Compensation Management

Compensation is the remuneration received by an employee in return for his or her contribution to an organization. Compensation management is one of the most important strategic human resource functions. It helps motivate employees and improvise an organization’s effectiveness. Compensation not only includes an employee’s salary but also includes other benefits, such as perks, overtime etc., rewards, allowances, and the like. In today's scenario the organizations are taking special measures to provide compensation to the employees so that they are motivated and encouraged to perform better and also to retain the most valuable employees. Compensation packages as per industry standards will help attract and sustain talented employees.

Types of Compensation

Compensation comprises of the following types.

• Basic Salary:

  Salary is the amount paid to an employee for his/her services rendered to the company on a daily, weekly, or monthly basis.

• HRA:

  HRA means house rent allowance, which is payable to an employee. The company either takes an apartment on lease and pays for the rent or includes this amount in the salary.

• Conveyance:

  This is an allowance paid to the employee for his mode of transport to reach the organization. Some companies provide the transport by way of organizing cabs/vans/buses. Others may also provide vehicles with petrol allowance.

• LTA:

  LTA means leave travel allowance.  Some companies provide this perk which is used by the employee to visit their home towns or go on holidays.  It is an annual perk and since it is taxable if availed yearly, the employee may avail of this perk once in two years.

• Medical Reimbursement:

  Medical reimbursement is given to an employee by the company, by taking a health insurance for the employee.  This benefit is extended to the family members of the employee also.

• Bonus:

  Bonus is paid to motivate an employee.  This is paid during festive seasons and comprises of one month’s salary.

• Special Allowance:

  Special allowance comprises of overtime, mobile allowance, food allowance / vouchers, interest free personal loans, etc.

• Flexible Timings:

  Flexible timings are permitted to employees who cannot come to work during the normal timings due their personal and other valid reasons.Thus compensation management plays a very important role in the growth of any company and good compensation helps the company to get good returns from the employees.