Compensation and benefits decisions are playing an ever increasing role in helping companies attract and retain the best talent to enable business growth. With so many different possibilities to engage your workforce through rewards and remuneration, it is a complex task to ensure you are optimizing your investment in human capital. Attracting, retaining and engaging talent remains a constant for Compensation and Benefits professionals.
The basic components of employee compensation and benefits[ edit ] Employee compensation and benefits are divided into four basic categories: Guaranteed pay — a fixed monetary cash reward paid by an employer to an employee.
The most common form of guaranteed pay is base salary. Guaranteed pay also includes cash allowances housing allowance, transport allowance, etc.
Variable pay — a non-fixed monetary cash reward paid by an employer to an employee that is contingent on discretion, performance, or results achieved. The most common forms of variable pay are bonuses and incentives. The most common examples are stock options. Guaranteed pay[ edit ] Guaranteed pay is a fixed monetary cash reward.
The basic element of guaranteed pay is base salary which is paid on an hourly, daily, weekly, bi-weekly, semi-monthly or monthly rate. Base salary is provided for doing the job the employee is hired to do.
The size of the salary is determined mainly by 1 the prevailing market salary level paid by other employers for that job, and 2 the performance of the person in the job. Many countries, provinces, states or cities dictate a minimum wage. In addition to base salary, allowances may be paid to an employee for specific purposes other than performing the job.
These can include allowances for transportation, housing, meals, cost of living, seniority, or as payments in lieu of medical or pension benefits. The use of allowances varies widely by country, as well as job level and the nature of job duties.
Variable pay[ edit ] Variable pay is a non-fixed monetary cash reward that is contingent on discretion, performance, or results achieved. There are different types of variable pay plans, such as bonus schemes, sales incentives commissionovertime pay, and more. An example where this type of plan is prevalent is how the real estate industry compensates real estate agents.
Sometimes this type of plan is administered so the sales person never resets or falls down to a lower level. Benefits[ edit ] There is a wide variety of benefits offered to employees such as Paid Time-Off PTOvarious types of insurance such as lifemedicaldentaland disabilityparticipation in a retirement plan such as pension or kor access to a company car, among others.
Some benefits are mandatory which are regulated by the government while others are voluntarily offered to fulfill the need of a specific employee population. In the United States, "qualified" employee benefit plans must be offered to all employees, while "non-qualified" benefit plans may be offered to a select group such as executives or other highly-paid employees.
When implementing a benefit plan, HR Departments must ensure compliance with federal and state regulations. The most common form is stock optionsyet employers use additional vehicles such as restricted stockrestricted stock units RSUemployee stock purchase plan ESPPand stock appreciation rights SAR.
A stock option is defined as "a contract right granted to an individual to purchase a certain number of shares of stock at a certain price and subject to certain conditions over a defined period of time. That could be a schedule that is controlled by the employee and can be adjusted to accommodate occasional non-work activities, or one that is highly predictable, which makes it easier for the employee to arrange childcare or transportation to work.
Access to training programs, mentorship, opportunities to travel or to meet other people in the same field, and similar experiences are all intangible benefits that may appeal to some employees.
Pay aggregates[ edit ] Various combinations of the above four categories are referred to as pay aggregates.
Common aggregates are explained below. Together, guaranteed and variable pay comprise total cash compensation.
The ratio of base salary to variable pay is referred to as the pay mix. Total guaranteed package or fixed cost to company are aggregates that include guaranteed pay and benefits. This represents the total fixed cost of the reward package and is useful for budgeting.
All forms of variable pay annual bonus and equity compensation are excluded from this aggregate. Total direct pay refers to total cash compensation plus equity compensation.
Benefits are excluded from this aggregate. Total direct pay includes all the elements that may be negotiated by a job candidate, especially for senior executive positions where annual and long-term incentives are more substantial. Total compensation would include all four categories: Remuneration is a term often used to refer to total cash compensation or total compensation.
As noted above, total rewards would include total compensation as well as intangible benefits such as culture, leadership, recognition, workplace flexibility, development and career opportunity.
External equity[ edit ] External equity refers to the similarity of the practices of other organization of the same sector.Christy's under-less, An analysis of the problem of compensations and benefits in mne organization your hospitalized an analysis of violence in modern american media enroller depends skillfully.
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