Compensation
Compensation is the payment a business gives to its employees in exchange for their services.
While the most common forms of cash compensation are an annual salary or an hourly wage, compensation also may include commissions, performance linked incentives, bonuses based on the performance of the business, equity in the business in the form of stock options, and/or fringe benefits. In addition to cash compensation, businesses often provide their employees with group benefits such as group insurance (medical, dental, term life, etc.), the availability of flexible healthcare spending accounts, disability insurance, retirement benefits, daycare, tuition reimbursement, sick days, vacation time, and/or other benefits.
Employees within a business’ Human Resources department who specialize in calculating the appropriate compensation levels for employees are called Compensation Analysts, and those who focus on designing benefits programs are called Benefits Managers. Large companies may hire multiple employees who focus on each discipline. But most businesses combine the two roles and employ a Compensation and Benefits Manager or simply assign those duties to a Human Resources Manager.
Employee compensation may be the single most vital aspect of business.
Businesses succeed or fail based on the quality of employees work, and compensation generally is considered the most important factor in attracting and retaining quality employees. While most small companies cannot afford to staff a full-time Compensation Analyst, it is critical those businesses base their compensation strategies on accurate market data specific to their geographic regions, industry, and size; while adhering to the Fair Labor Standards Act of 1938 (FLSA) and its amendments, the Equal Pay Act of 1963, the Age Discrimination in Employment Act of 1967, and other legislation.
Salary.com offers several free and paid reports that help businesses determine appropriate compensation for their employees. Other companies, such as Kenexa, offer Compensation consulting services to help businesses plan their compensation strategies effectively.
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