A compensation plan is used as an agreement between two or more parties that state what one would get in return for the work it does for the other. The most common is between an employee and a company. This includes salaries, bonuses, and perks like medical aid, health insurance , etc. Why is a compensation plan important? What makes a good compensation plan? What are the different types of compensation plans?
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There are a few basic aspects of compensation packages we should discuss before moving into the specific aspects of compensation. These foundations can assist in the development of a compensation strategy that meets the goals of your organization and is in line with your strategic plan. Before development of your compensation philosophies, there are some basic questions to address on your current compensation packages. Some possible compensation policies might include the following:. One major internal factor is the compensation strategy the company has decided to use.
Compensation Packages: A Guide for Small-Business Owners
Compensation may include hourly wages or an annual salary, plus bonus payments, incentives and benefits, such as group health care coverage, short-term disability insurance and contributions to a retirement savings account. A total compensation package can have several components. Employees classified as non-exempt receive what employers usually call wages, which are calculated on an hourly basis and require overtime payment for work in excess of 40 hours per week. Overtime is one and a half times the hourly rate. Employees who have a collective bargaining agreement with management — often called a labor union contract — have wages set by contract terms for a certain period.
April 27, TBS Staff. Congratulations college graduate! Just when you thought you might be living in your parents' basement forever, you've just scored a couple of job offers. The universe has heard your pleas, and even though your graduation gown is still warm, you've received two job offers. Now, you're in a quandary: which job to accept?