3 Types of Compensation and Its Purpose You Should Know


The term compensation is actually closely related to financial in the form of rewards obtained from someone based on a job relationship.

In particular, the definition of compensation is all or something that is obtained, both physical and non-physical. In addition, other meanings are all rewards or rights obtained by an employee for services or rewards for the results of what he has done both in the company.

Meanwhile, the forms of compensation can be of various kinds but are classified into two groups namely; physical and non-physical.

The provision of compensation, especially to employees or workers, will certainly have a positive impact not only for employees but also for employees company who have given rewards, for example in the form of salaries or allowances.

Generally, the impact that arises from the provision of rewards is a positive impact, such as; make people or workers more motivated to always give their best and achieve and be able to work even harder.

In addition, the provision of compensation by the company also provides a positive image in the eyes of both employees and competing companies. Another positive impact is obtaining good quality work from workers who receive compensation.

In a company, it is stated that the purpose of providing compensation to its employees includes;

  1. Have Qualified Workers

By providing rewards such as salaries, allowances and bonuses to workers, the company will have qualified and highly dedicated workers to their work while being able to keep their employees working at the company because the compensation given is appropriate.

  1. Having Employees with Integrity

Another purpose of giving is to have workers or employees with integrity so that they have an impact on the progress and sustainability of the company through innovation and a work culture that is in accordance with the needs of the company.

  1. Justice Guarantee

Giving rewards in a company also aims to guarantee fairness in a relationship between company management and employees. For employees, the provision of rewards is a form of remuneration for the company for what has been done and done for the progress of the company.

As for the company, it is to get a profit with the continuity of a good work process from the workers.

  1. Legal Administration Standard Obligations

In a company administration, the provision of benefits is a standard administrative obligation which is also regulated by the government in the labor law, which also includes regulations such as the amount of compensation to the level of providing appropriate compensation for workers.

Types of Compensation

In giving, divided into three types, namely; direct, indirect and non-financial compensation.

  1. Direct Compensation

The meaning of direct has a definition which means all rewards in physical form such as money, for example; salaries, allowances, incentives, commissions, performance bonuses and the distribution of company profits.

  1. Indirect

Indirect also generally takes the form of money or facilities provided by the company, for example compensation in the form of health and safety insurance by involving employees in work insurance programs to old-age insurance.

The concept of indirect compensation is that the company pays insurance premiums which are compensation for their workers to be able to guarantee their workers.

  1. Non-Financial

This type of reward is not given in a physical form such as money, but rather provides competency skills for employees such as job training to improve workers’ abilities or guarantees for providing career paths for workers, appropriate leave time to standard working hours.

Source link