Difference Between Compensation and Benefits

What are compensation and benefits in the workplace?

While compensation and benefit may seem to be the same—a remuneration from an
employer—to an employee, there are some key factors that make them different.

Compensation refers to a reward paid to an employee for the work they do for an

organization. When an employee works for an organization, they are paid back in terms of
money, perks such as free food, unlimited vacation time, great healthcare, bonuses, etc. for
their time and talent. All of this forms a part of the employees’ compensation, which can be
financial or non-financial in nature.

Benefits, on the other hand, refer to a non-financial reward  given to an employee as a token
of appreciation for their work. Some benefits that are popular among employees  are flexible
work timing, the opportunity to work remotely, access to gym memberships and catered
meals, as well as a casual dress code.

While benefits may not offer direct money to an employee, they are important to attract
talented employees to a company. Let’s assume an employee receives two job offers. Both
the offers have the same monetary compensation, but the first has a superior benefits
package compared with the second. The employee is very likely to take the first job offer in
this case.

Differences between compensation and benefits

Compensation Benefits
Compensation is an umbrella term  used to describe
anything that an employer gives an employee in exchange Benefits form a subset of compensation.
for their labor.
Compensation is a way for an organization to attract the best Benefits are used as a means to motivate employees to
talent. perform better.
Compensation can be monetary or non-monetary. Benefits are always non-monetary.
Compensation is a direct payment  for the work an employee
Benefits are an indirect payment for their work.
performs at a company.
Compensation is usually fully taxable, or a part of it can be Benefits can be tax-free or partially exempted  from
exempt from taxation. taxation.
What are Employee Benefits?

Employee Benefits are the indirect and non-cash compensation paid to an employee. These
benefits are given to employees over their salaries and wages. They are also called fringe
benefits that are offered to attract and retain employees.

Employees love benefits. They want appreciation and recognition for their hard work. Many
employees apply for organizations depending on the perks and benefits offered by that company.

Job satisfaction is directly tied up with employee satisfaction. Ignoring employee satisfaction

will ultimately lead to a decrease in commitment. Thereby causing a lack of motivation,
efficiency, and finally productivity.

1. Insurance Plans

Insurance benefit plans are great ways to show your employees that you care about them.

The organization pays specific amounts of money to cover an employee’s medical care. These
include insurance for losses from accidents, disability, sudden death. Other types of medical care
involve dental checkups, biometric screening, etc.

2. Disability Insurance

The employer pays for the worker’s salary if the worker becomes disabled or is unable to work.
An employer can provide either short-term or long-term disability insurance depending on the
needs of the employee.

Short-term covers for the employee for up to 6 months while long-term covers a worker’s
lifetime’s salary.

3. Tuition Reimbursement

Organizations offering employees to pay back for their education expenses is an excellent
employee benefits idea. Employees have to pay on their own before taking up a course. But once
the system gets over, the employer decides to pay either a part or the full amount for the course.
4. Corporate Discounts

Refers to the discounts offered to employees on the original price of goods or services by the
employer. These are discounts that are developed exclusively for corporate employees.
Companies also use this method to test their products internally before launching them to the
market.

Vantage Circle’s Vantage Perks program is the same. It provides the best deals and offers
handpicked for corporate employees at prices discounted exclusively for them.

5. Paid Vacation

As the name suggests, these are benefits where an employee is paid even when he takes time off
from work. Many companies providing this benefit have seen it be the most popular benefit
among their employees. And employees also tend to take almost the same amount of vacations as
they used to earlier.

6. Retirement Plans

A great employee benefits idea to add to your compensation package is providing your full-time
employees with financial security. These are done through various methods like pension plans.

7. Paid Sick Leaves

Taking care of your health is important. When employees will be weak but still have to work, it
will directly affect their productivity and efficiency. So creating a policy where they can avail
paid sick leaves is a great way to show that you care for your employees’ well-being.

8. Performance Bonus

Everyone wants to and loves being appreciated. And when you understand employees for their
hard work and achievements, they continue to perform well. Rewarding them for their
performance motivates and encourages them to achieve goals more effectively.

9. Office Perks

Organizations now try to merge both work and life together. They give out perks designed to
make the office fun and joyous. Some of these perks involve having board games at work, nap
rooms, free food.
10. Stock Options

The company offers the employee the right to buy shares in the company at an agreed-upon price
by a particular date. This price is generally lower than the market. This helps employees have
ownership over something that they are working to build too. It makes them feel as one with the
organization.

11. Paid Parental Leaves

It’s providing paid time off to employees to take care of their child or a family member. Parental
leaves can be in the form of paternity leaves, maternity leaves or even adoption.

12. Childcare Facilities

It is a type of childcare sponsored or managed by an employer. The employer usually provides

working parents the privilege to find work-life balance. Some ways are through company
provided childcare spaces, covering or sharing the expenses of the child with the parents.

13. Wellness Programs

Integrate your benefit program with your employees' health and wellness journey. Wellness
programs are initiated by the company to encourage employees to maintain a healthy lifestyle.
These include programs such as gym memberships, weight-loss competition, smoking
cessation, health screenings.

14. Employee Training

Another great way to retain talented employees is by letting them grow. Provide them with the
resources and the capital required to undertake training courses. You can also do the same for
new employees to enhance their skills. Some ways are by paying them to attend lectures and
conferences, e-learning methods and more.

15. Profit-Sharing

It is a compensation program to award eligible employees a share of the company’s profits. The
company contributes a portion of its pre-tax profits to a pool that gets distributed among eligible
employees. This motivates employees to work towards increasing the profitability of the
company. It also enhances commitment to organizational goals.
Some more unconventional employee benefits include:

 Pet-friendly office
 Free food and beverages
 Movie, concert and match tickets
 Free library membership
 Paid time off to volunteer
 Clubs- photography, board game, music clubs.