3. WHAT IS COMPENSATION PLANS
Compensation (also known as Total Rewards) can be defined as all of the
rewards earned by employees in return for their labour. This includes:
Direct financial compensation consisting of pay received in the form of wages,
salaries, bonuses and commissions provided at regular and consistent intervals
Indirect financial compensation including all financial rewards that are not
included in direct compensation and understood to form part of the social
contract between the employer and employee such as benefits, leaves,
retirement plans, education, and employee services
Non-financial compensation referring to topics such as career development and
advancement opportunities, opportunities for recognition, as well as work
environment and conditions
4. EMPLOYEE COMPENSATION
Salary
Annual rate of pay
Set amount of pay per paycheck
Work until the job is done; no overtime pay
Wage
Hourly rate of pay
Paid based on the number of hours actually worked
5. COMPENSATION TERMS
Gross Pay – total amount of your pay before any deductions
Take-Home (Net) Pay – pay actually received by an employee
after deductions, including taxes, health insurance premiums,
retirement contributions, etc.
Commission – payment based on employee meeting certain sales
goals; usually a percentage of those sales
Bonus – money given to an employee in addition to the
employee’s usual compensation
6. Supportive Corporate Culture
Executive Sponsorship
Rewards
• Bonus
• Salary Increases
• Promotions
• Equity Offerings
• Awards
• Recognition
• New job assignments
Salary
• Pay
• Overtime (if in non-
exempt classification)
Benefits
• Health Plans
• Retirement Plans
• Vacation/ time off
• Paid Training
• Working Hours
Employee Satisfaction
Total Compensation & Benefit
8. EMPLOYER CHALLENGES
• Structuring employee benefit packages that meet the needs of a diverse
workforce – one size does not fit all
• Helping existing employees understanding the “value” of their benefits
• Administering benefit programs – costly and time-consuming. Not a profit-
making venture!
• Continued rising health care costs
• Limited budgets – Benefits average 25% - 40% of Payroll in most organizations
• Government restrictions/legislation/public policy
10. LAWS AFFECTING EMPLOYEE BENEFITS AND
COMPENSATION
• Fair Labor Standards Act (FLSA)
• Employee Income Retirement Security Act of 1974 (ERISA)
• Age Discrimination and Employment Act (ADEA)
• Family Medical Leave Act (FMLA) of 1996
• Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001
• Health Insurance Portability and Accountability Act of 1996 (HIPAA) (and
amendments)
• Pension Protection Act of 2006
• many, many others
11. CONCLUSION
• How employees are “compensated” takes many forms – salary, benefits, working
conditions, challenging/stimulating work, co-workers, etc. The right “mix” for each
person is different
• Pay policies will differ for every employer – some will focus on cash compensation and
some will focus on Total Compensation
• The employer’s main goal is structuring compensation and benefit programs is to be able
to attract and retain the right employees needed to help the employer be competitive