Compensation

Compensation is a key factor in attracting and keeping the best employees and  ensuring the competitive edge in an increasingly competitive world. Compensation and reward system play a vital role in a business organization. 

Compensation refers to the monetary rewards to an individual for the efforts he/she offers to any organization or institution.   

TYPES OF COMPENSATION 

The most common types of compensation are mentioned below:

• Base Pay 
• Variable Pay
• Benefits 
• Incentive

Base Pay : The base pay (the fixed salary or wage) that constitutes the basic rate for the job, which is fixed. It may be varied according to the grade of the job or, for manual workers, the level of skill required. Base pay will be influenced by internal and external relativity.

Base pay maybe expressed as an annual, weekly or hourly rate.

Variable Pay : Variable pay is non-traditional compensation method. Also known as 'at-risk' pay, as it is performance-based.It is can take various forms like a share in the profits, saved costs, individual and team incentives for attaining the set goals or lump sum awards.

Benefits : Benefits include pensions, sick pay, insurance cover, company cars and other 'perks'. They comprise of elements of remuneration additional to the various forms of cash pay and also include provisions for employees that are not strictly remuneration, such as annual holidays.

Incentive : It is the additional form of compensation that is directly linked with performance and paid over and above  the standard pay. Incentives can be tied to the performance of an individual employee, a team of employees, a total business unit, or some combination of individual, team and unit.