Compensation and Benefits of HRM 

  Figure 1- Employee Benefits

Compensation and Benefits means most important part of Human Resource Management. In other words it is a package that offers from companies to motivates their employees to retain with the organization for a long time and to attract new talents. Employees always trying for companies with better structures, compensation and benefits. Therefore having a good compensation and benefit scheme is very important retain in today's business world.

Understanding the Compensation and Benefit?

Compensation is refers to all the monetary and non-monetary rewards which offers for employees. This can be include salary, bonus, commissions, profit sharing, equity, reward and recognition etc. 

'Compensation includes direct cash payment and indirect payments in form of employees benefits and incentives to motivate employees to strive for higher levels of productivity'

                                                                                                                -Cascio (1995)

Benefits means an additional advantage an employee receive from his employer. Benefits go beyond than the salary and wages. It includes vacation, pension, health insurance, work life balance, flexible working hours etc..

Types of Compensation & Benefits

Compensation...…

Compensation types are different form organization to organization. It is basically plan according to the number of employees in the organization. There are 2 types of compensations.

                                                                          Figure 2- Types of compensation

➦ Direct Compensation

   -Financial form of compensation. In other word this is name as monetary type.

• Base Salary -This is a fixed amount of money employees receive monthly according to their job categories and responsibilities based on their qualification.

• Over Time - It is the extra payment of receive by the employees for working extra hours.

• Variable Compensation/Allowances - This is an additional amount given to employees for their target achievements and their performances. This gives as a motivation and encouragement.

➦ In Direct Compensation

-This include both financial and non-financial form. Because in certain type of indirect compensation has a financial value too. But this is varying with the organization.

• Profit Sharing - Some organizations have programs related to profit-sharing where a portion of the company's profit is distributed among the employees.

• Equity -  Some companies may come up with stock options or equity as a form of compensation.

Benefits...…

In addition to compensation, organization provide employees with various services as employee benefits. The organizations offer benefits to their employees to motivate the employees and to protect the organizational image

• Health Insurance - This is one of the most important benefit which employer can give to their employees.

• Wellness programs - Some benefits like Gym membership, health coaching , These type of programs encourage healthy habits of employees. It increase their performance level.

• Education Assistance - Providing loans for educational purposes, education assistance, can helps employees to enhance their skills and performance level.

• Childcare Benefit - Employers can offer child care facilities, day care facility within the organization. It helps employees to maintain the work life balance.

• Flexible work arrangements -  Employers can arrange flexible work arrangements like, work from home, online working methods or flexible schedule to maintain the work life balance and their personal life.

    

     

            Figure 3-Employee benefits management

Why are compensation and benefits essential?

• To enhance job satisfaction - When employees get fairly compensated. It enhances their job satisfaction. They feel that they are valuable to the organization.

• Attracting and retaining talents - Competitive compensation and benefits package is very important to attract new talents and retain talents of the organization. In today’s competitive business world, it is important to minimize turnover rate to reduce the cost.

• Motivate employees - When it comes to the motivation factor. Compensation and a good benefit scheme play a major role. If employees get some extra for what they are doing, their productivity level goes up and they’ll try to the maximum to achieve the goals of the organization.

• Employee well-being - Good benefits scheme like healthcare coverage, childcare, retirement plans support employees to maintain work life balance. It motivates employees to achieve their targets.

• To improve productivity - The fair compensation and benefit plan rewards employees to make more effort to success at work. It encourages them to work hard, to increase productivity of the organization.

 

                                                                         Video Source-You Tube

Conclusion...

Compensation and benefits play a major role in an organization. HR Professional should establish a competitive compensation and benefit scheme specially to retain and to attract top talents, well-designed compensation and benefits package can help to align employee goals with the company’s strategy, to achieve goals and objectives of the organization.

References

The Human Capital Hub.(n.d) Compensation and Benefits. [online]. Available at  

https://www.thehumancapitalhub.com/articles/compensation-and-benefits. Accessed on 20th November 2023. 

Darwinbox (2022). What is compensation and Benefits? [online]. Available at https://explore.darwinbox.com/hr-glossary/compensation-and-benefits. Accessed on 20th November 2023.

Wool, M. (2022). Compensation and benefits: Why the right pay and perks [online]. Available at https://www.betterup.com/blog/compensation-and-benefits. Accessed on 21st November 2023.

Bhat, A. (n.d). Employee Benefits; Types, Importance and Examples [online]. Available at https://www.questionpro.com/blog/employee-benefits/#:~:text=Employee%20benefits%20are%20important%20to,improving%20their%20overall%20job%20satisfaction. Accessed on 23rd November 2023.

Employee Benefits; Meaning, Benefits, Objectives and Other Details [online]. Available at https://www.yourarticlelibrary.com/employee-management/employee-benefits-meaning-benefits-objective-and-other-details/60366. Accessed on 23rd November 2023.

 Zulkifi, C. & Omar, C. (2019).  Compensation and Benefit Key Reason Employees Retain In the Organization. International Journal of Economics, Business and Management Research,3(4), pp 2456-7760 [online]. Available at https://www.ijebmr.com/uploads/pdf/archivepdf/2020/IJEBMR_369.pdf. Accessed on 23rd November 2023.