What are compensation plans?
Compensation plans are the methods by which an organization pays its employees for their work. It includes what kind of compensation an employee receives, how much compensation is available, what benefits employees should receive, and any other financial or non-financial benefits.
Employee compensation plans may vary depending on the type of work, experience, seniority, and negotiations during the hiring period. Organizations often spend time researching and developing comprehensive compensation packages to ensure equity, compliance, and attractiveness to future employees. When designing compensation packages, an organization may include the following:
- Job analysis:
Job analysis is used to make all appraisal and selection decisions. It looks into job tasks, the skills required to complete them, and the relationship between the tasks and the skills. Data from job analysis is used to: identify and measure job-related skill sets, determine the job-relatedness of tasks and skill sets required to perform the job successfully, and provide a source of legal plausibility for appraisal and selection decisions. - Job description:
The full job description will outline what the company expects of you, including the required qualifications and skills, metrics to measure your performance, and who to report to. - Job evaluation:
Companies use job evaluation to determine which position is best suited to their needs in comparison to other positions. - Payment structure:
Generally, compensation plans include a detailed description of how you are paid, including your salary or hourly wage structure, commission type, and bonus structure. - Wage surveys:
Organizations can use wage surveys and other similar market data to determine wage categories for different roles. - Policies and regulations:
Compensation plans must comply with the Fair Labor Standards Act.
Rate the Compensation Package
Consider the total cost of all financial benefits and expenses. Certain benefits, such as health insurance, retirement contributions, and reimbursement programs, are examples of about 25–40% of income. However, work-related expenses, such as safe and comfortable housing and transportation, can significantly reduce the amount of income.
To check the value of your salary package, consider:
- Initial income, which includes a benefit package
- Comparative income and cost of living knowledge
- Vacation and other travel time and payment
- Salary review plan
- Registration bonus, if awarded
- Relocation costs
- The help of a partner/partner in finding a new position
- Stock options, if available
Other factors to consider:
- Employee dignity and stability
- Job security
- Resources and working conditions
- Is there a “catch” in the form of a competition that prevents the clause from being implemented?
How Can You Check Compensation Plans?
Different compensation plans attract different types of workers. Here are some ways to look at compensation schemes:
1. Create a timeline:
If your job usually requires you to work more than 40 hours per week on average, you should look for a paid position that compensates you for these extra hours or choose hourly compensation. If you need more flexibility, you can choose an hourly salary.
2. Calculate your financial needs:
If you have limited financial obligations, you may benefit from a paid site that offers guaranteed income to assist you in budgeting and planning.
3. Receive non-financial benefits
Companies may offer other types of benefits in addition to your salary, such as:
- Stock options
- Health and health insurance
- Cars
- Food and transportation costs
- Profit sharing
- Vacation and other paid time off
You should consider these additional benefits as well as the costs you may be saving or the intangible value you are adding to your life. Some employees may find a low-paying job very appealing.
4. Find out how strong the compensation plan is:
Ask potential employers how often they review and modify compensation plans. You may want to avoid compensation plans that do not allow for periodic adjustments. Additionally, you can negotiate compensation plan items, including your basic salary, commission percentage, and the number of vacation days.
5. Compensate for your personality by matching the types of compensation:
Different people thrive in different environments. Consider whether you prefer to work independently or with a team, whether you are encouraged by quick rewards or incentives, whether you want a consistent schedule or need flexibility. These preferences can help you find a career path, management style, and the type of compensation that best suits your personality.
How to analyze a job offer
Assessing job placement can be difficult. Yes, it is good to be selective, and you may be concerned that it will disappear if you do not accept it right away. However, do not let that happen to you. Learning how to evaluate a task takes time and careful consideration.
Visualize your health (and the balance in your bank account) six months from now. If developed in moderation, this function can be a good fit. If not, you may need to continue your search. Use this three-part checklist to evaluate the work that needs to be done.
Start with Money
Salary is probably the number 1 consideration when it comes to deciding if a job is right for you. Once you have been paid, double-check your budget to ensure it is adequate.
This is especially important if the job requires movement or a major change in your commute to work. Will your commute be accepted? Will this require more gas or a train or bus ride? How much will that cost?
After calculating the cost, ensure you have enough money left over to contribute to your retirement fund and savings account—even if it’s just a small amount.
Then Think About the Company Culture
Will you spend a lot of time on this new job? Yes, it is important that you pay your bills, but you also want to feel good about yourself. Here are some things to consider.
- Workplace:
Request a visit, including accommodation. If it’s a large cubicle room, is there a place where you can make private calls during your break or lunch? Do other employees seem happy or frustrated? Is there natural light? What is the dress code? Even a virtual tour can reveal a lot about business culture. - Professional Development:
Ask about opportunities for improvement, certification, and continuous improvement training.
Finally, consider your needs
Just as office culture is important, so is the balance of your work. As you examine your assignment, ask yourself, “Will I be able to spend as much time with my family as I would like? Can I go out for a walk or just go to work and not want to work?”
No matter what your final package looks like, make a list of everything. The handshake contract you have made for long-distance work and the annual performance bonus with this manager will not be honored if they leave the organization. Here are some things to consider:
- Travel requirements:
How much travel will you need? What travel-related expenses will be reimbursed? Will you need to arrange childcare or pet care when you are out of town? - Paid vacation time, holidays, personal or sick days, and family vacation:
Find out in advance about expiration policies. Ask about closing dates, extended vacation policies, and more. - Remote work:
Will the company allow you to work from home sometimes? Each time? - Adaptability:
It can be difficult to negotiate once you have started; do it now. You can also check the company worksheet and social media profiles to see if they comply with flexible job settings.
Author:
Phidelia Johnson is a global Human Resources Practitioner with eighteen years of leadership success. With a focus on streamlining Human Resources administration, she’s well-equipped to find the right solution to a myriad of concerns. Her experience as a commercial business leader gives her a unique ability to advocate for both the employer and the employee.
In her down time, Phidelia is a master of her kitchen, creating wonderful dishes filled with passion and flavor. If she’s not cooking delicious food, she’s stretched out with a good book. She hopes to use her experience to help others, guide company leaders to best practices, and help build better professionals and stronger organizations.