Compensation and Benefits week3

Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.
Compensation is based on:
• market research about the worth of similar jobs in the marketplace,
• employee contributions and accomplishments,
• the availability of employees with like skills in the marketplace,
• the desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and
• the profitability of the company or the funds available in a non-profit or public sector setting, and thus, the ability of an employer to pay market-rate compensation.
Compensation also includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and checks, and sales commission. Compensation can also include non-monetary perks such as a company-paid car, stock options in certain instances, company-paid housing, and other non-monetary, but taxable, income items. About.com human resources

A compensation philosophy is simply a formal statement documenting the company’s position about employee compensation. It explains the “why” behind employee pay and should be based on a framework for consistency. Employers can benefit from being transparent about their compensation philosophy and their official pay strategy. However, in unionized companies, the transparency is dictated by contract specifications for employees covered under collective bargaining. In publicly traded companies, most management salaries are also disclosed.
Compensation philosophies are typically developed by the human resources department in collaboration with the executive team. The philosophy is based on many factors, including the company’s financial position, its position in the market place, the state of the industry, business objectives, salary survey information, and the level of difficulty in finding qualified talent based on the economy, as well