What is compensation?

Compensation refers to the financial and non-financial rewards a company offers to team members in exchange for their work. It includes base pay, bonuses, incentives, equity, benefits, and other forms of payment that recognize work contributions.

Why is compensation important to HR?

HR and finance teams work together to create appropriate and competitive compensation packages to help recruit and retain top talent while balancing an organization’s financial goals. They can also offer bonus structures and performance-based rewards to support compensation-based retention efforts.

What is compensation management?

Compensation management involves managing, analyzing, and determining the salary, incentives, and benefits each team member receives. Creative compensation ideas include monetary and non-monetary benefits that boost engagement and employee productivity, reduce attrition, and attract top talent.

How is compensation determined?

Many factors impact compensation packages, including external factors like the company’s location and market as well as factors relating to the role and candidate.

What is compensation management software?

HR professionals use compensation management software to manage, calculate, and organize compensation data.

What is a deferred compensation plan?

Deferred compensation plans allow people to receive a portion of their income at a later date. This may be during retirement, when they reach a specific milestone, when they leave the organization, or at another predetermined time.

What is performance-based compensation?

Performance-based compensation rewards people for their achievements and contributions through monetary or non-monetary incentives. Organizations often offer bonuses and commissions as well as profit-sharing and additional PTO.

How can HR keep compensation fair?

While most organizations strive for fairness, quickly-changing industries and economies can make equitable compensation plans difficult to develop and upkeep over time. Ongoing audits, constant market analysis, and transparent policies contribute to overall fairness and equity in compensation management.