Please enable JavaScript.
Coggle requires JavaScript to display documents.
Compensation and Incentives - Coggle Diagram
Compensation and Incentives
Compensation
Definitions of compensation
Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction.
Objectives of compensation planning
To attract, engage, and retain employees through competitive compensation plans that align with the company budget, corresponding job-market, and government regulations.
A detailed compensation program gives employees a roadmap for career progression and drives them to achieve.
It increases productivity and profitability, reduces turnover, reflects company culture, attracts top talent, combats discrimination,
Factors affecting compensation planning
Years of experience and education level
Industry
Location
In-demand skill sets
Supply and demand
Various modes of compensation
Wages and Salary
Incentives
Fringe Benefits
Non- Monetary Benefits
Incentives
Definitions of incentives
A reward that an employer gives to employees for results achieved by the company as a whole
Various kinds of incentives
Pay and allowances. Regular increments in salary every year and grant of allowance act as good motivators
Profit sharing
Co-partnership/stock option
Commission
Fringe benefits
Fringe benefits usually refer to non-cash benefits granted to employees, but do not constitute cash payments made.
These include health insurance, life insurance, tuition assistance, childcare reimbursement, cafeteria subsidies, below-market loans, employee discounts, employee stock options, and personal use of a company-owned vehicle.
Employee motivation
Definitions of motivation
Motivation is the internal and external factors that stimulate desire and energy in people to be continually interested and committed to a job, or to make an effort to attain a goal.
Theories of motivation
Maslow's need hierarchy
Theory states that when a lower level need is satisfied, the next highest becomes dominant and the individual’s attention is turned to satisfying this higher need.
Herzberg's two factor theory
Implies that the managers must stress upon guaranteeing the adequacy of the hygiene factors to avoid employee dissatistaction.
Building a compensation plan
A compensation plan is a payment package designed to attract and retain employees. A basic compensation package consists solely of a salary or wages. A more comprehensive compensation could include additional benefits such as bonuses, perks, commission, health insurance, or retirement investments.