ATTRIBUTES OF COMPENSATIONNovember 26, 2019 / by Marco / Categories : Business
Human Resources (HR) professionals are often the ones behind the scenes, ensuring that a company’s employee needs are being met. Their role can consist of a variety of duties, including everything from company onboarding and orientation to setting up payroll and health benefits that an employee receives.
With so much responsibility to consider, HR professionals often rely on software technology and other similar business tools to help streamline and simplify the compensation process. One of the primary functions of HR management is the development and implementation of a compensation system.
In this post, we will identify the attributes of compensation within the HR management realm.
What is Compensation?
In the most general sense, compensation refers to the monetary and non-monetary benefits or otherwise the valuable exchange an employee receives for the work he or she performs while employed with the company.
Generally speaking, as many brands have unique systems of identifying attributes, compensation is often broken down into the following three categories:
- Direct Financial – The most common financial compensation that typically includes hourly wages, annual salaries, and commissions
- Indirect Financial – Commonly associated with non-cash employee benefits such as health and dental care, life insurance, stock option plans, 401K and the like
- Non-Financial – Typically includes nothing of economic value and can be quite different depending on the company
Non-financial compensation generally consists of the satisfaction employees receive by working for a company, and employee engagement activities can enhance this.
Other forms of compensation, such as gratuities and tips received are often not taken into consideration by HR departments due to the arbitrary nature of this type of compensation and the fact that a company’s patrons usually deliver this compensation. You must note that there may be an agreement through the HR department stating that the employee must claim tips and gratuities.
Components of the Compensation Structure
Many attributes make up a brand’s compensation system, but you can apply the overall structure to most business practices. Additionally, with the complexity of most of these systems being so broad in scope, business software tools are highly recommended to aid in organization, to mitigate HR liability.
The following are attributes commonly incorporated with most systems of compensation:
- Job Description
- Pay Structure
- Compensation Policies and Regulations
- Salary Data
- Occupational Analysis
- Occupational Evaluations
Note that the attributes above are often used to formulate a system of compensation to determine the value of a specific position. Correspondingly, the more complex and integral the role is, the higher the amount of compensation will be.
Business guidelines, market data, employee restrictions, salary caps, and fluctuating business goals can all impact compensation in some shapes or forms, and all of those must be taken into consideration before developing a compensation strategy.
With all of the constantly changing variables and metrics that can impact compensation, it has become essential to use smart software to organize and integrate data across multiple platforms.
Today, these business performance tools are widely available, and they allow the HR department to streamline its compensation efforts without worrying about information being lost, forgotten, or miscalculated.
To maintain a satisfied workforce, HR departments should first identify their compensation strategy, then choose software based on business goals. This approach will ensure that all the demands, both from the company and its employees, are being met proficiently.
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