Compensation vs Benefits
To understand the difference between compensation and benefits, we need to understand both the terms individually. So here the question are what compensation is and what does it mean by benefits? When company gives compensation to their employees and when we use terms benefits in business.
So let’s start with basic concepts of compensation and benefits. Compensation and benefits make up the remuneration package of employees in an organization and are the key motivators for the workers to perform the task, they are assigned with. Companies have to offer an attractive remuneration package comprising both financial and non-financial elements in order to appeal to competent workers.
The key difference between compensation and benefits is that compensation is referred to as the money paid to a worker in return for his contribution to the business by performing a job, which is designated to him. On the other hand, benefits are the non-financial type of value provided in addition to compensation in return for the worker’s contribution to the organization.
Compensation is referred to as the payment made to a staff member in response to their role in the corporation by executing a designated job. Compensation includes the following factors.
- Equitable wages and earnings including bonuses
- Increase in salary with the passage of time
Compensation is very important due to the fact that it is directly related to the workers’ life. The primary reason for which the worker community looks for jobs is to cover the household expenses. So, compensation becomes the deciding factor in signing up new employees. An attractive compensation should be offered if the corporation is to catch the attention of skilled employees. Compensation for an employee is based on a number of factors including the educational requirements, a number of years of experience and the primary nature of the job. Compensation increases in value depending on the performance of the employee and when he advances within the organizational structure.
Benefits are non-financial values provided in addition to the payment to the employee them to thank their contribution to the organization. Thus, benefits can be explained as a kind of non-financial compensation and include all rewards that are not a part of compensation. The number of benefits and their effectiveness differs from one business to another and can be in the form of:
- Insurance Plans
- Social Security Rewards
- Paid Absences
Benefits also include other aspects that ensure smooth progression of careers where employees are motivated. These are not included in job remuneration deals; however, they must be present and are necessary for the worker to motivate him to perform his job effectively.
Difference between Compensation and Benefits
- Compensation is a responsibility as the company is responsible to a worker in return for his involvement in the firm carrying out a selected job.
- Benefits are non-financial values provided, in addition to compensation, to the employee in return for their contribution to the organization.
- Compensation is quantitative in nature, while benefits form a qualitative way of compensating employees.
- Wages and salaries are the key types of compensation.
- Insurance programs, social security benefits, and paid absences are various types of benefits.
I’m sure after reading this post; you will be clear about compensation and benefits both. And there is no confusion to all you to understand the difference between compensation and benefits.