A lot of people may think that HR is only involved in hiring and onboarding. Maybe the occasional disciplinary meeting here and there. But there is often a lot more going on behind the scenes. One of HR’s most important – and complex – responsibilities is to manage the benefits and compensation of the company’s employees.
It has a direct impact on employee satisfaction because it affects how people feel about their jobs. And if they see a long-term future with the company.
Pay and benefits are a deeply personal part of someone’s career. It dictates whether or not they feel valued at work and their motivation to show up every single day. If HR had to get the compensation part wrong, the company culture is at risk of collapsing.
The Difference Between Compensation And Benefits
Compensation is the financial pay that employees receive in exchange for working. It includes their basic salary as well as any overtime pay, bonuses or commissions depending on their structure.
Benefits, on the other hand, are forms of rewards that indirectly support employees. It’s things that are over and above their basic pay like medical aid or pension contributions. It doesn’t have to be strictly financial, it could also be wellness programmes or flexible working arrangements.
Together, they form an employee’s total reward package.
Companies that offer human resources software solutions in the UK include:
How Does HR Manage Employee Benefits And Compensation?
In a nutshell, HR’s job is to put these packages together in a way that feels fair while still being aligned with the company’s goals.
Here are a few of the ways in which HR has to manage the benefits and compensation for each employee at the company.
Create Fair And Competitive Pay Structures
Probably one of HR’s biggest tasks is to build a pay structure that is acceptable for both employees and the business. This means carrying out market research to determine industry benchmarks and salary surveys to determine the amount.
Paying too much can put strain on the company’s finances while paying too little can cause employee frustration and high turnovers.
The next step is to create salary ranges to accommodate the different roles within the company. It means that employees with similar roles are paid consistently but there is still room to grow and earn more.
Administering The Employee Benefits
HR is also responsible for managing the specifics of the benefits. That means choosing service providers and negotiating coverage while ensuring any changes are updated accordingly and benefits are administered on time.
Beyond that, managing the benefits also means making sure that they are in fact valuable and relevant to each specific employee. As their priorities change, so might the benefits. Nowadays, things like mental health support matter just as much as health insurance.
Outlining Any Performance Incentives
Compensation doesn’t just mean fixed salaries and it’s common for companies to use financial incentives to award performance.
It’s up to HR to design these incentive systems and make sure that employees understand how these bonuses are calculated. If this isn’t clear to them, or they seem biased in some way, they’re more likely to become a source of frustration rather than motivation.
Communicating Both Compensation And Benefits
Right from the onboarding stage, HR has to clearly outline what benefits are available, how the employee’s pay is structured and how salary reviews will work.
If any of the benefits or policies change, they need to make the employees aware of it too. Essentially, they need to help employees to understand the full value of their reward package. It makes them feel informed rather than anxious or confused about their pay and benefits.
Supporting Career Growth
Both compensation and benefits have a direct influence on career development. HR helps to create the vision for employees, allowing them to see how their compensation might grow as they acquire experience and take on more responsibilities.
This could include things like structured pay increases or outlining the criteria for a promotion. If employees are able to see a future with fair rewards, there’s a better chance of them investing their time and energy into the company instead of looking for a way out.
Adapting To A Changing Workforce
Today’s workforce is constantly changing and HR has to be able to keep up with it. Remote working, flexible schedules and hybrid roles all impact how both compensation and benefits should be structured. While these things didn’t have a big influence a couple of years ago, they matter now.
Some employees might value more leave or flexibility instead of a higher salary, while others prioritise medical aid cover or retirement. It’s on HR to recognise which employee values what. Every benefits package should allow room for customisation and be personalised to each employee to make sure those needs are met.
