Compensation and Benefits

Compensation and benefits are basically referred to as the benefits provided by an organization to its employees in exchange for their labor. Hence, compensation and benefits are an essential part of the Human Resource Management. Package Inclusions Reliable, accurate, current survey data on compensatio..

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Compensation and Benefits

Compensation and benefits are basically referred to as the benefits provided by an organization to its employees in exchange for their labor. Hence, compensation and benefits are considered as an essential part of Human Resource Management.

In the current time, every HR Professional looks at their compensation and benefits strategy. As the companies look for talent, a crucial change in the strategy could ultimately seal the deal for high performing talent courted by the company recruiters.

Employees these days move to another company with better offers. It has also become easier for employees to research all the information related to the company online. With the data, employees can evaluate the employers based on the information that they have found.

However, the compensation and benefits strategy moves beyond the fight for talent. In fact, it is something that must be considered for every employee. Sometimes it is a one-size-fits approach, and sometimes it becomes more individualistic. Either way, it becomes essential for human resources to keep a handle on its strategy.

What are compensation and benefits?

Whenever you receive a job offer, the first thing that you look at is the salary. When the recruiter lists the wage as an hourly, weekly, monthly, or hourly rate. The candidates look at it as the most critical part of any job offer. Usually, when employees think about compensation, the salary is what they think. However, in the case of many employees, compensation is far more than just a regular paycheck.

Benefits cover indirect pay. This can be health insurance, ESPO, or any other myriad of things offered to employees. All these things are crucial in any job offer. Many times two jobs offering identical salaries may vary wildly in the benefits category, making one a better financial proposition than the other.

Overtime pay, employee stock options (ESOPs), pension plans, days off, and even free lunches make up as a critical part of the compensation and benefits package.

Who is in charge of Compensation and Benefits Schemes?

Most people want a decent salary with a good job. They also need other incentives that will reward them for their hard work. In this type of situation, the HR professionals having specialization in compensation and benefits.

The Human Resources Department takes control of money. They look at bonuses or even the salary that is being paid at the end of each month.

The compensation and benefits schemes ensure that the hard-working employees get rewarded fairly and in the most cost-effective way for the company. This also motivates the employees to sustain their performance.

The compensation and benefits schemes managed by the HR professionals are not only important for retaining and motivating employees, and also in attracting new people to the company. Salary and incentive packages are the primary reason why people apply for specific jobs. The more attractive compensation and benefits schemes tend to attract more interest in the positions.

What are the Practices Adopted in Giving Compensation and Benefits?

The practices adopted in giving compensation and benefits are as follows:

  • Understand the Budget

HR needs to ensure the structure of the company's budget when it comes to compensation and benefits. Also, make clear about its importance, and accordingly plan on spending the money. Keeping compensation and benefits balanced is critical in making sure HR can continue to adopt the strategy as per the requirement.

  • Consistently review employee compensation.

Mostly the HR departments only look at the compensation of the employees at the end of the year or during an employee review period. This assists them in determining salaries going forward. However, reviewing the compensation practices at least quarterly allows the HR to make adjustments as required.

  • Create salary ranges

This goes with the previous practice. It helps in ensuring that the organization is competitive in the industry. This aligns with the previous practice.  It also helps ensure the organization is competitive in the industry.  These can be increased by benchmarking similar jobs or based on the internal adopted practices.

  • Audits are a must

Additionally, HR must make audit compensation on a regular basis. There are a number of changes that could impact the salaries and the need to adjust those for the employees.

  • Pay high performing employees well

Better performance of employees means increased payment. This is an important point not only for the compensation and benefits but also for retention. Employees who don’t feel they are paid as per their worth will look for the company that accepts this belief.

  • Benefits as part of the strategy

In addition to retention, benefits also help in attracting new employees. The main aim here is to be competitive and the preferred employer in the sector. Many times, benefits are a deciding factor for a potential employee to join an organization.

  • Develop a plan

The developed plan is compelling of all the previous practices into one strategy. Understanding the matter as to how the HR department is going to apply these practices throughout the year will help in ensuring success at the end of each process.

What is the Difference Between Compensation and Benefits?



Monetary Value


Non-Monetary Value

Compensation is based on performance.


Benefits are not based on performance but based on membership.

Employees cannot, in any way, determine their compensation amount.


Employees can determine their benefits packages to be availed and are entitled to them.

The main difference is highlighted below:

Compensation and benefits are related in some way, but on deep analysis, we can find that these two concepts are different.

Some of the primary differences between benefits and compensation are explained below.

Nature of compensation and benefits

  • Compensation is based on the monetary value paid to the employee for completion of work.
  • Benefits are of non-monetary nature, and they are an indirect form of compensation offered on above the payment made in cash.

Types of compensation and benefits

There are various types of compensation available that includes the following:

  • General compensation offered on a weekly, fortnight, or monthly basis.
  • The other type of compensation is commission based that can be determined by the level of revenue that is generated from sales of a particular commodity.
  • Some forms of benefits are unemployment compensation, sick as well as holiday pay. Employees can also select the desired benefit package from health insurance, vacation, subsidized meals as well as company housing, amongst others.


  • Compensation is based on performance. This is based on individual, group, or organizational performance where employees are given bonuses for an outstanding or excellent performance.
  • Benefits are not based on performance, but they are based on membership. Regardless of the performance, the employees are entitled to their benefits.

Employee choice on compensation and benefits

  • Employees cannot decide on their own salaries. Factors such as the level of qualification and experience are often taken into account while determining the level of compensation awarded to a specific individual within the company.
  • Whereas the employees have the authority to choose the benefit packages as they see fit since they are the ones who know exactly about their needs.


  • Compensation is meant to attract and retain the employees within the organization. Lucrative salaries are offered to skilled employees to order for them to remain in the organization.
  • Benefits, on the other hand, are supposed to improve employee satisfaction, improving their welfare, and motivating them so that they can improve job satisfaction. All these factors are good for the employees since they stay for a longer period of time in the organization.

What are the Qualities Needed in Compensation and Benefits Specialists?

The characteristics support the work of compensation and benefits specialists and managers include:

  • Strong with numbers

The compensation and benefits specialists must be numbers-oriented, as this career involves a great deal of quantitative analysis.

  • Analytically inclined

The HR compensation and benefits profession requires professionals with strong analytical capabilities. The professionals are expected to analyze trends, do surveys, and prepare spreadsheets to determine the compensation and benefits structure.

  • Detail-oriented

The compensation and benefits structures are highly technical in nature, and the work also involves a considerable amount of research and the interpretation of data. Therefore, compensation and benefits managers must be detail-oriented to understand how compensation fits into the overall objectives of the organization.

  • Great communication

Compensation and benefits specialists must be able to communicate effectively with employees and senior executives. They must also be comfortable presenting programs to employee groups and members of senior management.

  • Strong Ethics and Discretion

Compensation and benefits managers deal with confidential information, they must be highly concerned about ethics and discrete when the matter is related to the handling of sensitive information.

What are the Job Responsibilities of Compensation and Benefits Specialists?

The daily responsibilities and duties of compensation and benefits specialists are as follows:

  • Researching the compensation and benefits plans and policies.
  • Ensuring that the offered compensation and benefits plans are cost-effective and competitive as per the standards of the industry.
  • Monitoring and researching on the compensation and benefits trends.
  • Comparing the benefits and compensation plans or job classification and salaries by way of data and cost analyses.
  • Designing reports and preparing recommendations based on the research and analysis for the senior management team.
  • Preparing and updating job descriptions and occupational classifications.
  • Ensuring that the company is compliant with state and Central laws.
  • Collaborating with outside vendors, such as investment brokers and benefits vendors.

Job duties for the managers of  compensation and benefits  organized by the HR department are:


  • Assessing the matters related to the organization's pay structure.
  • Researching on the compensation trends and reviewing on its surveys.
  • Evaluating all the compensation policies and plans.
  • Ensuring that the salary practices comply with state and Central laws.


  • Looking at the organization’s benefits programs (e.g., retirement plans, leave policies, wellness programs, insurance policies, etc.).
  • Researching and analyzing all the benefits, plans or programs, and policies.
  • To make recommendations that are based on analyses of data.
  • Monitoring government regulations, legislation, and the benefits structure.
  • Working with insurance brokers and benefits careers.
  • To manage all the enrollment, renewal, as well as the distribution processes.

Job Analysis

  • Writing and revising the job descriptions.
  • Determining all the position classifications.
  • Preparing and updating the salary scales as per industry standards.
  • Making recommendations to the managers regarding job descriptions, salaries, and classifications.

Some organizations assign specialists to all areas of compensation and benefits, (Some corporations have a dozen or more compensation and benefits specialists.) while other organizations have separate specialists for compensation, benefits, and job analyses work.

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Frequently Asked Questions

The types of compensation include the following:

• Base pay (hourly or salary wages).

• Sales commission.

• Overtime wages.

• Tip income.

• Bonus pay.

• Recognition or merit pay.

• Benefits (insurances, standard vacation policy, and retirement).

• Stock options.

Properly compensating employees shows you value them as workers and as human beings. When people feel valued, they feel better about coming in to work. Overall company morale increases and people are motivated to come to work and do a good job.

Compensation administration is a segment of management or human resource management focusing on planning, organizing, and controlling the direct and indirect payments employees receive for the work they perform

Compensation refers to pay or the exchange in monetary terms of the work performed by the employee and is paid by the employer. This can be in the form of wages, salaries, or tips. On the other hand, benefits refer to the exchange in value to the employees as part of their packages for the work that has been performed.

Compensation in business is an exchange for services, like getting paid for a job done. Compensation management is overseeing the process of providing pay or other benefits to employees for doing a job. The objective is to use compensation in order to recruit and retain the highest quality of employees.

Total compensation also includes the monetary value of any or all benefits that you pay for your employees. Some of the benefits are: paid vacation, sick leave and holidays, bonuses, and commissions.

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