organization to achieve organizational goal by retaining existing
employees. Also it is very important when onboarding new employees as well.
Failing to do a proper compensation and benefit package can cause a huge loss
for the organization and will fail to achieve company goals.
References
Emeritus, 2023. What is Compensation Management?
Definition & Examples. [Online]
Available at: https://emeritus.org/in/learn/what-is-compensation-management/
[Accessed 13 08 2023].
hrmhandbook.com,
2021-2. Compensation Management. [Online]
Available at: https://hrmhandbook.com/hrp/compensation/management/#:~:text=Compensation%20management%20involves%20the%20development%2C%20implementation%2C%20and%20administration,determinant%20of%20an%20organization%E2%80%99s%20overall%20success%20and%20sustainability.
[Accessed 12 08 2023].
mbaskool.com, n.d. Compensation
& Benefits - Meaning, Importance, Types & Example. [Online]
Available at: https://www.mbaskool.com/business-concepts/human-resources-hr-terms/4032-compensation-a-benefits.html
[Accessed 14 08 2023].
tutorialspoint.com,
n.d. HRM - Compensation Management. [Online]
Available at: https://www.tutorialspoint.com/human_resource_management/human_resource_management_compensation.htm#
[Accessed 12 08 2023].
Compensation and benefits management is required as it encourages the employees to perform better, show their excellence and also provide growth and development options to the deserving employees. When the proper compensation and benefits are given to the employees than they feel valuable, motivated, secure and satisfied which motivate them to perform better for the success of the organization.
ReplyDeleteAs per this post I can summarize as the renumeration that a business provides to the employee for the services they render to the org. It helps set incentives, and, in turn, helps the employees stay motivated to achieve more and achieve fast.
ReplyDelete