Compensation

This text looks at salary and bonuses, benefits, insurance, long-term incentive plans, and paid expenses. Some companies offer employee stock options believing that they incentivize employees with an ownership stake in the firm to boost the company's stock price (ordinarily a function of firm performance). Managers may use some of these tools when organizational systems govern salary.

Standard Benefits

Human resource requisites regarding employee compensation include a wide variety of common benefits beyond salary.


Learning Objectives

List the various standard benefits human resource professionals must take into account when compensating employees


Key Takeaways

Key Points
  • Compensation is more than just salary. Employees require a wide variety of supports in order to work and live comfortably.
  • Benefits are a great source of differentiation and talent recruiting for organizations, as excellent benefits can tip the scales in an organization's favor when negotiating with new potential employees (as well as when trying to retain current talent).
  • Standard benefits can vary fairly widely, but generally revolve around health care, transportation, retirement, various forms of insurance, relocation, dependent support, childcare, and a strong work-life balance.
Key Terms
  • pension: An annuity paid regularly as benefit due to a retired employee, serviceman etc. in consideration of past services, originally and chiefly by a government but also by various private pension schemes.
  • dependent: An individual who an employee supports financially, often a spouse or a child.


Compensation incorporates more than just salary, and benefits are a key legal, motivational, and organizational consideration when it comes to employee relations. Organizations provide a wide range of benefits for employees, and understanding what can be expected as a new employee is an important aspect of negotiation.


Standard Benefits

Standard benefits span a wide variety of employee needs, and represent a key reason for employees to find full-time employers who provide a full selection of standard benefits. Human resource professionals must familiarize themselves with the organizational offerings revolving around:

  • Relocation assistance – Often enough, hiring employees requires some percentage of those employees to move from one location to another. Talent is found all across the globe, and motivating talent to come to you requires assistance with visas, housing, flights, and a wide variety of other costs.
  • Medical, prescription, vision, and dental plans – Particularly in countries with poor social benefits, medical insurance is a requisite for hiring full-time talent (sometimes even legally required). In socially supportive countries, these benefits are provided by the government as a basic need.
  • Dependent care – Just as noted above regarding health insurance, many working professionals have individuals who are dependent upon them (spouses and children primarily). These individuals are covered under group health insurance plans for that given employee.
  • Retirement benefit plans ( pension, 401(k), 403(b)) – Employees are entitled to various retirement-related benefits such as long-term investments, pensions, and other savings for retirement age. The primary draw for most of these benefits is the tax benefits, whereas withdrawing this capital past the retirement age is tax free.
  • Group-term life and long term care insurance plans – Life insurance and long-term care are benefits paid by employers to insure individuals against various types of risks and disasters. Employees with life insurance or long-term care insurance will see their dependents (and themselves, in the case of long-term care) supported if a serious ailment or tragedy occurs.
  • Legal assistance plans – Not quite as standard as the rest of the benefits above, legal assistance plans can be put in place for jobs where personal liability is high. Legal assistance is expensive, and in circumstances where legal assistance is in place the employee will be covered by organizational resources.
  • Child care benefits – Supporting employee families is absolutely critical to retaining great talent. With two working parents being quite common, having childcare options in place for employees is a key benefit, allowing parents to focus on their work (not to mention the huge cost savings of group plans via an organization).
  • Transportation benefits – Another common benefit is paid transportation. Particularly in countries/regions where public transportation is the norm (as opposed to personal vehicles), it's quite common for the employer to pay for all work related transportation.
  • Paid time off (PTO) in the form of vacation and sick pay – All organizations must provide paid time off, vacation, and sick pay in certain circumstances. Many countries have stringent legislation governing minimum requirements for paid time off and vacation leave to ensure the people in that country have a healthy working environment.

While there are other, less common benefits that can be provided, this list is a comprehensive overview of what employees can normally expect from employers in regards to standard benefits of employment.