Types of Compensation

Compensation and Benefits

    Types of Compensation

  •           PHR categories compensation as various forms where it comes from base pay to differentials, variable-pay plans and types of special incentives.

    Base Pay in compensation

              Base pay is the amount of compensation that employer and employee agree to pay for performance of specific job duties. External market value is determined by comparing base pay with compensation philosophy reflects internal value of jobs.

              HR professionals take these factors into considerations when making base-pay calculations

              Base pay evaluates annual basis through merit or seniority based process where employees takes new roles and responsibilities. Base pay was maximized, when an employee gets promotion. When the organization hires new pay, then length and type of previous experience key factors are considered. Since pay might differs in certain profession or certain industry or total experience.

              Compensation philosophy derives types of compensation divided into performance-based or seniority-based programs.

                   •  Performance based compensation: When an employee performance said to be high, their performance is measured based on organization metrics. Performance based compensation are paid to employees classified based on salary range which might vary one another.

                   •  Seniority based compensation: Another classification in compensation philosophy is employee performance based on seniority in the organization. It deals with working timeline of the employee in the organization; it might be long-term and short-term compensation. 

    Variable compensation

              Organization designs compensation program includes individual or group incentives as significant component of total compensation package. It aligned with organization’s compensation philosophy which can help shape or change employee behavior or organizational culture by rewarding behaviors is valued by organization.

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