Compensation management is the process of managing, analyzing, and determining the salary, incentives, and benefits each employee receives. Compensation management is a crucial part of any talent management and retention strategy. Creative compensation includes monetary and non-monetary benefits companies can employ to boost engagement and productivity, reduce attrition, and attract top talent. Compensation managers aim to attract, retain, and engage employees by offering broad and competitive compensation plans within the company budget. Compensation management ensures that people get paid a fair salary based on: Effective compensation management benefits both the employer and the employee. Professionals who receive a fair base salary,
generous benefits, and incentives in return for their work are much more likely to stay at their job and maintain a high performance level and morale. Effective compensation management fuels employee engagement and thereby leads to company success. Compensation includes far more than just a base salary. The full compensation
package includes a variety of compensation types, both direct and indirect. The four types of direct compensation are:
There is also indirect compensation, which includes anything that provides people value such as:
How is compensation determined?Many factors go into determining the specific compensation package offered to any given person, including external factors relating to the company’s location and market as well as factors relating specifically to the role and the candidate in question. Some considerations that go into calculating compensation include:
What can HR leaders do to ensure effective compensation management?HR leaders can guide compensation management towards building and implementing successful compensation plans with these methods:
Compensation management softwareOne tool that has skyrocketed in popularity in recent years is compensation management software. This software is used to help HR professionals manage, calculate, and organize compensation data. Compensation management software has several features that can make it highly valuable to organizations looking to streamline and optimize their compensation management processes, including:
Compensation management point solutions vs HRISAs you can see, compensation management software offers many helpful features, making it highly useful to professionals and teams involved in compensation decision-making and management. However, it qualifies as a point solution, meaning it’s a tool that can help with a single problem. This means that its utility is limited. The alternative is a platform solution like an HRIS which offers multiple solutions for a variety of problems that an HR team deals with. Rather than only helping with compensation management, an HRIS can also help with things like performance management, payroll, time and attendance, and more. Essentially, you can think of HRIS vs point solutions as a Swiss army knife vs a simple pair of tweezers. Both are useful, but one is able to offer more value than the other because of its multiple functions. So if your organization could use help with optimizing and automating processes across the entire employee lifecycle, an HRIS may be just the thing you’re looking for. Why should compensation management planning be a part of modern HR strategy?Compensation management ensures the financial success and wellbeing of employers and employees and makes both happy. Integrating compensation management into a company’s HR strategy helps organizations reward their people with market-range salaries, well-deserved bonuses, and incentives to improve their people’s lifestyles. It also allows employers to show their people that they appreciate them. Appreciation goes a long way towards making people feel motivated and engaged. It can also inspire people to give back to their employer through increased productivity and high-quality work. All of this leads to a company culture made of happy and enthusiastic people. What is true about the companies that use a lead the market pay?What is true of companies that use a "lead-the-market" pay strategy? They pay more than the current market wages for a job.
What strategy is often used by companies when there is a labor surplus quizlet?The company must consider downsizing because it is the quickest way to deal with a labor surplus that results in financial losses.
What approaches may organizations adopt to manage Labour shortage quizlet?The typical organizational response to a labor shortage has been either hiring temporary employees or outsourcing, responses that are fast and high in revocability.
What is the benefit of relying on internal recruitment sources to find potential employees?It's cheaper and faster to recruit staff internally than it is externally as it leverages employees that you already have. Internal recruitment promotes loyalty and can even improve employee morale as it serves as a reward for existing employees.
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