What types of employee compensation are there?
The human resources department in an organization is critical to the overall success of the organization; especially when it comes to establishing strategies so that employees feel comfortable with the work environment and motivated to achieve the objectives of the company, that is why knowing the types of compensation that exist for your employees will help to be clear about how your employees and their motivations.
The types of compensation for employees can be the decisive factor in retaining high-potential employees and incentivizing them to put all their effort into achieving organizational goals; In addition, it is not only about creating strategies for employees who already belong to the payroll, but also those candidates who aspire to a job position.
Employee compensation is strategies and incentives, in addition to the monthly salary, used mainly for:
- Recruit and retain qualified employees.
- Increase the level of satisfaction.
- Reward and incentivize top performance.
- Reduce staff turnover.
- Foster loyalty to the company.
But these types of rewards aren’t just about cash; Some are based on the achievements of the collaborators, while others are included in the contract for all equally, that is, without being limited to certain employees, since in this way you would be limiting the potential of your organization.
There are different types of compensation for employees, some can be circumstantial and others established in the long term depending on the results and the fulfillment of the objectives. Below we explain each of them. 4 Types Of Workers’ Compensation Benefits
types of compensation
There are two types of compensation for employees of an organization: direct and indirect.
Direct compensation is divided into different types, among which are extra remuneration for rendered services and bonuses. While indirect compensation has to do with long-term benefits and incentives.
Types of direct compensation for employees
-Monetary: It is all kinds of remuneration in addition to the basic salary of a worker. Christmas bonuses, vacations, social benefits, and other extra payments are part of monetary compensation.
– Bonuses: Bonuses are the compensations most used as an incentive to increase the performance of employees for a certain objective, be it time or volume. These are also used to retain high-potential employees with certain specialized skills or knowledge needed by the company.
Types of indirect compensation for employees
– Non-economic benefits: This type of compensation is generally stipulated in the employment contract, although many companies make progressive improvements. Health insurance in addition to life and disability insurance; and the retirement plan are some examples of additional benefits to employees.
Small and medium-sized companies can increase benefits and expand the compensation package as they grow.
– Training: One of the aspects that potential collaborators evaluate the most when making the decision to work for an organization is the training and education opportunities. Offering your employees the opportunity to increase their knowledge in areas of interest to both them and the company is a very valuable strategy.
Career and development plans are essential to retain employees and motivate them to work to achieve the objectives of the organization.
– Recreational: The quality of life and entertainment is essential so that employees do not feel that they work for a monotonous organization. That is why it is important to promote comprehensive well-being and encourage them through rest opportunities, such as tickets to recreational parks, vacations, recreational activities for families, and more.
Other benefits may include transportation, overtime and days worked on weekends, and personalized incentives, such as lodging, meals, and telephone, among others, in the event that the employee must travel to another location to carry out their work.
Employee compensation can be adjusted according to the organization’s needs, goals, and available resources.
In addition to the benefits packages that employees know when signing their employment contracts, such as health insurance, vacations, and retirement plans; many collaborators show a greater interest in those companies that offer things of greater value, such as the balance in the life of each one of them.
Flexible hours, relaxed atmospheres, childcare or childcare during set hours, and other lifestyle benefits for employees are becoming almost as important as wages and bonuses themselves.
Types of compensation: Format to manage it better
Without a doubt, establishing a compensation system for employees is a strategy that will bring benefits to your organization. The increase in the satisfaction and motivation of the worker translates in turn into an increase in the productivity and performance of the work team.
Download the Excel format for free to manage the compensation of your work team and start implementing pay for performance to motivate them to achieve their goals.