Compensation & Benefits Management

Overview

• Introduction
• Table of Contents
• FAQ
• Practical Demo

Introduction 

In very simple terms, compensation is the results or rewards that the employees receive in return for their work.

Compensation includes payments like bonuses, profit sharing, overtime pay, recognition rewards and sales commission, etc.

Compensation can also include non-monetary perks like a company-paid car, company-paid housing, and stock opportunities. Compensation is a vital part of human resource management, which helps in encouraging the employees and improving organizational effectiveness.

Compensation packages with good pay and advantages can help attract and retain the best employees. A quick survey of employees about compensation is likely to expose an expectation that wages are fair and cover basic living expenses, keep up with inflation, leave some money for savings (perhaps for retirement) and leisure, increment over time.

A compensation scheme projects what the company expects of its employees. For example, if the quality is an essential value, then it should be implemented through some element of the total compensation system.

Objectives of Compensation Policy

The objectives of the compensation policy are as follows −

• Keep qualified personnel.
• Develop reward structures that are equitable with logical and fair pay relationships between differently valued jobs.
• Assure that rewards and salary costs handle changes in market rates or organizational change.
• Appraise performance, duty, and loyalty, and provide for progression.

To summarize, compensation management is a synchronized practice that includes balancing the work-employee relation by facilitating monetary and non-monetary benefits for employees start working on HRMS to easily monetize the solutions. 

Importance of Compensation Management

Good compensation is a must for every business organization, as it gives an employee a reason to stick to the company.

An organization gains from structured compensation management in the following ways −

• It tries to give the proper refunds to the employees for their contributions to the organization.
• It discovers a positive control on the efficiency of employees and motivates them to perform better and achieve the specific standards.
• It creates a base for the happiness and satisfaction of the workforce that limits the labor turnover and confers a stable organization.
• It enhances the job evaluation process, which in return helps in setting up more realistic and achievable standards.
• It is designed to abide by the various labor acts and thus does not result in conflicts between the employee union and the management. This creates a peaceful relationship between the employer and the employees.
• It excites an environment of morale, efficiency, and cooperation among the workers and ensures satisfaction to the workers.

In short, we can say that compensation management is required as it encourages the employees to perform better and show their excellence as well as provides growth and development options to the deserving employees.

Types of Compensations

We have learned about what compensation and its importance is. However, when it comes to an organization, be it private or public, compensations are further divided into the following −

Direct Compensation – Direct compensation that is in line with the industry standards facilitates employees with the assurance that they are getting paid fairly. This helps the employer not to worry about the costly loss of trained staff to a competitor.

Indirect Compensation- It focuses on the personal encouragements of each individual to work. Although salary is essential, people are most productive in jobs where they share the company’s values and priorities.

Components of Compensation

Compensation as a whole is made up of different components that work as an aid for an employee after retirement or in case of some accident or injury. Now we shall see the key elements or components that make compensation.

Wages and Salary – Wages mark hourly rates of pay, and salary marks the monthly rate of pay of an employee. It is irrelevant of the number of hours put in by an employee working in the firm. These are subject to an annual increase.

Allowances – Allowances can be defined as the amount of something that is allowed, especially within a set of rules and regulations or for a specified purpose.

• Dearness Allowance
• House Rent Allowance 
• City Compensatory Allowance 
• Transport Allowance/Conveyance Allowance 

Incentives and Performance-Based Pay – Incentive compensation is performance-related remuneration paid with a view to encouraging employees to work hard and do better.

Fringe Benefits/Perquisites – Fringe benefits include employee benefits like medical care, hospitalization, accident relief, health and group insurance, canteen, uniform, recreation, and the likes.

Table of Contents

Bonus and Leave Salary, Costing, Incentive

Bonus Configuration

Bonus Period Creation

Bonus Processing

Bonus Account Posting

Bonus Report

Costing Period Creation

Costing Processing

Costing Report

Incentive Period Creation

Incentive Processing

Incentive Account Posting

Incentive Report

Leave Salary Configuration

Leave Salary Period Creation

Leave Encashment Entry Based on Policy

Leave Salary Processing

Leave Salary Account Posting

Leave Salary Report

FAQ

Practical Demo