Along with the excitement of landing a new job, every employee must have a good understanding of the income they will be getting from that job. There are several criteria according to which companies determine the compensation for an employee. If the employee is not happy with their compensation, they have the right to negotiate as well.
In this article, we will be looking into compensation packages and their criteria.
What Is A Compensation Package?
Now, there’s no need to feel daunted by this big word. Compensation packages are nothing but a combination of your employee salary and the benefits that your employer will give you in return for your services. These benefits include salary, vacation days, insurance, retirement plans, and more. A compensation package is everything an employer receives for doing their job.
While job positions usually have a standard basic salary, the benefits that come with them can vary due to many factors. Some employers might be lavish with their employee benefits, while others might offer minimal benefits.
How Do Companies Determine Compensation?
The factors that influence compensation packages vary among employers. Here are some of the common factors one could consider:
#1 Market research for comparison
Compensation packages are generally determined based on industry standards. Many companies create and make changes to compensation packages after studying how other companies in the field offer benefits to their employees. If a company offers a similar or better salary than its competitors, chances of employee retention are also high.
#2 Employee’s skills and experience
Pay packages are influenced mainly by how valuable an employee is to the company. Someone highly skilled and qualified will definitely prove to be an asset. If they bring years of experience to the table, they’re highly likely to receive a high compensation package.
#3 Location
The salary packages in urban areas are significantly higher than in rural areas due to the increased cost of living in towns and cities. One of the major areas of concern would be the cost of living, as flats and houses are far more expensive in cities than in the suburbs. Conversely, with more companies switching to remote work, employees are negotiating for a position-based package rather than location-based compensation.
#4 Growth opportunities
Some companies cut down on an employee’s salary package citing long-term growth in their career paths. This can also happen due to the company’s brand value. Generally, smaller companies and startups provide faster career growth opportunities.
#5 Company’s profitability
Last but not the least, business success is a crucial factor in determining employee salary. The profits generated by the company determine whether budget cuts or raises need to be applied or not.
Conclusion
These were some of the critical factors that influence compensation packages. If you’re unsatisfied with the salary package offered, you must try and negotiate by all means to get the pay you deserve.