Meaning of Compensation
Sum of direct benefits (such as salary, allowances, bonus, commission) and
indirect benefits (such as insurance, pension plans, vacations) that
an employee receives from an employer.
Something, such as money, given or received as payment or reparation, as
for a service or loss.
Meaning of benefits
An advantage or profit gained from something.
Benefits are a form of compensation paid by employer to employee over
and above the amount of pay specified as a base salary or hourly rate of
Significance of compensation and benefits
Job satisfaction: Fair rewards in exchange of their services.
Motivation: A compensation plan that hits workers’ needs is more likely to motivate them
to act in the desired way.
Peace of Mind.
Components of compensation system
• Job description
• Job analysis
• Job evaluation
• Pay structure
• Salary surveys.
A benefits includes
A thing that motivates or encourages one to do something: "incentive to
Incentives aim to provide value for money and contributes to organization
A payment or concession to stimulate greater output.
Common kind of incentive is cash reward.
It is the price for service render. it varies according to mental and physical requirements of
the job evaluation.
It is a need based minim wage it should take care of the cost of basic existance which
include food, clothing, housing.
Base salary does not include benefits, bonuses or any other potential compensation from an
Level of wage
• Living wage
• Fair wage
• Minimum wage
A sum of money paid regularly in addition to salary to meet some particular requirements.
Money that a company or government agency provides to an employee for a specific purpose,
such as transportation, healthcare costs or a flexible spending account. Benefit allowances
administered to employees can be distributed through regular payroll. regularly to a person,
typically to meet specified needs or expenses.
• Perk range from such amenities special parking and plus offices to pay
for vacation travel, automobile expenses, and company paid
membership in clubs.
• The perks goes with the executive status.
• Strictly restricted to the CEO’S and small group of key officials.
• It is an various extra benefits provided to the employees in addition to
the compensation paid in the form of wages or salary.
• Not directly connected with the employee’s productive effort,
performance, services or sacrifice.
Purpose of fringe benefits
• For employment security
• For health protection
• For old age and retirement
• For personnel identification