EMPLOYEE COMPENSATION

 Employee compensation refers to all forms of pay or rewards going to employees and arising       

from their employment (Dessler, 2005), it is divide in financial and non financial compensation; the financial compensation has two main component, direct financial compensation and indirect financial compensation.

            The organization recognize that they have a responsibility to provide insurance, safety, security, and general welfare to their employee, Mondy (2012) explain that the benefits are the second most important driver of job satisfaction fallowing jobs security (Mondy, 2012).

INDIRECT FINANCIAL COMPENSATION

            Also named Benefits, encompasses all financial rewards no related with the several form of pay that the person receives like wage, salaries, commissions, and bonuses; this benefits are received because the employee are member of the organization and are not related with employee productivity. (Mondy, 2012).

            The indirect financial compensation is composed by Legally Required Benefits, Discretionary Benefits, and Voluntary Benefits.

            Legally Required Benefits

Are benefits required by law, independent from those the company offering, these benefits currently represent about 10 percent of total compensation costs according to Mondy (2012) and include Social Security, unemployment insurance, and worker’s compensation.

Discretionary Benefits

Discretionary benefits are those benefits that are not mandatory by the law; it plays an important role in the organization related with total reward strategy, recruitment and retention, and behavior changes (Markel, 2010).

It includes (Mondy, 2012):

Payment for time not worked

Health Care

Life Insurance

Retirements Plans

Disability protection

Employee Stock Option Plans

Employee service

Premium Pay

Voluntary Benefits

Paid by the employee at 100 percent and the employer pay the administrative cost, these benefits are elective for the individual member. Voluntary benefits as explain Johnson (2012), by design, are complicated as they balance competing interests: underwriting vs. access; liberal terms vs. affordability; customer service vs. ease of administration. (Johnson, 2012).

CONCLUSION

Understanding the balance that a company wants to achieve between direct wages and indirect benefit is fundamental to the development of global strategies of total compensation. Using a compensation philosophy for the design of benefit programs provides solidity to the organization and its members.

It’s important to know what we are providing to our employees. This is achieved with a strategic design that allows us to identify goals and objectives, taking into account competition to recruit and retain employees, emphasizing the balance between internal and external equity, linked to increased organizational performance.

 Bibliography

Dessler, G. (2005). The human resources management. New Jersey: Pearson Prentice Hall.

Johnson, J. (2012, June 6). Government Financial Officers Association . Retrieved from Voluntary Benefits: http://www.gfoa.org/downloads/CON10Outlines/GFOA_PENSIONPPTvoluntarybenefits.pdf

Markel, K. S. (2010). Discretionary Employee Benefits. http://www.shrm.org/Education/hreducation/Pages/DiscretionaryEmployeeBenefits.aspx.

Mondy, R. W. (2012). The Human Resources Management. New Jersey: Pearson Prentice Hall.