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Compensation System
The compensation system results from the allocation, conversion and transfer of a portion of the income of an organization to its employees for their monetary and in kind claims on goods and services.
Monetary claims on goods and services are wages and salaries paid to an employee in the form of money or any other form that is quickly and easily transferable to money at the favoritism of the employee. As medium of exchange, money enables an employee to purchase certain kinds and amounts of goods and services available in the marketplace. The total compensation package may be described in many ways, but the classification scheme used in eight dimensions. Each dimension has a number of compensation components. Each component has a variety of features. The structuring of features, components, and dimensions into a compensation system is a job for the compensation specialist. The eight dimensions of compensation system are;
- Pay for work and performance: Pay for work and performance includes money that is provide in the short term like weekly, monthly and annual bonuses/awards and that permits employees to pay for and contract for the payment of desired goods and services.
- Pay for time not worked: The number of hours worked per week and the number of days worked per year have decreased.
- Loss of job income continuation: Job security is and always has been the primary consideration for most workers. They want assurance that their jobs and the income derived from working will continue until they are ready to retire.
- Disability income continuation: The possibility always exists that a worker will incur health or accident disability because of these disabilities employees are frequently unable to perform their assignment.
- Deferred income: Most employees depend on some kind of employer-provided program for income continuation after retirement.
- Spouse income continuation: Most employees with family obligations are concerned with what might happen if they are no longer able to provide money that will allow their families to maintain a particular standard of living.
- Health, Accident and liability protection: when a health problem occurs, employees must be concerned not only with income continuation but also with payment for goods and services required in overcoming the illness or disability.
- Income Equivalent payment: Employees usually find them highly desirable and both employer and employees find certain tax benefit in them. Perks are tax free to employees and tax deductibles to employers.
