REMUNERATION AND BENEFITS ( (If a particular employee excels at their job,…
REMUNERATION AND BENEFITS
What is compensation or Remuneration?
Compensation is the total cash and non-cash payments that you give to an employee in exchange for the work they do for your business. It is typically one of the biggest expenses for businesses with employees. Compensation is more than an employee’s regular paid wages. It also includes many other types of wages and benefits.
Types of compensation include:
Base pay (hourly or salary wages)
Recognition or merit pay
Benefits (insurances, standard vacation policy, retirement)
Other non-cash benefits
How to determine compensation of employees
There are many ways to determine an employee’s compensation. No matter how you determine employee wages, you should consider internal equity. Internal equity is when you compare the positions in your business to ensure fair pay.
Do research on what other businesses pay their employees. Compare your business to other businesses in the area. What are other employees paid in your area? Also, make sure you pay attention to employees who have similar job titles and duties that your employees have.
You can survey other businesses that are similar to your business. You can also check websites where employees self-report their wages.
If a particular employee excels at their job, you can pay them increased wages. Or, you might pay an employee more if they received more education or advanced training related to their job.
You base an employee’s wages off their wages at their previous job. You might match the previous wages or offer an increase.
What does compensation mean for your bottom line? You need to calculate carefully how much you can spend on employees. When determining how much an employee costs, remember the costs of taxes and benefits. Before you offer a job or pay raise, make sure the compensation plan will fit in your budget.
By offering desirable benefits, you might be able to offer a lower base pay to employees. You need to know what benefits are the most desirable in your area and industry. Employees often heavily consider employee benefits packages when looking for a job.
What is base pay? Base pay is the initial pay you give your employees. The base pay rate is essentially the minimum amount an employee can expect to receive before taxes and other deductions.
Base pay includes an employee’s base salary or hourly wages. It also includes shift differentials and pay for special assignments.