Describe How Total Job Benefits and Total Employee Compensation Differ

Describe How Total Job Benefits and Total Employee Compensation Differ

In virtually cases apart from voluntary work, people exchange their work to different employers in apprehension of getting bounty. On top of this, employees tin besides go some benefits from their employers. Whilst compensation and benefits are two terms that are ofttimes used interchangeably, it tin be noted that they are different since they do not refer to one matter.

The chief divergence between compensation and benefits lies in the aspect related to budgetary value. Compensation refers to pay or the exchange in monetary terms of the work performed by the employee and is paid by the employer. This can be in the form of wages, salary or tips.

On the other hand, benefits refer to the substitution in value to the employees as part of their packages for the work that has been performed. In other words, benefits practise not involve money but are presented in grade of value.  However, there are likewise other fundamental factors that differentiate compensation from benefits.

Primal Characteristics of Compensation

Compensation refers to all forms of pay to employees arising from their piece of work and this is offered in monetary value. At that place are various central features that differentiate compensation from benefits. Some of these features determine the level of bounty one gets for his services rendered to the arrangement.

Types of compensation

In that location are different types of bounty packages for different employees depending on their nature of work. These include the post-obit:

Basic compensation

Some companies offer basic salaries equally compensation to their employees. People who vest to the aforementioned form get equal basic pay. Notwithstanding, people who accept high qualifications and are in possession of advanced skills and experience oft go higher pay compared to their counterparts with lower levels of education as well every bit experience and skills.

Functioning related compensation

In that location are different types of compensation plans and some are performance based. For instance, pay can be adjusted to reflect some functioning measure and that can be individual productivity, work grouping or departmental productivity. This can also involve unit productivity or overall organisation’s turn a profit performance. In most cases, annual operation bonuses based on corporate profitability are besides used every bit operation based compensation strategies for senior executives.

Piece-rate bounty programme

Alternatively some companies offer their workers compensation that is based on piece- rate plans where they do not get a base salary and are but paid for what they take produced. This is also known as commission based compensation in other circles. This applies to vendors in detail where they go a sure percent of the total acquirement they generate per solar day. Information technology is like the more revenue you generate, the more than money yous earn. Therefore, no sales no pay for the mean solar day.

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Compensation schedule

Some companies adopt to pay their employees on monthly footing while others tin can choose either weekly or fortnight payment days. Some companies calculate the pay for their employees on an hourly ground. Aspects such as experience equally well as levels of qualifications are mainly used to determine the compensation charge per unit for each employee within the organization.

Significance of compensation

Compensation is very important in the organisation. Information technology is specifically designed to attract besides every bit to retain talent within the system. It also focuses on utilizing employee energy to gain competitive strategy while at the aforementioned fourth dimension trying to control costs at desired levels. Attractive compensation helps to amend job satisfaction among the employees. This is advantageous to the arrangement since this leads to low absenteeism and low turnover since satisfied workers are willing to stay in their corresponding organizations.

Difference Between Compensation and Benefits-1

Key features of Benefits

During the electric current flow, information technology tin can exist noted that employees expect to earn extra autonomously from cash alone. This is known every bit benefits and some people prefer to call them fringe benefits and they are not-monetary form of compensation. Benefits are offered on summit of the greenbacks pay to the employees in a bid to amend the welfare of the employees as well as to motivate them.

Types of benefits packages

There are dissimilar types of benefit packages and employees have the opportunity to choose do good packages that suit their needs. Some benefits are required by constabulary and these include sick and holiday pay as well as unemployment compensation. On the other mitt, information technology tin be observed that employees can choose their desired benefit packages from the following: vacation, health insurance, company housing, subsidized meals too as educational funding for children. In some cases, benefits depend on i’s level inside the company.


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Workers receive benefits regardless of their performances. In other words, benefits are not functioning based only membership based. The other notable attribute about employee benefits is that they usually do non affect the performance of the employees though in some case they can pb to low satisfaction and atomic number 82 to absenteeism and ultimately turnover if they are insufficient. Intendance should exist taken when designing the benefit package since this tin can impact the employees if the benefits are not satisfactory. It is also of import to consider associated costs.

Goals of benefits

Benefit plans are specifically designed to fulfill the needs of the employees and they are also oriented towards the overall objectives of the system. Some of the goals of offering employee benefits include the following: better employee satisfaction, attract new employees likewise as to satisfy the employees already working within the company.

Tabular array indicating the differences between compensation and benefits

Bounty Benefits
Monetary value Non-budgetary value
Bounty is performance based Benefits are not operation based but membership based
Employees cannot determine their bounty Employees can determine their benefit packages and are entitled to them
In piece-charge per unit bounty plan, pay determined by contribution made No benefits at all
Meant to attract also as to retain talented workers. Meant to motivate besides equally to improve welfare of employees
Pay offered on weekly, fortnight equally well as monthly ground Benefits tin can come split up from actual pay earned by the employee

Summary of the main differences between compensation and benefits

Compensation and benefits are somehow related but upon closer analysis, these 2 concepts are different. Some of the major differences between benefits and compensation are summarized beneath.

Nature of compensation and benefits

  • Compensation is monetary value paid to the employee for piece of work done.
  • Benefits are non budgetary and they are an indirect course of bounty offered on top of cash pay.

Types of compensation and benefits

  • There are different types of compensation and they include the following: basic compensation offered on weekly, fortnight or monthly basis. The other blazon is committee based bounty which is determined by level of revenue generated from sales of a particular commodity.
  • Some forms of benefits are required by law such as unemployment compensation, ill also equally holiday pay. Employees can also choose desire benefit parcel from health insurance, vacation, subsidized meals also as company housing among others.
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  • Compensation is performance based. This tin be based on individual, group or organizational functioning where employees are given bonuses for outstanding functioning.
  • Benefits are not based on performance but they are membership based. The employees are entitled to their benefits regardless of performance.

Employee choice on compensation and benefits

  • Employees cannot determine their own salaries. Factors such as level of qualification and feel are often taken into account when determining the level of compensation awarded to a specific private within the visitor.
  • On the other hand employees can choose their benefit packages as they run across fit since they are the ones who know what they exactly need.


  • Compensation is meant to attract likewise every bit to retain employees inside the organization. Skilled employees should offered lucrative pay in social club for them to remain in the organization.
  • Benefits on the other hand are meant to amend employee satisfaction, improving their welfare as well as motivating them and so that they can better job satisfaction. All these factors are practiced for the employees since they stay for long flow in the system.


In conclusion, it tin exist stated that benefits and compensation are somehow related since they have something to do with compensating employees in item for the work performed. However, as discussed above, these two concepts are different. The primary departure betwixt the two is that compensation is monetary based while benefits include other gains that are non monetary. Bounty itself is performance based and it is designed to concenter too every bit to retain the already existing employees in the arrangement. In dissimilarity, benefits are membership based and employees are entitled to them and employees tin choose their desired do good package.  Benefits are also designed to improve job satisfaction equally well as to motivate the employees inside the organisation to ameliorate their operation.

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Describe How Total Job Benefits and Total Employee Compensation Differ