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- DictionaryCom·pen·sa·tion/ˌkämpənˈsāSH(ə)n/
noun
- 1. something, typically money, awarded to someone as a recompense for loss, injury, or suffering: "seeking compensation for injuries suffered at work"
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Compensation definition: the act or state ofcompensating, as by rewarding someone for service or by making up for someone's loss, damage, or injury by giving the injured party an appropriate benefit.. See examples of COMPENSATION used in a sentence.
COMPENSATION definition: 1. money that you pay to someone because you are responsible for injuring them or damaging…. Learn more.
[uncountable, countable] compensation (for something) something, especially money, that somebody gives you because they have hurt you, or damaged something that you own; the act of giving this to somebody. to claim/award/receive compensation; The employer has a duty to pay full compensation for injuries received at work.
- Overview
- What is compensation?
- What is a compensation type?
- Direct compensation types
- Indirect compensation types
- How to evaluate compensation plans
Employers and human resource managers share the common goal of recruiting and retaining motivated team members. When a company offers proper compensation, team members may feel valued and inspired to make a meaningful contribution. If you're a compensation specialist or a human resources manager, understanding different compensation types and their...
Compensation is remuneration given to a team member from an organization for their services for a set period. Human resource managers use remuneration packages as a tool to recruit candidates and manage the performance and satisfaction of team members. Employers offer varying compensation corresponding with a candidate's experience, qualifications,...
A compensation type is a method used to pay a team member for their services. Individual schedules, financial needs and desired workplace environment help prospective candidates evaluate which compensation option best suits their needs.There are two categories of compensation types, and both are vital elements in a prospective candidate's remunerat...
Hourly wages
The most common industries that employ team members who receive hourly wages are retail, hospitality, manufacturing and construction. These people are often students, semi-skilled, temporary, part-time or contract team members.Employers pay hourly wage team members a set amount per hour of service and sometimes include overtime pay for hours worked outside of their set contract. The benefits of earning an hourly wage include flexibility of working hours, increased pay rates for working on holidays and eligibility for overtime pay. Payroll administrators must comply with local minimum wage legislation.Related: What Is an Hourly Employee and How Do Employers Pay Them?
Annual salary
In contrast to hourly wages, companies pay annual salaries for skilled, managerial and full-time team members. A full-time candidate offers their services with scheduled and budgeted working hours on an average of 40 hours of service per week, but no less than 30 hours per week. An organization divides and pays an annual salary at set intervals, often each month.Employers don't compensate salaried people with overtime pay, but they may review annual salaries and negotiate increases in performance reviews or at the end of a contract. Examples of team members who receive a salary include teachers, accountants, doctors, lawyers, computer programmers and retail managers. The benefits of this compensation type include: •Compensation amount: Companies often pay a higher monetary value per hour to salaried team members compared to people who earn hourly wages. •Stable employment: When an organization pays a team member an annual salary, it often means investing in them for the long term. •No compensation fluctuation: Team members can budget and plan for the future, as they know the value of their compensation for each pay period. •Business continuity: An organization may enjoy the continuity of specialized skill sets when it employs people with an annual salary, as the candidate is more likely to have a long-term commitment to their employer. Related: 13 Salary Negotiation Strategies
Commission
Commission is a common form of compensation provided to people in sales or outcomes-oriented roles. Employers base commission payments on a predetermined quota or target. These predetermined specified factors include revenue and profit margins. Some team members work on commission only, and others receive an annual salary with commission. People who receive commission or part-commission as compensation include: •Agricultural pickers •Auctioneers •Car salespeople •Hairstylists •Insurance agents •Pharmaceutical salespeople •Real estate brokers •Sales engineers •Travel agents •Waitstaff Some benefits of commission or part-commission compensation include: •Earning potential: Commission compensation often contains no income cap, and high-performance outcomes can lead to higher potential earnings. •Motivation: High earnings potential may motivate team members and encourage dedication and consistent engagement. •Flexibility and independence: Commission-based team members often have the flexibility to set their schedules and adjust their routines to meet their outcomes and personal requirements. They can enjoy a level of independence that helps reduce workplace constraints. Related: What Does It Mean To Earn Sales Commission? Definition, Types and Examples
Financial indirect compensation
Creating attractive compensation options can motivate current team members and attract talented prospective candidates. Many organizations offer similar wages and salaries, so if a candidate chooses between two different opportunities, they may compare additional indirect compensation options. Examples of financial indirect compensation include:
Nonfinancial indirect compensation
These forms of compensation can contribute to a team member's happiness and workplace experience. Examples of nonfinancial indirect compensation include: •Paid or nonpaid time off •Flexible working schedule •Learning and development opportunities •Parental leave •Child care
1. Determine your key motivating factors
Determining your key motivating factors in a compensation plan can provide you with a greater sense of career satisfaction. Considering these factors before accepting a career offer can help you choose the most suitable compensation plan and enhance your workplace experience. Examples of motivating factors include a flexible working schedule, a rewards and recognition program and the option to earn commission and determine your own compensation.
2. Calculate your financial needs
Calculating your financial needs and earning a salary or wage that allows you to afford your lifestyle and commitments is also important. You may benefit from a salaried position with no commission if you have several fixed financial obligations. In contrast, you might value a position with a larger commission component so that you can determine your own income.
3. Determine the benefits package and your eligibility
Determining the benefits package is as important as finding out if a prospective employer has eligibility requirements for benefits. Some benefits may rely on a team member's performance or require a candidate to offer their services for a specific period before qualifying. It's important to consider whether benefits meet your and your family's needs compared to similar packages in the marketplace.
Definition of compensation noun in Oxford Advanced American Dictionary. Meaning, pronunciation, picture, example sentences, grammar, usage notes, synonyms and more.
compensation meaning, definition, what is compensation: money paid to someone because they have ...: Learn more.
noun. com· pen· sa· tion ˌkäm-pən-ˈsā-shən. -ˌpen- Synonyms of compensation. 1. a. : the act of compensating : the state of being compensated. b. : correction of an organic defect or loss by hypertrophy or by increased functioning of another organ or unimpaired parts of the same organ. c.
