Table of Contents
What is Compensation?
Compensation refers to payment given to an employee because of work performed. It is the compensation you give to workers in exchange for the services they render to you. These services can include their time, intellectual resources, and loyalty to your organization.
The use of compensation packages is becoming more popular as companies recognize the importance of human resources in gaining a competitive advantage in the marketplace. The main goal of compensation is to get higher yields from human capital. In fact, compensation policies are the predominant reason many prefer government work to private.
Although a paycheck forms a major part of compensation, it is not the entirety of what compensation is. A compensation also contains elements of other cash and non-cash payments.
Cash compensation includes
- Base pay
- Commissions gotten from sales
- Overtime payment
- Supplemental wages such as bonuses
Non-cash compensation includes
- Company stocks
- Work flexibility, etc.
Compensation is a vital part of every great company’s policy. This is because it has the ability to
- Attract the best talent.
- Increase the commitment of employees to the company.
- Improve workers’ productivity and motivation.
- Improve employee retention.
Compensation policies are the predominant reason many prefer government work to private work.
What are Benefits?
Benefits, in the business world, are kinds of non-wage remuneration that companies offer to their employees in addition to their wages. They are extra benefits that businesses, brands, and other places that hire people give to attract and keep workers.
Benefits can also be referred to as “perks.” They are extra benefits that companies give their workers on top of their salaries or wages.” They are intended to improve employee happiness and well-being.”
Your workers are critical to your company’s capacity to flourish and develop sustainably. Thus, a handsome combination of benefits can substantially assist your company in meeting its goals and objectives. This is because most workers stay with or leave a company based not just on salary but also on benefits and perks.
Benefits may aid in the development of a productive and committed team.
According to a survey by the US Department of Labor, 87 percent of industry workers were in “pension plans with either specified retirement benefits or with unspecified retirements based on employer contributions.”
To date, work and retirement benefits remain a deciding factor in employees’ choice of work.
Difference Between Compensation and Benefits
- Compensation mostly consists of monetary and cash rewards, while benefits consist of non-cash rewards.
- Compensation is based on service rendered, while benefits are given for membership.
- Compensation is intended to both recruit and retain personnel in a business. Workers with exceptional value are compensated well in order for them to stay with the company. On the other hand, benefits are meant to make employees happier and encourage them to do a better job at work.
- Compensation is intended to increase employee retention. Benefits are meant to increase employee satisfaction.
- Compensation can be taxed and can also be tax-free. Benefits are tax-free.
Comparison Between Compensation and Benefits
|Parameters of comparison||Compensation||Benefits|
|Nature||Compensation mostly consists of monetary and cash rewards.||Benefits consist of non-cash rewards.|
|Performance||Based on service rendered or quality of performance||based on membership of the organization.|
|Purpose||is intended to both recruit and retain personnel in a business.||are intended to boost employee happiness and motivate them to perform better at work.|
|Tax||can be taxed and can also be tax-free.||are tax-free.|
|Goal||is intended to increase employee retention.||is meant to increase employee satisfaction.|