What Are The Cash In Hand Salaries Of A Lieutenant Major And Lieutenant Colonel In The Indian Army How Do They Calculate The Pay – Understanding the different types of compensation is essential if you are a compensation professional, human resources manager, payroll professional, business owner or manager. Of course, companies are legally responsible for compensating employees for their work, but you’re also responsible for explaining compensation to candidates and employees. This is especially important in the hiring process, performance reviews, salary reviews and retention interviews. However, the terms used in the industry to classify and discuss compensation can sometimes be confusing.
Because compensation can take many forms, it is important that workers understand how they are compensated, the different types of compensation that apply to them, and the overall value of their compensation package. While this may seem like an overly complicated way to describe salaries, it makes sense when you understand that compensation is nuanced when broken down into base salary, commission, tips, bonuses, stock options, benefits, and other forms of compensation. Current compensation also affects a worker’s earnings throughout their career.
What Are The Cash In Hand Salaries Of A Lieutenant Major And Lieutenant Colonel In The Indian Army How Do They Calculate The Pay
First, let’s start with the definition of compensation. When we talk about compensation, we usually mean the payment the employee receives from the employer in the form of salary, wages, benefits and variable pay. However, it’s important to note that compensation can also refer to money paid to someone for something that is lost or damaged, such as “worker’s compensation” for unemployed or injured workers. It can also refer to costs as a result of the process. In a more general sense, compensation can mean something of value to compensate for a loss, such as a paid dinner to “make up for your time and trouble.” The word compensation comes from the Latin verb
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, which means “for against”. In this sense, compensation is a balance. Compensation usually takes the form of monetary payment in exchange for time, labor and expertise.
Determining the salary of a position is not an easy task; There are many factors to consider in order to deliver an attractive and fair course to potential job candidates. Common factors companies use to determine compensation include:
If you’ve come across the term remuneration and wondered what the difference is between remuneration and compensation, we’ll make it easy for you. There is no difference. Remuneration is synonymous with compensation. They mean the same thing. The payment is simply used more often outside the United States. Compensation is the most popular term in North America. Because we currently serve customers primarily in the United States and Canada, we use the term refund rather than compensation.
One way to categorize the different types of compensation is to distinguish between direct compensation and indirect compensation. Both types of compensation are financial, meaning that the compensation takes the form of money or can be valued as money.
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Direct compensation includes money paid to employees in cash, such as hourly wages, salaries, bonuses, and commissions. Salaries and wages (gross pay) generally fall under the basic salary category, while bonuses and commissions fall under the variable salary category.
Indirect compensation is still monetary, meaning it has a financial value that can be calculated, but is not a direct cash payment. What is considered indirect compensation can vary from organization to organization, but typically includes a large portion of the employment-related benefits package, such as employer-sponsored health insurance and employer contributions to the employee’s 401(k) retirement plan. to an employee. Stock options and profit sharing usually fall under indirect compensation, as do other employee benefits such as tuition assistance or company-paid gym memberships. What these examples have in common is a cash value that is not paid to the employee in actual dollars.
Not all compensation is necessarily monetary. Non-monetary compensation includes time off, flexible work schedules, training and coaching opportunities, recognition and awards, certain fringe benefits and other benefits (such as catered lunches or a company car) that cannot be measured in dollars as part of the compensation package. . .. But they are still valuable to employees and make a difference to workplace culture and the overall attractiveness of job opportunities.
However, different organizations disagree on what benefits constitute indirect compensation versus no-event compensation. The line between the two is gray, especially in organizations that do not share the cash equivalent of benefits with employees or have not calculated the cash equivalent at the individual employee level.
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When they ask about compensation, most people want to know about direct compensation, specifically base pay and variable pay. The four main types of direct compensation are hourly wages, salaries, commissions, and bonuses. In service-oriented industries, especially retail and hospitality, gratuities are sometimes included as one of the main forms of compensation. However, since it focuses primarily on professional occupations, we’re leaving the tips out of our list.
Of the four main types of direct compensation, employees are paid by the hour or salary. Wages, whether hourly or salaried, constitute basic compensation. Hourly wages are usually attributed to unskilled or semi-skilled labor, while salaried workers tend to be better educated workers or workers in managerial positions. Hourly wages are also used to compensate temporary, part-time, or contract workers, while wages are more common for workers in whom the company has made a long-term investment.
Of course, this is not universally true. There are many examples of highly educated, highly skilled, highly valued workers who are paid by the hour, and these workers can often benefit from nonexempt status (ie, are eligible for overtime pay). There are also many examples of non-executive and/or non-executive salaried employees. The Fair Labor Standards Act (FLSA) governs workers’ compensation provisions for overtime or minimum wage.
Commission and bonuses are the other main form of direct compensation. Commission-based pay is most common in sales and is paid as a percentage of goals (or quotas) achieved. Typically, the amount of commission paid increases as the target increases. The committee’s goals can be based on a variety of things. For example, some sales goals are based on revenue. If a seller closes $100,000 in new business with a 5% commission, the seller will take home $5,000. Commissions can also be based on gross profit or profit margin, where the more you sell a product or service, the more money you make. There may also be commissions called placement fees that pay fixed amounts for each unit sold.
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There are also many ways to structure the commission as part of total compensation. Examples include: salary plus commission, where the employee pays both salary and commission as part of a total compensation package; direct commission, in which the employee only earns commission; residual commission, where the employee continues to earn commission on current accounts; Graduated commission, where commission increases with higher sales volume; and variable commission, which is a combination of commission types. Each of these types of commissions has its supporters and detractors. What is right for a business depends on the specifics of a particular business, its industry and its goals.
Bonuses are a little different. Although bonuses are also a variable form of payment, they are applicable to more than salespeople. Year-end bonuses are a common example where employees are paid a certain amount or a percentage of an amount based on company performance, incentive goals set by individual meetings, or at the manager’s discretion. Bonuses may be offered more frequently, such as quarterly. There are also immediate bonuses that reward performance at management’s discretion for a specific period or project or achievement. Bonuses can also be incentives shared across an office, department, region, location or team.
From incentives when tied to specific metrics such as KPIs, MBOs or OKRs, to measuring performance-related goals. The purpose of incentive pay is to encourage employees to achieve higher standards. Bonuses can also be linked to values, i.e. if they are a form of incentive payment, but bonuses can also be paid without quantitative performance results, for example in the case of a Christmas bonus, or if management decides to spontaneously reward employees after a profitable year, a successful event or a stressful time. We generally say that bonuses are retrospective, while incentives are forward-looking, such as earned time off. In other words, bonuses reward past performance, while incentives encourage future performance.
Arguably, the most practical way to communicate to employees in a way that works best for them is through a total compensation statement or employee compensation report that separates base salary from commission, bonus pay, and other forms of compensation. variable salary. . , company contributions to benefits and other benefits with cash value. It helps employees know what they can count on with each paycheck, what compensation should be earned from performance, and the monetary value of company benefits and other rewards.
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At the end of the day, when it comes to different types of compensation, it matters who you are
