BA25

• Compensation


  The means of giving a monetary value equivalent to any work performed by an employee. It is also referred to as all financial rewards and nonfinancial rewards which an employee may receive out of a work rendered for the employer
• Salary


  A fixed amount of money paid to an employee for their work on a regular basis, usually expressed annually. Salaried employees typically receive the same amount of money each pay period, regardless of the number of hours worked (though some exceptions may apply). Salaried employees often hold professional or managerial positions and are commonly paid on a monthly basis.
• Wages


  Payments made to employees for the hours worked or the tasks completed. They are often calculated on an hourly, daily, or piece-rate basis. Wages are more common in industries where employees are paid for the actual time they spend working, such as hourly workers in retail, hospitality, or manufacturing sectors.
• Compensation Philosophy


  A formal written statement about the compensation program and reward strategies of a company in regards to its employees. It answers the reasons behind the compensation provided to the employee.

  
• Characteristics of Compensation Philosophies

  • Alignment with Organizational Goals
  • Competitive Positioning
  • Fairness and Equity
  • Performance-based Rewards
  • Communication and Transparency

  
• Google's Compensation Philosophy


  • Google bases its compensation plan on hard data and research
  • Google has a commitment to pay its employees as competitively as possible
  • Google believes that it is a must to reward talent
  • Google's compensation philosophy is giving employees a satisfying work environment
• Entitlement Philosophy


  This philosophy enables employees to a receive salary increase every year regardless of performance
• Performance Philosophy


  This philosophy reflects pay increases based on differences in performance
• Contingent Pay


  The additional pay to the base pay which is usually based on past performance. Contingent pay is also relates to individual, team, organization-wide performance.
• Individual Contingent Pay


  1. Agreed Result

  2. Performance Standard

  3. Performance Evaluation Rating

  4. Performance Pay
• Individual Contingent Pay


  • Piece Rate Plan
  • Standard Hour Plan
  • Competency-based pay
  • Contribution-based pay

  
• Team-based Pay


  Pay connected to a particular team where members are paid based on the overall performance of the team. It encourages cooperation and teamwork as members of the team perceive the team's performance as a product of their efforts.
• Organizational Performance-based Pay


  Employees should be rewarded not only as individual performers or team players, but also as stakeholders.
• Organizational Performance-based Pay


  • Gainsharing
  • Profit sharing
• Gainsharing


  An incentive program where employees receive bonuses or rewards based on improvements in productivity, efficiency, cost reduction, or other key performance metrics within their work area or department.
• Profit sharing


  A compensation arrangement where employees receive a portion of the company's profits as a bonus or incentive. The payout is typically based on the company's overall financial performance and profitability, rather than specific operational improvements.
• Compensation for Executives


  • Basic salary
  • Incentives
  • Bonuses
  • Other bonuses attached to their position
  • Long-term incentives in the form of stocks or share of stocks
  • Perquisites or perks

  
• Compensation for Salespeople


  • Straight salary
  • Salary plus Commission
  • Commission Only
  • Draw Against Commission
  • Profit Margin
  • Territory Volume
  • Capped Commission
  • Performance gate
  • Set Rate
• When employees are adequately compensated, they feel motivated to come to work. Their morale remains high, and their job satisfaction levels increase. High morale ensures that employees are motivated enough to come to work every day and deliver work to the best of their abilities.
• Individual Contingent Pay


  Pay associated with individual performance, contribution, competency, or skill
• Transparency and Communication


  The company maintains transparency about the competency-based pay system, ensuring that employees understand how their compensation is determined. Clear channels are established to address any questions
• Compensation for Salespeople


  • Straight salary
  • Salary plus Commission
  • Commission Only
  • Draw Against Commission
  • Profit Margin
  • Territory Volume
  • Performance Gate
  • Set Rate
  • Capped Commission
• Straight salary


  Salespersons receive a fixed salary regardless of their sales performance. This structure provides stability and predictability in income but may lack incentives for high performance
• Salary plus Commission


  Salespersons receive a base salary along with additional commission based on their sales performance. This structure combines stability with incentives for increasing sales
• Commission Only


  Salespersons receive compensation solely based on the sales they generate. There is no base salary, and income is entirely dependent on performance
• Draw Against Commission


  Salespersons receive a draw, which is an advance on future commissions. They repay the draw once their actual commissions exceed the draw amount
• Profit Margin


  Salespersons receive a percentage of the profit margin on sales rather than a fixed commission on total sales revenue. This aligns their incentives with the company's profitability
• Territory Volume


  Salespersons receive compensation based on the volume of sales within their assigned territory. This rewards them for expanding market share in their specific region
• Performance Gate


  Salespersons receive incremental bonuses or rewards upon reaching specific performance milestones or targets
• Set Rate


  Salespersons receive a fixed rate or fee for each sale, regardless of the sale amount or profit margin. This simplifies the compensation structure but may not provide incentives for increasing sales value
• Capped Commission


  Salespersons receive commissions based on sales performance, but there is a maximum limit or cap on the total commission they can earn