Compensation

and Benefits
Lecture 1
Employee Compensation
Objective:

By the end of this class, we will be able to:

▪ Define compensation and benefits

▪ Understand the importance of compensation and

benefits

▪ Understand the compensation philosophy

▪ Recognize the link between compensation and

benefits and employee motivation
Reflect…

 Where have you heard of Compensation?

What is Compensation?

▪ Compensation is a set of rewards that

organizations offer to employees in return to their
willingness to perform various tasks or jobs in a
role they take up. It is the cash rewards paid to
individuals in exchange for the services they offer.
Defining Compensation

▪ Edwin B Flippo: The function of compensation is

defined as the adequate and equitable remuneration
of personnel for their contributions to the
organizational objectives.

▪ Benham: Compensation is the value of work of the

employees according to the agreement between
employer and employee.
What are Compensation and Benefits?

Total Compensation

Employee Satisfaction

Rewards
Salary
Benefits
 Bonus
  Pay
Salary Increases  Health Plans
  Overtime (if in non-
Promotions  Retirement plans
 Equity Offerings exempt classification)
 Vacation/time off
 Awards  Paid training
 Recognition  Working Hours
 New job assignments
Did You Know?

In Europe, there is more focus on In France and Finland,

social benefits like maternity and employers pay for restaurant
paternity leave, severance pay, vouchers that cover part of
and termination notice.  the employee’s lunch. 
Compensation Philosophy

To attract the best people,

Compensation Goal retain good talent, and motivate
the employees
 Video

https://
www.youtube.com/
watch?
v=wZoRId6ADuo
Why are Compensation and
Benefits Important?
Link Between Compensation and Motivation

10% salary hike Results in 1.5% more chances that an employee

will stay longer.

Pay Clarity Fair Compensation

 Debate Session
Activity

• Which is more important to employees

today Compensation or benefits ?
 Now you know :

 Definition of compensation and benefits

 Importance of compensation and benefits
Recap  Compensation philosophy
 link between compensation and benefits and employee
motivation
 A good compensation strategy