Currently, there are two basic approaches to determining the compensation of the employees in the company. Both methods require that the person be placed in a specific position in the organization, for example, production manager, editorial adviser, secretary, messenger, or general assistant.
It is also crucial that the following is known about each position:
- Title
- Purpose
- Responsibilities
- Expected Results
- Priorities
- Ideal Characteristics
- Expected Work Environment
Ideally, the compensation calculation in a company will happen before a person gets hired for the position. However, since each employee will have different skill levels and experience, it must be factored into the calculations.
Steps to Compensation Calculation
Step 1. Obtain information from the clearing market
This approach determines how much to pay for a job through a compensation market survey. For example, if you wanted to decide how much to pay for the position of accountant in a small company, it would be enough to know how much other counter places earn in other companies similar in size to the one we are dealing with and which is the information contained in the compensation surveys.
Step 2. Decide the level of competitiveness of the compensation we need to pay
Once you have the information on the market compensation for the position, which in the example is that of an accountant, the crucial decision of the employer is to decide what professional quality is wanted in the person filling the position.
In the case of the example, as long as you want to have an accountant with more preparation, experience, and skills, the level of compensation awarded should be more competitive. This decision is generally made considering the significant range of compensation included in the survey between the minimum and maximum reference market.
Step 3. Build a salary range that allows locating the occupants of the position according to their level of performance
To maintain internal equity in the company at different performance levels, you must also correspond to different compensation levels in the same position. For this reason, once you have decided on the level of competitiveness of the required compensation, you can.
You want to pay (compensation policy of the company). You need to build a range around that level of compensation that has been decided. Thus, within that range, the company can pay differential compensation at different performance levels of the company occupant of the position.
The compensation approach by the content of responsibility of the post requires you to evaluate the position’s responsibilities.
It is assumed that you have a “job description,” which in some way identifies the reason for the position in the organization, its primary responsibilities, the results figures that impact the situation, the resources on which it acts, its main activities, and the most relevant aspects of the work environment in which the position is performed.
On the other hand, as in this case, the compensation is based on the content of responsibility of the position in the particular organization. The essence of this approach is that the company has a method that allows it to measure the responsibility content that the posts have of the organization, that is, with a method of valuing positions.
Once the positions have been valued, this approach allows a more precise diagnosis, both of the internal equity of the company and the external competitiveness of its compensation practices. Then, decide your level (policy) of compensation, Build your salary ranges, and, finally, have a firm technical basis to manage the staff salaries based on performance.
Compensation
It is the financial compensation that a collaborator receives for the services provided to a particular company or institution, which may be physical, mental, and visual efforts developed by a collaborator in favor of an employer or employer; in work contracts, the low conditions to which services are provided.
Objectives of the Compensation
These objectives create conflicts, and compromise solutions must be sought. Another essential aspect is the broad potential of the area to promote criteria of equality between people.
Among the most common and precise objectives that meet the compensations we have:
- Equitable compensation
- The attraction of qualified personnel
- Retain current employees
- Guarantee equality
- Alert adequate performance
- Control costs
- Comply with legal provisions
- Improve productivity and administrative efficiency
Characteristics of Compensation
Within the main unique characteristics of the compensations:
- It is a consideration
- It must be freely available
- It must be paid in cash
- It is intangible
- It is unattachable
- It has preferential or prevalent character compensation
The form of compensation for the payments will be made according to the company’s legal provisions in force and usual procedures.
The compensations are paid in cash or in kind.
Compensation must be paid after having made the provision of services, and the agreed periods may be weekly, biweekly, monthly, semi-annually, or annually. For this purpose, the respective payrolls and compensation slips must be prepared.
Fundamentally, there are three ways to determine the financial compensation of the collaborators:
- By time
- By performance or result
- By class of collaborator
Compensation Conditions
The compensations and their reimbursements must be made directly to the employee unless they are proxies with the status of spouse, child, elder brother, or father.
The compensation may be made directly by the employer or through third parties, provided that the latter case allows the employee to have the compensation at the time established at no cost.
The compensation must be paid to the employee in the agreed manner after having performed the provision of services, and the agreed periods, except when by agreement for the nature of the contract or by custom, must be paid in advance or periodically.
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