Compensation and benefits refer to the rewards and remuneration employers provide their employees in exchange for their work and services. These rewards are designed to attract, motivate, and retain talented individuals within the organization. Compensation and benefits packages typically include financial and non-financial elements, and they play a crucial role in shaping the overall job satisfaction and employee engagement levels.
Compensation: Compensation refers to employees’ financial and non-financial rewards in exchange for their work and services. It includes all forms of payment and incentives an employer provides to an employee. Here are two main categories of compensation include:
Direct Compensation: Direct compensation is the monetary compensation paid directly to employees for their work. It includes
Indirect Compensation: Indirect compensation includes non-monetary rewards and benefits that add value to an employee’s compensation package. Some examples include:
Benefits: Benefits are specific perks and privileges employers provide employees to enhance their well-being, work-life balance, and job satisfaction. Benefits are indirect compensation intended to support employees beyond their base pay. They may include financial and non-financial components.
Here are some reasons why compensation and benefits are important: