Finance of Compensation and Benefits

Abstract

Compensation may be defined as the salary and wages that are fixed to be paid to employees against their services. Other than the financial compensation, there are other forms of non financial benefits that can be offered to employees as a means of motivation or retention. The importance of compensation and benefits must be understood from the fact that it is one of the major functions of Human resource development. The paper discusses the concept of employee concept and benefits, the strategic use of it, and the financial Components of compensation and benefits.

Table of Contents

Introduction1

Qualities of a good compensation and benefits program2

Compensation and Benefits Procedures3

So is it gain sharing?3

The strategic use of compensation and benefits4

Quality human resource4

Employee Retention5

Components of compensation and benefits6

Fixed Cash components6

Variable pay7

Benefit components8

Conclusion9

References10

Finance of Compensation and Benefits

Introduction

Compensation may be defined as the salary and wages that are fixed to be paid to employees against their services. Other than the financial compensation, there are other forms of non financial benefits that can be offered to employees as a means of motivation or retention. The importance of compensation and benefits must be understood from the fact that it is one of the major functions of Human resource development.

Today's business environment is marked by cut throat competition which makes it difficult not only for the employee but also puts pressure on companies to employ effective recruitment, maintenance and motivation strategies to retain quality human resource (Rhodes, 2008). As far as financial compensation is concerned there are different views in terms of the position it gets on the hierarchy of employee needs and requirements. The paper discusses the concept of employee concept and benefits, the strategic use of it, and the financial Components of compensation and benefits.

Employee Compensation and Benefits

Employee Compensation and Benefits is known with different names in different countries. These are total reward and remuneration in UK and Australia and New Zealand respectively. Employee and executive compensation and benefits require strategic planning and implementation. This consists of planning of remuneration, benefits and incentives (Kennedy, 2009). The plan for compensation and benefits can be as simple as steady benefits offered to individuals and can go higher up and become more complex in the form of stock based incentive plans.

This is one of the most important disciplines in human resource management and more and more companies have formed separate compensation and benefits department considering the need for employee retention. The best practices on compensation and benefits have been found to be in companies that realize that quality human resource is their most valued asset. They try to keep them happy and view them as internal business stakeholders. Different organizations have different policies and procedures for compensation and benefits. The most common one is described hereunder.

Qualities of a good compensation and benefits program

A good compensation and benefits program is one with which the employees are satisfied. The sense of satisfaction comes from the belief that the program is fair and equitable and is closely ...