What is a Professional Compensation Plan?

A plan, defined as the plan of how to compensate employees for their work efforts, is one of the most common concepts in the professional world. Compensation plans design a number of payment schemes: wages associated with the amount of hours spent at work, wages gained from productivity while working, health benefits, bonuses, and even a cafeteria plan.

What Are Comepensation Plan Types?

A compensation plan, explained as the motivational factor which makes employees show up to work, is the most central concept in the study of human resources. HR professionals around the world spend most of their work day working with compensation plan benefits. The two main methods are salary and commission-based pay.

• Salaried employees receive a consistent amount of income. This method is perfect for employees who’s performance is not related to sales in the company: administrative staff, analysts, and others. The benefit of a salaried compensation plan for a sales team is that it provides a consistent platform for an employee to survive on.
• Productivity based compensation plans are perfect for employees who drive sales. These employees, such as sales staff, need a motivation to be more productive each day. If a company were able to create this behavior it would result, in the end, in increased shareholder wealth. Many employees with this type of compensation plan receive some salary in addition to commission. This allows them to have some stability while they attempt to grow their success.
• Other compensation plans provide an additional perk to employment. Health benefits, for example, make an employee feel like a company cares about their health. Cafeteria plans project the same image. In reality, a company experiences the benefit of this morale boost while also ensuring the ability of employees to work effectively. Regardless, the compensation plan for the CEO should be very different from that of the office manager.

Sources: https://strategiccfo.com/compensation-plan/