The decent salary and incentives which are given to the employees in return of their handwork is called -Compensation and employee benefits as most employees do not just work for the love of the job. These compensation packages have to be created, managed and distributed efficiently by the HR professional of the organization.
There are four basic categories of COMPONENTS of Employee compensation and benefits-
1. Guaranteed Pay: Fixed monetary reward by an employer to the employee- eg.Base salary
2. Variable Pay: A non fixed monetary benefit paid by the employer to the employee eg.bonus and incentives.
3. Benefits: The rewards/remuneration given to supplement employee’s compensation e.g. paid time off, medical insurance, company car etc.
4. Equity based compensation: The stock, benefits for the employees to provide long term ownership in the company to the long term success of the company.
Employee compensation can be divided on 2 terms
Business objectives, labour unions, internal Equity, Organizational culture /structure
The state of the economy, inflation, unemployment rate & relevant labour market, labour laws, Tax laws & industry habits.
Therefore compensation can be regarded as a form of insurance providing wage replacement and medical benefits to employees in lieu of his rights to sue the employer in case of any kind of negligence that happens within or outside the office premises.