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Employee Compensation
is rewarding the employee for the services rendered by them for the benefit of the organization. It is a set of programs aimed at achieving the following objectives:
- Employee Attraction - Compensation aids in attracting capable employees to the organization.
- Employee Motivation - It also helps motivate employees towards superior performance.
- Employee Retention - Compensation also helps in retaining the employees and their services over an extended period of time.
Types of Employee Compensation
There are three types of Compensation and Benefits namely;
- Base (Basic) Compensation
- Variable Compensation
- Supplementary Compensation
Base Compensation and Benefits
refers to the basic salaries and wages given to the employees. It is normally constant (fixed amount e.g. wages can be per hour while salary can be per month) at a given amount irrespective of the difference in work performance.
Factors influencing Base Compensation and Benefits
Trade union activities. i.e. unions fight for improved wages/salaries of their members’.
Nature of job i.e. wages/salary will be determined by the Job analysis particularly the job description.
Size of the organization i.e. the smaller the organization, the more ability it has to pay better wages/salaries to its employees.
Market/ Salary surveys i.e. salaries paid by similar firms are also a factor affecting Base Compensation.
Government policies on wage determination e.g. Minimum wage policy.
Variable Compensation and Benefits It means that an employee gets wages depending on the work performed by the aforementioned employee (as per the work done). i.e. if an employee performs a job well, such a one receives a higher wage than an employee whose work was poorly performed. E.g. an employee who meets the targeted sales may not only earn a base pay but also a variable pay in form of; Performance based bonus, Profit sharing, Cash rewards, Production sharing
Supplementary Compensation and Benefits Refers to fringe benefits/incentives given by an employer according to his/ her wishes to. It is not compulsory or a routine meaning once one is given the compensation that one will be awarded another time. Consequently, the employer has a right to add, deduct or even withdraw the benefits when he or she wishes to. It may come in the following form; services such as medical, housing, transport/paid vacation, children’s education, Insurance, Interest free loans etc.
Conclusion
Basis Base Variable Supplementar y Nature Wages/ salaries
Wages Fringe benefits Payment Mode
Monetary Monetary Non-Monetary
