Understanding Compensation: What Are Its Key Components and How Does It Work?

Hey,

I am a new creature in this world. Can anyone help me better understand what components are present in compensation and what it's all about?

Hi Julie,

Kindly reframe your question and explain clearly what you want to know so that we can help you out. From what I understand, you are asking about the components of compensation, which would include perks, bonuses, amenities, etc. Please rephrase your question so that we can assist you better.

Thank you.

Hi,

The main components in a compensation package are Basic, all Allowances, and all deductions.

Gross = Basic + all allowances (viz, HRA, TA, SPECIAL ALLOWANCES, CITY COMPENSATORY ALLOWANCES, etc.)

Net = Gross - all deductions (viz, Employee PF - 12%, employee ESI - 1.75%, P.TAX, etc.)

Other components are also included such as BONUS, OT, COMPENSATORY OFF, GRATUITY, MEDICAL REIMBURSEMENTS/MEDICLAIMS, LTA, INCENTIVES, etc.

Now, CTC = BASIC + ALL ALLOWANCES + EMPLOYER CONTRIBUTIONS (Viz PF - 12%, ESI - 4.75%, etc.)

Actually, there is no particular definition for CTC; it depends on the company's pay structure.

Few companies will include incentives in CTC, few companies will not.

Dear Hr Hyd,

Pl find below the details of components of compensation.

COMPONENTS OF COMPENSATION

Compensation is the remuneration received by an employee in return for his/her contribution to the organization..

Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services..

DIRECT COMPENSATION

BASIC SALARY

Salary is the amount received by the employee in lieu of the work done by him/her for a certain period say a day, a week, a month, etc. It is the money an employee receives from his/her employer by rendering his/her services.

HRA

Organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees. This is done to provide them social security and motivate them to work.

CONVEYANCE

Organizations provide for cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them.

Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The employees are given allowances to visit any place they wish with their families. The allowances are scaled as per the position of employee in the organization.

Medical Reimbursement

Organizations also look after the health conditions of their employees. The employees are provided with medi-claims for them and their family members. These medi-claims include health-insurances and treatment bills reimbursements.

Bonus

Bonus is paid to the employees during festive seasons to motivate them and provide them the social security. The bonus amount usually amounts to one month's salary of the employee.

Allowances

Allowance such as overtime, mobile allowances, meals, travel allowance, are provided to employees to provide them social security and motivate them which improve the organizational productivity.

INDIRECT COMPENSATION

Leave Policy

It is the right of employee to get adequate number of leave while working with the organization. The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc.

Overtime Policy

Employees should be provided with the adequate allowances and facilities during their overtime, if they happened to do so, such as transport facilities, overtime pay, etc.

Hospitalization

The employees should be provided allowances to get their regular check-ups, say at an interval of one year. Even their dependents should be eligible for the medi-claims that provide them emotional and social security

Insurance

Organizations also provide for accidental insurance and life insurance for employees. This gives them the emotional security and they feel themselves valued in the organization.

Retirement Benefits

Organizations provide for pension plans and other benefits for their employees which benefits them after they retire from the organization at the prescribed age.

Holiday Homes

Organizations provide for holiday homes and guest house for their employees at different locations. These holiday homes are usually located in hill station and other most wanted holiday spots. The organizations make sure that the employees do not face any kind of difficulties during their stay in the guest house.

Flexible Timings

Organizations provide for flexible timings to the employees who cannot come to work during normal shifts due to their personal problems and valid reasons.

I hope now u must be having a brief idea of components of compensation management.

KATYANA

Hi,

I want to know the current minimum wages of Punjab for all categories. If available, please provide me with the notification of minimum wages.

Thanks,
Ranjit Samal
9818758445

Hi, I am working in the hotel and cottage industry. One problem we face is late payment. This means that regular fixed date payments are not provided, resulting in employees leaving the organization. Although I am not a HR manager, what actions should be taken in such a situation?