Difference Between Compensation and Benefits
Difference Between Compensation and Benefits
The primary distinction between
compensation and benefits is related to monetary value. Compensation refers to
remuneration or the monetary exchange for work performed by an employee, which
is paid by the employer. This may consist of wages, salary, or gratuities. In
contrast, benefits refer to the exchange of value to employees as part of their
compensation contracts for work performed. In other words, benefits are
presented in the form of value rather than monetary compensation. However, there are additional distinguishing
factors between compensation and benefits
Compensation
In monetary terms, compensation refers to
all forms of payment to employees resulting from their labor. There are several
important distinctions between compensation and benefits. Some of these factors
determine the recompense a person receives for services rendered to an
organization
Compensation is crucial to the
organization. It is designed specifically to attract and retain talent within
the organization. In addition, it concentrates on utilizing employee energy to
achieve a competitive strategy while attempting to maintain desired cost levels.
Employees are more satisfied with their jobs when they receive competitive pay.
This is advantageous for the organization because it results in low absenteeism
and low attrition, as satisfied employees are more inclined to remain with
their respective employers
Benefits
During the present time period, it is
evident that employees expect to earn more than just cash. This is referred to
as benefits, although some prefer the term supplementary benefits. These are
non-monetary forms of compensation. Employees are offered benefits in addition
to their monetary pay in an effort to improve their welfare and motivate them
Plans for employee benefits are tailored to
the employees' requirements and geared toward the organization's overall goals.
Among the purposes of providing employee benefits are the following: Improve
employee satisfaction, attract new employees, and meet the needs of the
company's current workforce
In conclusion, it can be stated that
benefits and compensation are connected in some way, as they both have to do
with compensating employees for their labor. However, as previously discussed,
these two concepts are distinct. The primary distinction between the two is
that compensation is monetary, whereas benefits include non-monetary
advantages. The organization's compensation is performance-based and is
intended to attract and retain both new and current employees. In contrast,
benefits are membership-based, and employees are entitled to them and can
choose the benefit package that best suits their needs. Benefits are also intended to increase job
satisfaction and motivate employees to improve their performance within the
organization.
References
Abraham, K., 2009. Managing Human
Resource. 4th Edition ed. New York: Prentice Hall .
Dachler, H. P. & Enderle, G., 2009.
Epistemological and ethical considerations in conceptualizing and implementing
human resource management. Journal of Business Ethics, Volume 06, pp.
597-606.
Ichniowski, J., 2009. Human Resource Management in
Business Context Employee involvement. [Online]
Available at: http://www.hrmguide.co.uk/jobmarket/turnover_cost.htm
[Accessed 15 April 2023].
Ulrich, D., 2012. Future of Human Resources. [Online]
Available at: http://www.forbes.com/sites/danschawbel/2012/07/18/dave-ulrich-on-the-future-of-human-resources/#400f3f693b0a
[Accessed 15 April 2023].
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