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by Jen Leigh on November 11, 2020

Understanding Employee Compensation and Employee Benefits

Many employees believe that their salaries are set arbitrarily by their company. They don't realize all of the different factors that go into determining their total wages. Fully explain employee compensation, including employee benefits, so that your employees understand their total pay package.

Monetary versus non-monetary pay

Total employee compensation includes more than the simple salary you set for each position.

Monetary pay

Monetary compensation is important. It includes the base wages and any bonuses or commissions that the employee can earn.

Current and prospective employees need to understand the monetary portion of their compensation so that they can take advantage of bonuses and commissions. Most companies base bonuses on performance or longevity. Offering generous bonus packages can motivate your employees to perform at their highest level.

Commissions generally represent a portion of an employee's sales. This percentage can be fixed so that the employee receives 10% of his or her total sales regardless of the amount of product sold. An alternative is to offer percentages on a sliding scale. An employee could expect 10% on the first $100,000 of product sold, 15% on $100,000 to $200,000 and 25% on all product sold after $200,000. Some companies believe that this sliding scale encourages sales employees to push themselves not only to reach a higher commission, but also to outperform other members of the sales staff.

Small- and medium-sized businesses often rely on a cloud-based payroll system for accuracy and efficiency. This concept is especially appealing for small HR departments trying to manage bonuses and commissions.

Non-monetary pay

Non-monetary compensation comprises the remainder of an employee's total compensation program. Such compensation can include paid time off, medical benefits, retirement contributions, educational contributions and company equity.

Your company should clearly define how paid time off is earned and when it can be used. Written leave policies often include provisions such as adequate notice before using vacation leave. Some companies stipulate that an employee must have a doctor's excuse after two or three consecutive days of sick leave.

Medical benefits generally start after 90 days of employment. Some companies provide fully paid medical benefits, but most require employee contribution.

A strong employee benefits package can give a prospective employee the incentive to sign with your company versus with a competitor's. It can also incentivize current employees to be more productive.

Cloud-based time and labor management solutions simplify the process of monitoring non-monetary compensation, freeing your HR department to concentrate on other issues.

Similar jobs in the industry

If you are uncertain as to how competitive your company is when it comes to attracting top talent, you can research similar jobs in your industry and your area. This information will give you a baseline regarding a candidate's expectations. It also provides you with the information you need to retain your own top performers.

The U.S. Department of Labor, Bureau of Labor Statistics continually updates its wage data. The department tracks wage data and trends for over 800 common occupations. You can sort the data by job characteristics, industry and area. Using this information, you can determine the base salary that you should offer for your job openings.

Several open-source websites also offer wage ranges by job and industry. Most often, these sites poll a variety of companies in each industry to generate national salary averages.

Creating a job description, advertising and sorting through potential applicants for those who qualify is extremely time consuming. Automated hiring solutions take much of that burden away from you or your HR department.

These solutions help you create appealing ads, track appropriate candidates and streamline HR activities from interviewing to onboarding. A cloud-based hiring solution also enables you to edit available openings, create new job postings and track those candidates who were not chosen for one position to see whether their qualifications match other openings within your company.

Employee performanceArizona-mini-COBRA-CTA

Companies use employee performance evaluations in various ways. A high-performing employee may be considered for a merit bonus or a promotion. A low-performing employee may be considered for termination.

One common company pitfall in evaluating employee performance is the lack of documentation. Without a clear paper trail, how do you really know that you are rewarding the correct employee or terminating a slacker?

Properly done, performance evaluations can provide an objective view of any given employee. Improperly done, they are a subjective reflection of the supervisor's attitude towards the employee or towards the company.

Subjective evaluations can lower morale in your company. Employees who are viewed as the supervisor's favorites may often receive a bonus, leaving other employees unmotivated to perform. Employees who are terminated at the whim of the supervisor leave other employees fearful of losing their own jobs.

Modern, cloud-based HR management solutions provide an objective overview of each employee. Cloud-based solutions can track Key Performance Indicators (KPIs) for each employee, document any complaints brought by or against an employee, and track his or her leave usage. Each of these objective indicators gives you a clear picture of how dedicated an employee is to your company and verifies performance-based decisions by the paper trails.


If all of these HR functions seem overwhelming for your small- to medium-sized business, don't worry.

Inflection HR has all of the cloud-based systems in place to help you each step of the way. We have worked with companies like yours since 2002. We specialize in customized cloud solutions to help you throughout your employees' lifecycles.

For more information about how we can ease your HR pain points, please contact us. We would be happy to help you address your company's needs.


Jen Leigh

Jen Leigh is a Senior Product Specialist with Inflection HR's Cloud Based HR and Workforce Management Solutions. Connect with Jenni and the rest of the Inflection HR Team on Twitter, Facebook, or LinkedIn.