Everything You Need to Know About Indirect Compensation

A Guide to Indirect Compensation

A Guide to Indirect Compensation

Everyone needs to earn an income. To survive in society, we need to eat. For that, we need money. And to have money, we have to work. However, money is only one of the very few rewards we should strive towards and be open to. 

What else is there besides money, you ask? Well, we have the answer! In this article, we will take a look at the concept of indirect compensation, what kinds of indirect compensations there are, and what the advantages of indirect compensation are. It promises to be an intriguing read, so let’s jump in without further ado!

What Is Indirect Compensation?

If you have ever heard the saying, “Money is not everything,” then you are familiar with the concept of indirect compensation. When you take a job, you get a contract. This contract tells you everything about what you will be receiving. Meaning not only does it tell you the amount of money you will be making, but it also tells you what you will be getting in addition to money.

Make no mistake; perks play a big part when it comes to selecting a job. People pay close attention to what it is they will be getting out of their position before deciding to either take it or look for better. If this seems like an alien concept, then perhaps the next section, where we list out and discuss some indirect compensation examples, will help you understand.

Types of Indirect Compensation

There are many different kinds of indirect compensation offered by employers. Some of the most popular ones are:

  • Insurance. Whether it be life insurance, health insurance, car insurance, or whatever kind of it you get, the company providing it for you is a big deal. That means the employee saves on monthly premiums and rests assured knowing that the company will be there to take care of them in the event that something happens.

  • Pension. Most companies will provide a pension fund, which takes a percentage of an employee’s income and deposits it into said account for as long as they work there. This is to make sure that even after the employee quits or moves on, they will have some form of financial security to do with what they will. It is a good investment for a rainy day.

  • Leaves and Holidays. Sick leaves, medical leaves, accrued leaves, and maternal and paternal leaves all come under the purview of this clause. Nobody can constantly work without taking a few days off to recharge, especially if they fall ill. No matter how much the pay is, a job without leave is just torture. This should be the absolute minimum and basic form of indirect compensation example that should matter to anyone.

  • Overtime. When people are made to work overtime, their overtime payment is considered a perk. This is because many companies do not have overtime payments. You need to make sure that your employees’ extra efforts are rewarded accordingly. 

  • Healthcare. Like insurance, many companies give health care benefits. Dental coverage is a very popular example of this, and again, knowing the company has their back goes a long way in an employee picking a certain job over another.

  • Childcare. This is big. One of the most common ways a company provides childcare is by giving employees childcare subsidies. You can do this by either giving the employee a certain amount of money directly or by giving them discounts at particular childcare centers and workers. This takes the load off of working parents in multiple ways.

  • Flexible Working Hours. This allows employees to negotiate their work hours. Especially useful for working parents who need to go home to take care of their kids, or working students, who need to focus on academics and exams. 

  • Company assets. When a company provides employees with their own laptop, phone, and car for work purposes, these count as incentives. They make the lives of employees easier, and thus are a bonus to the salary they are paid.

What Are the Advantages of Indirect Compensation?

Having read through the list of the most commonly used indirect compensation tools at your disposal, the advantages should be quite clear. The HR departments all know that employee retention is the crux of the problem. Money is no longer the sole form of security, and, if by some method, they can end up providing that, they will be able to keep them longer and reduce the dreaded rate of turnover.

Perks like this end up playing a big role in making the employee feel cared for. This boost in morale is all it takes, sometimes, to make the employee feel like they belong. To them, it feels like their loyalty is being rewarded. This pushes them to do better not only because of a sense of gratitude but also because they know that the better they perform, the more perks they are likely to get down the line.

Finally, getting rewards means doing something right. And doing something right does not only mean performing well. It also means employees are abiding by the rules of the company and are cooperating with HR. This allows for the overall smooth functioning of the company as all the gears fall into place and production occurs smoothly. Happy employees are always the ideal. 

Boosting Effectiveness With Lanteria

Indirect compensation is a relatively new addition to the HR toolkit. If you want to use it to effectively drive the productivity and engagement of your employees, you’ll want to take a look at the whole host of new tools Lanteria has on offer! Doing this has never been easier, so contact us today to book a demo!


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