Total Compensation Benefit package

In human resource management, total compensation package is referred to not only money but also other benefits received by an employee for providing services to his employer. Today we will learn about the components of whole compensation package. An ideal compensation package may identify its various components as follows:

1. Fixed Pay or Base Pay

Base Compensation is one type of Compensation that refers to the basic salaries and wages given to he employees. It is normally constant at a given amount irrespective of the difference in work performance.

Salary and Wage

Salary and Wage refers to the largest cash component of the compensation package. Wage is referred to as remuneration to workers particularly, hourly-rated payment. Salary refers to as remuneration paid to white-collar employees including managerial personnel. Wages and salary are paid on the basis of fixed period of time and normally not associated with productivity of an employee at a particular time. It is normally a fixed amount which is subject to changes based on annual increments or subject to periodical pay hikes. It is structured based on the position of an individual in the organization and differs from grades to grades.

Cost of Living Adjustment Allowance

Cost of Living Adjustment Allowance refers to the allowance given to the employees when sent on temporary assignment or posting outside of their home country, to compensate for difference in cost of living between the host and home countries.

Family allowance or Dependent Allowance

Family allowance, children or dependent Allowance are given to the employees to support employees in their child care by providing a flat amount every month for every dependent child or disabled person of family.

2. Incentives:

Incentives are the additional payment to employees besides the payment of their base pay. Often these are linked with productivity, either in terms of higher production or cost saving or both.These incentives may be given on individual basis or group basis. Variable pay offered can be categorized into following two categories:

Short-term incentives—including annual incentives, bonuses, commissions, gain-sharing, and the like—reward the individual employee for achieving certain goals over a short period. The measurement period for short-term incentives is most often quarterly, semi-annually, or annually. Short-term incentives can be measured based on the individual’s own performance, a group’s performance, or the company’s overall performance. This depends on the organization, the incentive plan, and the level of the individual within the organization’s hierarchy.

Long-term incentives—including restricted stock, stock options, phantom stock, stock appreciation rights, performance units, and the like—measure organization-wide performance, typically over several years. The intent of such plans is to provide incentives for employees to improve the overall performance of the organization by linking the employees’ long-term rewards to the organization’s long term results.

3. Benefits
Employee benefits or Fringe Benefits (also called perks) are indirect and non-cash compensation paid to an employee in addition to their normal wages or salaries. Some of these benefits are mandated by law (such as social security, unemployment compensation, and workers compensation), others vary from organization to organization (such as health insurance, life insurance, medical plan, paid vacation, pension, gratuity).

Legal Employment Benefits

It includes,Family and Medical Leave Act.,COBRA, FLSA (minimum wage, overtime), Colorado Wage Act Issues, Employee/Independent Contractor Issues, Employment Agreements, Confidentiality and Non-Compete Agreements, Separation Agreements, Maternity leave and paternity leave.


Insurance provided by companies usually falls into Health Care. These types of insurances can include: Medical, Dental, Vision, and Disability. Employers usually pay all or part of the premium for employee insurance. In case of medical insurance, there are options to include the family members or dependents of the employee under the insurance coverage. Some companies may also include life insurance in its benefit package.

Retirement Benefits

Retirement benefits are funds set aside to provide people with an income or pension when they end their careers. The most common forms are Pensions and Gratuity. A pension, also known as a defined benefits plan, is a plan in which the benefit amount is pre-determined on the basis of salary and years of service. When the employee retires, he or she will receive the determined amount of payment each month. Gratuity is an additional financial benefit given to employees of organizations irrespective of salary or status, when their services end because of superannuation, retirement or resignation or death, or disablement (Section 4). The Payment of Gratuity Act, 1972 act provides for gratuity payment to all employees at the prescribed rates (currently 15 days for every year of service).

Time Benefits

Time benefits include paid time off and flexible working hours. Paid Time Off (also referred to as PTO) is earned by employees while they work. The three common types of paid time off are holidays, sick leave, and vacation leave.Flex time is a variable work schedule that allows employees to set the time when they work. Instead of mandating work time 9-5, employers who use flex time allow the employees to come and go when they please, as long as the work gets done.Time benefits also includes work from home and paid for vacation benefits.

Other Benefits

Besides insurance, retirement and time benefits some companies may provide on-campus nurseries, relocation expense reimbursement, cafeterias, intramural sports leagues, casual dress code, training and development opportunities, career advancement opportunities, on-staff masseuses, group tickets to events, company cars, and stock options to their employees.

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