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Introduction to Compensation and Benefits – Human Resource Management (HRM) has never been as significant as it is today. Companies want to attract, retain, and motivate brains to meet objectives. Today Humans are regarded as one of every company’s assets so they need to be efficiently and effectively managed. One of the tools companies use to attract, retain, and motivate their people is Compensation Management. In this hub, I shall define compensation and benefits along with their advantages for a company and its workers.
Suppose, you own a boutique. Let’s call it myWear – or you can give it any name of your liking. You have hired three salespersons and a receptionist. The salespeople are responsible to look after the sales affairs. The receptionist’s duties are to handle the cash and manage the account books. I shall refer to this illustration throughout the hub.
COMPENSATION
Would the three salespersons and the receptionist work for free? No. They would, like us all, expect something in return. You must have heard a common phrase: Give and Take. You always have to give things to people in return to what you take from them. Compensation refers to this exchange but in monetary terms. It is the employer’s feedback for an employee’s work. It simply is the monetary value you would give to your four employees in return for their services.
Gary Dessler in his book Human Resource Management defines compensation in these words “Employee compensation refers to all forms of pay going to employees and arising from their employment.” The phrase ‘all forms of pay’ in the definition does not include non-financial benefits, but all the direct and indirect financial compensations.
BENEFITS
Employees today are not willing to work only for the cash alone, they expect ‘extra’. This extra is known as employee benefits. Also known as fringe benefits, Employee benefits are non-financial forms of compensation offered in addition to cash salaries to enrich workers’ lives.
What benefits would you offer to your employees at myWear? Of course, you would offer different benefits to the salespersons and the receptionist. The problem will arise when you begin to decide what benefit to give to whom and on which basis? Employee benefits are not performance-based, they are membership-based. Workers receive benefits regardless of their performances. Employee benefits as a whole have no direct effect on employee performance, however, inadequate benefits do contribute to low satisfaction levels and increase absenteeism and turnover in employees (DeCenzo and Robbins; 2007). So you would have to carefully design your benefits package. Your package may include a cell phone for each worker, taking them to a training workshop or seminar, giving them a day or two off every month, and so on. While deciding on the benefits package, do consider the associated costs.
The module includes the following:
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