Total Compensation

Описание: Let’s take a look at the concepts that define total compensation. Compensation refers to the monetary and nonmonetary rewards employees receive in exchange for the work they do for an organization.

In exchange for these rewards, employees are expected to be loyal and committed to their firms. Compensation can be either direct or indirect. Direct compensation includes the hourly wages or salaries paid to employees, as well as any incentives, including merit raises and bonuses or commissions they receive. Direct compensation can be fixed (wages) and/or variable (commissions). Indirect compensation includes the benefits and services employees receive, such as their health care insurance, vacations, lunches, company-paid training programs, and other “perks.”

Over the past decade or so, many organizations have begun to refer to the total compensation package they provide as total rewards. A compensation philosophy communicates information to employees about what is valued within the organization, enhances the likelihood of consistency in pay across the organizational units, and helps attract, motivate, and retain employees.

When these factors are considered and the program is administered well, including communicated to employees, the compensation program will assist the firm in achieving a competitive advantage.