Compensation and Benefit Plan
Benefits are values and not payment, which employers provide to their employees as a form of returning their contribution to the organization or company. They are optional and non- wage returns provided, in addition to obvious compensation. Benefits refer to insurances like disability, life and health; retirement plans, vacation plans, and employee stock ownership plans. They are often expensive for businesses since they are provided to all employees. Therefore, rapid involvement in changing the existing benefit plans in to a flexible one is necessary. Benefits can be tangible or intangible and they are often employee paid and company paid (McNamara). Examples of employee benefits include pays like holiday, vacation, maternity leave and pension pays. Insurances are also part of employee benefits, for instance, dental, disability, medical, life, employee compensation and unemployment. The above benefits can be categorized as tangible. However, intangible benefits are in most cases, less direct and may include meticulous office, appreciation from the boss and likelihood for promotion.
Compensations are payments given to employees in return to their contribution into a company or organizational business. Major compensation types include salaries, wages and tips. They are offered as variable or base pay, where variable pay considers the performance of an employee in a given role while base pay considers a role in the organization and market for the required expertize in conducting the role. Compensations can also include issues relating to wage and salary programs and structures, for example, bonus- based program, merit- based and commission- based programs (Biswas 20). Compensations provided as variable pays are majorly incentive plans, for instance, bonus plans. Most compensations are ranged with the job description of the organization. There are always minimum and maximum ranges of compensation that can be earned annually by organizations.
Benefit plans are essential and beneficial because they help organizations in keeping their top performers and highly qualified employee. Business sector is more competitive than before, and employees are becoming increasingly creative and responsible. Therefore, a benefit plan can help an organization in keeping such employees, thus improving the entire business (HR Council for the Nonprofit Sector). A progressive organization has the capability and flexibility to face today’s business challenges. Benefit plan is beneficial to both the employer and employees. For instance, the employer gets to recruit and retain qualified employees and also be able to manage the risks of business at low costs. Productivity is bound to improve in such benefit providing organizations since employees are more effective than before. Employees receiving benefits always experience the peace of mind as they are satisfied. The disabled employees receive disability insurance, which gives them additional protection and income enabling their survival. Such employees are also proud of themselves as their efforts at work are fully compensated. Benefit plans if drafted accurately and appropriately, can be extremely cost- effective particularly to the small scale and self- employed employers (Biswas 25). Corporate benefit plans, on the other hand, require serious advice and proposals from professionals. A properly defined benefit plan often includes a good retirement plan, having annual retirement contribution. Benefit plans are an integral portion of the total compensation strategy and policy. The plans are always designed to meet the evolving and growing competitive business market. Benefit programs are used in supporting business strategies and goals, and they are always associated with local legislation and practices, depending on different countries.
Compensations can be categorized into direct financial compensation, which consists of the pays given to employees in the form of salaries, wages, commissions and bonuses. These are often provided on a regular and consistent basis (HR Council for the Nonprofit Sectors). Indirect financial compensations are all returns not present in the direct compensation but are part of the social deal between the worker and employer. These compensations may include leave and retirement plans, employee and education services. Non- financial compensation also exists in some organizations. Compensations are always dictated by legal policies, meaning compensation process must adhere to certain legislation. These legislations are often found in areas of human rights, pension and retirement benefits, labour standards, and they ensure that organizations comply with the legislations regulation of compensation practices (McNamara). The legislations often address issues relating to advancements, bonuses, leave options, wages and termination pay. Legislation compliance requires annual auditing in order to determine the sustainability of an organization. When giving compensations, legislative compliance is relevant in areas of statutory obligations like minimum wage. Statutory benefits like pension plans and employment insurance must also comply to compensation legislation. A compensation program is a method utilized in the effective attraction, motivation and retaining employees by employers. The program often results into equitable payment of compensation for performance (HR Council for the Nonprofit Sector). Compensation program development requires consideration of the components of the compensation, equity matters and philosophy of compensation.
Works cited
Biswas, B. Compensation and Benefit Design: Applying Finance and Accounting Principles to Global Human Resource Management Systems, FT Press, 2012
HR Council for the Nonprofit Sector.Employee Benefits and Compensation. 2011. Web. 7
February 2013.
Available at:
<http://www.hrcouncil.ca/hr-toolkit/compensation-overview.cfm>
McNamara, C. Employee Benefits and Compensation (Employee Pay), 2009. Web. 7
February 2013.
Available at:
<http://www.managementhelp.org/>
