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Compensation management encompasses the strategy for determining appropriate compensation and benefits for employees. It is an important element of employee retention and uses financial and non-monetary benefits to recruit new employees, reduce employee turnover, increase performance and promote employee engagement. The biggest benefit of compensation management is that it ensures salaries are competitive. More generally, the right compensation strategy can motivate employees to increase their performance, productivity and creativity. This in turn increases turnover, efficiency and ultimately the profitability of the company. Compensation management is usually the responsibility of a separate department, Compensation & Benefits.
Employees are a company’s most important asset and their costs are usually the largest cost center. Therefore, it is essential for the company to make sure that the compensation and benefits are attractive enough for the employees. This way, employees know that they are valued. Consequently, they will not be tempted to look for alternative jobs. They become attached to the current company.
Compensation includes, for example, vacation days, sick days and holidays that are paid. There are also supportive payouts regarding tuition, childcare or learning and development opportunities. Among other things, gym memberships are also covered.
Compensation management is usually handled by HR professionals. They are responsible for ensuring that salaries and bonuses remain competitive and aligned with workforce needs. HR leaders in this role must collect and analyze internal and external salary figures and demographic and economic statistics. They must also understand the complexities of benefits administration. More and more companies are turning to organizational software for this purpose. It serves as a central system for managing all types of compensation. Its main purpose is to provide HR managers with information about the available budget for employee salaries and industry compensation rates for comparable positions. It also allows total compensation, including benefits such as health insurance and retirement plans, to be calculated and viewed centrally and automatically. Total compensation is a personalized breakdown of the value of each employee’s compensation package.
Looking for software to plan costs around human resources? We will be happy to help.
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