Compensation and Benefits

Topics: Employment compensation, Salary, Employment Pages: 6 (1529 words) Published: November 28, 2012
Compensation and benefits
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Compensation and benefits (abbreviated “C&B”) is a sub-discipline of human resources, focused on employee compensation and benefits policy-making. It is also known in the UK as “total reward” and as “remuneration” in Australia and New Zealand. Contents[hide] * 1 The basic components of employee compensation and benefits * 2 Variable pay * 3 Benefits * 4 Equity-based compensation * 5 Organizational place * 6 Main influencers * 7 Bonus plans| [edit] The basic components of employee compensation and benefits Employee compensation and benefits are basically divided into four categories: 1. Guaranteed pay – monetary (cash) reward paid by an employer to an employee based on employee/employer relations. The most common form of guaranteed pay is the basic salary. 2. Variable pay – monetary (cash) reward paid by an employer to an employee that is contingent on discretion, performance or results achieved. The most common forms are bonuses and sales incentives. 3. Benefits – programs an employer uses to supplement employees’ compensation, such as paid time-off, medical insurance, company car, and more. 4. Equity-based compensation – a plan using the employer’s share as compensation. The most common examples are stock options. Guaranteed pay Guaranteed pay is a monetary (cash) reward.

The basic element of the guaranteed pay is the base salary, paid based on an hourly, daily, weekly, bi-weekly or a monthly rate. The base salary is typically used by employees for ongoing consumption. Many countries dictate the minimum base salary defining a minimum wage. Individual skills and level of experience of employees leave room for differentiation of income-levels within the job-based pay structure. In addition to base salary, there are other pay elements which are paid based solely on employee/employer relations, such salary and seniority allowance. [edit] Variable pay

Variable pay is a monetary (cash) reward that is contingent on discretion, performance or results achieved. There are different types of variable pay plans, such as bonus schemes, sales incentives (commission), overtime pay, and more. An example where this type of compensation plan is prevalent is the real estate industry and real estate agents. A common variable pay plan might be the sales person receives 50% of every dollar they bring in up to a level of revenue at which they then bump up to 85% for every dollar they bring in going forward. Typically, this type of plan is based on an annual period of time requiring a "resetting" each year back to the starting point of 50%. Sometimes this type of plan is administered so that the sales person never resets and never falls down to a lower level. It also includes Performance Linked Incentive whcih is variable and may range from 130% to 0% as per performance of the indiviudal as per his KRA. [edit] Benefits

There is a wide variety of employee benefits, such as paid time-off, insurances (life insurance, medical/dental insurance, and work disability insurance), pension plan, company car, and more. A benefit plan is designed to address a specific need and is often provided not in the form of cash. Many countries dictate different minimum benefits, such as minimum paid time-off, employer’s pension contribution, sick pay, and more. [edit] Equity-based compensation

Equity based compensation is an employer compensation plan using the employer’s shares as employee compensation. The most common form is stock options, yet employers use additional vehicles such as restricted stock, restricted stock units (RSU), employee stock purchase plan (ESPP), and stock appreciation rights (SAR). The classic objectives of equity based compensation plans are retention, attraction of new hires and aligning employees’ and shareholders’ interests. [edit] Organizational place

In most companies,...
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