Compensation and Benefits
Compensation and benefits (C&B) is a discipline within the field of human resources and is primarily a framework to develop policy addressing employee benefits and other payment. C&B is typically divided into four sections: guaranteed pay, variable pay, benefits, and equity-based compensation. Each of the sections can be influenced by a number of external and internal factors such as presence of absence of a labor union, company culture, inflation, labor and tax laws, industry norms, and the general state of the economy.
Guaranteed pay is most frequently identified as the basic salary which is usually paid on an hourly, bi-weekly, or monthly basis. The skills, experience, and education of individual applicants affect the level of guaranteed pay in addition to other internal and external factors. Variable pay is payment given in reward for performance and results. Variable payment includes sales commission, overtime pay, production bonuses, and other forms. Benefits are not typically paid in cash but are designed to address other needs such as paid vacation days, insurance, pension, and other company perks. Equity-based compensation is compensation using an employer's shares. The most typical form of equity-based compensation is stock option.
Part of a compensation and benefits plan may explicit bonus plans that may be in place for one of a few reasons. Some bonus plans work to ensure that a company is paying more employee bonuses during times of growth and prosperity and less during times of financial struggle. Still other types of plans may function to drive employee performance by offering achievement based monetary performance bonuses received contingent upon reaching specified goals. A third form of bonus plan works to assist in the retention of employees. Though retention is not a primary goal of bonus plans in general, they are thought to bring further value to an employer.
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