Non-wage compensation that is offered to at least 80 percent of the staff.
Employees are invaluable resources for an organization. Ensuring the welfare and happiness of employees can make them more productive and less likely to leave the company. This is not only an internalconsideration but also a competitive one. Securing and retaining top talent is not unlike securing and retaining customers, where effectively identifying the appropriate target and sustaining that relationship lowers long-term costs and increases brand value.
One of the key instruments in attracting and keeping employees is creating an effective compensation package. Compensation must therefore be both competitive and well-designed to meet the needs of the customer (in this case, the employee). Human resources (HR), in conjunction with the hiring manager, is tasked with this process.
Components of Compensation
Compensation is what employees receive for the work they perform at a company. Compensation can come in the form of cash as well as benefits (e.g., health insurance).
The current trend for organizations is to compensate employees with a combination of wages and benefits. Candidates often require a compensation package that includes benefits as a perk for employment, and may pass on a position with a higher salary if a competitor is offering a lower salary and a benefits package. These benefits generally revolve around healthcare and dental coverage, employee discounts, retirement planning, educational benefits, stock options, and other forms of additional compensation.
Compensation and Competitiveness
Compensation can be a two-edged sword if it is not managed properly. On one hand, a high base salary and a lucrative benefits package can help an organization keep and retain high-quality employees. On the other hand, high levels of compensation create high overhead for the company. In addition, attracting employees purely through offering high levels of compensation has disadvantages; these employees may have little attachment to the intrinsics of the job and may leave as soon as they find a better offer elsewhere.
Companies need to find a balance when creating a compensation package to attract quality employees and keep overhead low. To identify this balance, companies must look at the structure of the wages within the organization, the compensation common in their industry, as well as their strengths and those of their competitors. By looking at these factors an organization can attract the employees it needs to maintain a competitive advantage and keep employee turnover low.