Learn How to Determine the Compensation for an Employee?

How to Determine the Compensation for an Employee?


   By John Wolf

How to Understand Your Current Compensation, or of a New Job Offer.

The sum of monetary and non-monetary pay is the compensation for the employee, provided by the employer as a return to the work, service and time of the employee.

Types of Compensation & Benefits

The paycheck and the main working conditions as vacation, bonuses, health insurance, and other perks such as free lunches, free events, and parking pay. All those components are making the conglomerate of your compensation.

Employers base the compensation on a few factors. They may have differences in giving more attention to the following factors than to other factors, but the majority use some form of study to set compensation.

Market Research and Study About the Worth of Compensation for Similar Jobs

Many businesses do regular salary and benefits surveys to learn the market rate of similar jobs. These surveys are based on salary and benefits and job descriptions. This way they can compare apples with apples and not apple with pears.

The survey companies use the data to compile it and report it back to the participants. The survey’s finding can be considered giving an accurate view of the competitive rates that are paid in the job market for similar jobs.

The Internet has a few websites like Payscale.com and Salary.com.They can give you more information about salaries rates. Those websites have national and international data.

These sites provide recommended salary rates taking in account factors such as the market of jobs, the location of the workplace, the size of the organizations offering the job, and the job descriptions and level of responsibilities.

There is a lot of information on websites like Glassdoor.com. Do not consider this source as accurate because they are self-reported by the employees. They are not comprehensive on all the components of employee compensation packages.

It may happen that the job descriptions are not the same, though the tile of the job is the same.

Local economies make a lot of difference and company size can make a difference too.

An administrative assistant of a Fortune 100 company based in New York will be paid more than the same tile job in a Midwest small town 35 employee company. The differences are the cost of living in New York and the higher responsibility of being an administrative assistant of a Fortune 100 organization.

Employee Accomplishments and Contributions

You want to pay more to your star employees than you pay to the lower performing workers, even they are at the same job title

The usual way that a company recognizes the difference between employees that contribute more to the company is through a higher pay to the better worker, the higher merit, the higher pay. It may work with good enough workers, those that their qualities are too low will be better sent to look for a new job in a new place.

The Availability of Employees You are Looking for in the Marketplace.

The job marketplace is a market like any market, offer and demand are the factors that influence the price. In our case the compensation for the employee doing his job. If there are more worker than jobs, they will accept a lower salary and benefits. In the opposite case, the companies will offer more to the candidates for a vacancy, making their workplace more attractive to the potential employees.

The Importance to Attract New employee, or Retain Your Particular good Employee.

When a company is in a desperate need of a particular employee, they will pay more to make sure they will have this so wanted employee. It can happen when a good company is looking for a great professional or when a lousy reputation workplace is in need to have someone that will accept the horrible reputation workplace.

The rentability of the business or the Funds Available in a Non-Profit or Public Sector Setting

Some people will take a lower pay job if it is working for a non-profit or public sector that is limited in salaries they can pay. The reasons for choosing these low pay jobs can be more idealistic than economic. Some people will like the mission and vision of a non-profit or public sector workplaces.

Workplaces to look for a job can be — governmental and unionized operations. Where job security is higher, and the expected increases are not that volatile. 

A secure job is much more important to these people than increased wages.

The public sector jobs will have a lower paycheck, but high benefits, like health insurance and pensions. When you compare workplaces compensation, you would have to see the whole picture of public and privet sectors.

Previous Salaries

Looking at the past salaries is a common habit though it is a horrible way that is illegal in some places. Many companies o look at the previous wage and offer some more to attract the potential employee. It is unfair compensation toward the employee and can create discord in the hiring company.

When an employee gets a better salary than he use to have at the place he left, he may be happy at the first moment buy will feel bad when he will discover that the other employee that came aboard for other workplace got the same $5,000 more but on the $60,000 she used to make in her previous workplace. Now the new employees are making different salaries for the same job in the same company, an ugly situation that will create bad feelings.

It can bring the relationships into conflict and a claim for discrepancy will force the company to pay the same salary for the same job. It will be much more healthy for the company to have the salaries tied to the job description.

Profit sharing, bonuses,  overtime pay, recognition rewards, and commission for sales are part of compensation. There are compensations that are non-monitory perks like the company-paid car stock options, in some cases the perks are taxable

Money and what cost you money is the compensation for our work for the owners of the business. You make the money for the owners to pay you in the different ways we mentioned below. Your best interest is to gain as much as possible.

One way to make more money is to climb up the corporate ladder to the executive level where wages and perks are much higher.

The good employer will look for fair pay for all his or her employees. It is not in best interest of the employer to have disgruntled or unhappy workers feeling that they are underpaid.

The way to make the employers wish for a contributing workforce that is synchronized with the business goals, come true is to pay fair market compensation with generous benefits.

paystumbmakr.com team thanks you for a visit and reading this blog




Disclaimer: John Wolf and paystubmakr.com are making a total effort to offer accurate, good, ethical HR management, employer, and workplace advice.  We do not use the words of an attorney and the content on the site is not given as legal advice. The website has readers from all US states which all have different laws on these topics. The reader should look for legal advice before taking any action.  The information presented on this website is offered as a general guide only and never as legal advice.

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