What is the definition of employee compensation?

Employee compensation is a broad term that defines
payments and rewards given to workers in order to persuade them to keep working for a
company. Compensation is not just about regular rewards for work done but also attempts
made by employers to retain employees. It goes beyond salary and transcends this
boundary to include benefits and other incentives. Examples of such are salaries, wages
and bonus payments.

Organizations put in place
schemes that ensure their employees are not lured by the competition. These schemes
include insurance schemes, retirement benefits and ownership of company stocks.
Employees do not come cheap and employers must be prepared to dig deeper into their
pockets to finance their work force. Managers are tasked with determining the value of
each employee against the price tag placed by the
company.

Employee benefits transform to value
assigned and need not necessarily be in cash. Some forms of compensation are actually
rights and not benefits. Take for instance workman’s compensation. This is a federal
requirement for every employer to uphold. It is assumed that every employee has to be
compensated for the work they do or services provided to an organization. In the same
breath, loss of income should be
compensated.

Employee compensation can also be
looked at as either a tangible benefit or intangible. Good examples of tangible benefits
include insurance, holiday packages, maternity leaves, pension, bonuses and share of
profits. Intangible compensation is in form of promotions, letters of appreciation and
being provided with nice looking
offices.

Compensation may also be from the
employee. In most cases, benefits flow from the employer to employee. However, in some
form of departure from the norm, employees may be compelled to part pay for their
benefits. Prominent examples are medical covers for instance. Here the employee may be
asked to part pay for things like consultation fees or other costs of
treatment.

Firms are supposed to determine what salary
scales to pay for their respective positions. This will be dependent on qualifications,
nature of work involved and years of experience a particular employee has. These will
then be adjusted periodically based on factors such as inflation and economic changes
that push up costs of living. Another factor that influences salary scales is the
pressure from other players in the same
sector.

Employee compensation is also pegged
against regulations imposed by the government. Contractual obligations in this respect
must be honored lest the organization finds itself facing costly legal suits. Industrial
pressure from trade unions needs to be paid attention to. These unions represent huge
masses and their voice cannot be
ignored.

Organizations employ professionals to
assist with compensation matters. Human resource managers or consultants form part of
the management and they are charged with drafting and implementing compensation plans by
determining salaries and other employee benefits. It is important that employees are
kept motivated during their working life in a company as this ensures they perform well
to match the compensation they receive from the organization.