Download to read offline
Uploaded byNasrunnissa Aziz
types of compensation plan
This document outlines different types of compensation and benefits plans for employees. It discusses base or guaranteed pay, which is the minimum cash amount agreed upon in a job. It also covers variable earnings like commissions and bonuses that depend on performance. Equity compensation involves paying employees with company stock. Benefits can be voluntary, like additional time off or insurance, or mandatory, such as Social Security, unemployment insurance, and workers' compensation. The document provides an overview of common compensation structures and legally required employer benefits.
types of compensation plan
- 1.
- 2. Base or GuaranteedPay • The basic cash amount you agreed to pay an employee is that worker's base or guaranteed pay. • In most companies, base pay is determined by an employee’s job description and position.
- 3. • The companysets a minimum and maximum range that an employee for a specific position may earn for the year. • This amount can increase, decrease or stay the same, depending on the employee’s performance.
- 4. Variable Earnings • Piece-rateplans, merit-based programs, incentive bonuses and profit-sharing plans are types of variable compensation, • based on an employee’s performance or results obtained. Depending on the position, an employer may combine base and variable pay.
- 5. • This mayhappen with a salesperson who receives a salary plus commission or sales bonus. Note that a bonus can be compensation or a benefit. • For example, sales bonuses are compensation but annual Christmas bonuses are benefits
- 6. Considerations • Compensation mightalso include supplemental wages, which are paid in addition to regular wages. • non-performance based bonuses and accumulated sick leave, are benefits. • Others, such as commissions, overtime pay and severance pay, are compensation.
- 7. Equity Compensation • Paycompany shares, such as stock options, restricted stock, stock appreciation rights, profits interest and restricted stock units. • Startup companies that cannot afford to pay their employees competitive wages or salaries may offer equity-based compensation instead,
- 8. • You canchoose to pay your employees with stock instead of cash • This is a tricky process. • Obtain legal advice if you decide to offer stock options as compensation.
- 9. Voluntary Benefits • Voluntarybenefits are incentives you choose to provide your employees; you are not legally required to give them. • They might include paid time off such as vacation, sick, personal and bereavement time and other forms of leave.
- 10. • You mayalso provide medical, dental.disability and accident insurance; a company vehicle and a cellphone; educational assistance; dependent care and adoption assistance programs; retirement plans; and transportation benefits. Moving, meal, travel and lodging reimbursement, wellness programs, athletic facilities, employee discounts and stock.
- 11. Mandatory Benefits • Legallyrequired benefits include Social Security and Medicare taxes, which are used to fund programs that offer benefits to eligible retirees and disabled people and beneficiaries. • Most employers must also pay federal and state unemployment insurance, which provides benefits to qualified unemployed individuals.
- 12. • If youhave employees, you must carry workers’ compensation insurance, which compensates employees who suffer job- related illnesses or injuries. • Depending on the state, you might also need to provide disability insurance coverage to employees who suffer non- job-related illnesses or injuries.