Let’s admit it - everyone works for financial sustenance above anything else. The monthly paychecks are what keep you going and motivate you to work harder each day.
It is therefore important for human resources to pay special attention to employee compensation as a tool to drive increased productivity. However, with changing times, the concept of compensation too has undergone a transformation.
It is no longer limited to CTCs and monthly payouts but also includes a number of other monetary and non-monetary employee benefits. To give you an in-depth understanding, we’ll go over what employee compensation and benefits entail in this article.
What Are Employee Compensation And Benefits?
Before delving deeper into this subject, let’s first understand what is employee compensation and benefits in the context of the modern-day workplace. The term compensation refers to the advantage that the company provides its employees in exchange for their services.
It is a type of benefit that the firm extends to its people for their contributions and hard work. However, this isn’t limited to salaries but also includes other monetary and non-monetary incentives that help employees stay motivated.
Some of the best employee compensation and benefits package examples include medical insurance, stock options, paid time off, and remote working arrangements, amongst other perks.
All of these together account for a compensation plan, based on which an employee evaluates whether his or her job is satisfactory or otherwise. Let’s discuss the importance of employee compensation and benefits packages in detail.
Importance Of Employee Compensation And Benefits Package
Employee compensation and benefits packages are important aspects of human resource management. You can say that the better the compensation and benefits the firm provides, the higher the performance and revenues you enjoy.
Further, according to a survey, over 60% of employees noted that benefits are a very important contributor to job satisfaction. Another study also revealed that 69% of employees will choose another job if it offers better financial compensation.
This is why developing a robust employee compensation and benefits policy is crucial in today’s times.
In the absence of well-developed employee benefits and compensation policy, companies can face several drawbacks such as higher attrition rates and absenteeism, poor employee performance, dissatisfied clients, and an overall compromise of the company image.
To avoid this, firms should focus on compensation management to unlock high productivity, enhanced cash inflows, better client relationships, and a positive company image.
Now it’s time to find out the main types of employee compensation and benefits organizations offer.
Types Of Employee Compensation And Benefits
Due to the growing importance of compensation and benefits to employees, HRs and firms are now uplifting pay structures in line with workforce expectations.
While there are several forms of compensation and benefits available, the important types of monetary/direct compensation, as well as non-monetary/indirect compensation, are listed below:
5 Types Of Direct Or Monetary Compensation
One of the best monetary benefits that employers can provide to their staff is bonus payouts. These are exclusive of the salary component and are offered monthly/quarterly/annually.
2. Competitive appraisals
Each year, employees look forward to receiving appraisals on their existing pay packages. And while it's fine to link annual hikes to performance, the overall appraisals should be competitive and in line with market standards.
By providing lucrative salary raises, employers can enjoy better employee loyalty and retention.
3. Stock options
Another great way to laud the efforts of employees is by offering stock units in the company. This enables them to enjoy the success of the organization and feel like an important asset to it.
4. Overtime pay
It isn’t uncommon for employees to work beyond their designated hours on some days. However, they aren’t always compensated for the same. Provide overtime pay as part of the total compensation to appreciated employees for their extra hard work.
Another important component of the benefits packages is commission. This is particularly relevant for sales teams and is based on the fulfillment of monthly/quarterly targets. In this case, you can extend a monetary payout to the employees for their performance.
5 Types Of Indirect Or Non-Monetary Compensation
1. Health insurance
Health insurance has gained more importance post the pandemic. Employees are now looking forward to receiving financial leverage in case of health contingencies and employers can provide that with the help of robust health coverage.
2. Paid time off
Another important part of the employee compensation and benefits package is paid time off. It allows employees to maintain a work-life balance and recuperate. This also helps in boosting their performance at work.
3. Wellness support
In addition to health insurance, employees are also looking forward to receiving holistic wellness support. The idea is to stay fitter and healthier before a health emergency arises. To this effect, employers can offer gym subsidies, counseling support, and so on.
GOOD TO KNOW: Top 10 Health And Wellness Companies In India
4. Flexible working
Another great component of benefit plans is flexible working. By offering remote or flexible working arrangements to employees, companies enable them to take care of their personal commitments and avoid the time spent commuting to work. This helps enhance productivity and earn employee loyalty.
5. Learning and development
In addition to variable pay and other benefits, employees also crave personal and professional development opportunities.
You can provide these in the form of educational courses, added responsibilities, sabbaticals for higher studies, and more. By offering learning and development support, companies can also build better teams and process efficiencies.
The above is not an exhaustive list. There are several other benefits for employees, such as free lunches/meals, vouchers, company transportation, offsite, and more to keep them happy and motivated.
How Can Compensation And Benefits Motivate Employees?
By providing lucrative compensation, including both monetary and non-monetary benefits, employers can motivate their employees and enjoy higher productivity. Receiving perks over and beyond their salaries enables employees to feel that they are taken care of.
This, in turn, motivates them to perform better. For instance, when a company provides competitive pay packages, the employees feel like putting in extra effort at the workplace.
The same holds true when they receive incentives, bonuses, and other monetary benefits.
Further, by extending indirect compensation perks such as health insurance, firms can send out a positive message to their employees.
It enables employers to show their humane side and enable the wellbeing of their people. Employees, in exchange, extend their loyalty and best work to the company.
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There are several reasons employers should consider providing compensation benefits and perks to employees. However, it isn’t always possible to do so without piling on costs. With Loop, you can extend amazing health benefits to employees along with several complimentary perks.
Our health insurance schemes can be customized as per your specifications and come with a host of benefits such as 24/7 primary care support, mental health counseling, and access to expert wellness sessions twice a month – all for no added costs!
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