COMPENSATION AND BENEFIT

COMPENSATION AND BENEFIT

 Compensation- literally means payment for work done such as earnings, emolument, fee, hire, pay, remuneration, salary, stipend, wage. It can also be defined as something given in exchange for goods or services rendered: consideration, payment, recompense, remuneration.

Benefit literally means a payment made or an entitlement available in accordance with a wage agreement, an insurance policy, or a public assistance program. It also carries the definition of something that contributes to or increases one's well-being: advantage, good, interest (often used in plural), profit.

Nature of Compensation

 It can be divided by 2 types:

1)      INTRINSIC- include praise completing a project or meeting performance      objectives Other physiological and social effects of compensation reflect the intrinsic type of rewards.

 

2)      EXTRINSIC-rewards are tangible and take both monetary and non    monetary forms. It can be direct and indirect .The direct compensation, the employer exchanges monetary rewards for work done. Example of  Direct compensation  includes Base Pay (Wages and Salary) ,Variable Pay (Bonuses, Incentives , Stock Options) and Indirect  includes Benefits (Medical ,Insurance, Paid Off Time, Retirements/Pensions, Workers Compensation ).

 

Compensation Philosophies

 2 Basic compensation –

Ø      Entitlement Philosophy -by giving automatic increases to their employees every year practice the entitlement philosophy.

Ø      Same percentage increase every year.

Ø      Employees and the manager who subscribe this entitlement philosophy believe that individuals who have worked another year are entitled to a raise in base pay.

Ø      And also they believe all incentives and benefit programs should continue and be increase.

Ø      Pay increase are referred to as cost of living raised.

Ø      Performance Orientation – the situation  where the organization do not guarantee additional or increased compensation simply completing another year of organization service.

Ø      Employee who perform well receive larger compensation and who do not perform satisfactorily see  little or no increase in compensation.

Ø      From this method, will motivate the employee to perform at satisfactory or better maintain or advance in relation to market compensation level.