Compensation Plan
Meaning & Definition
Compensation Plans are organized and laid out in a way that outlines the various ways employees will be compensated for their labour. The different types of compensation include salaries, commissions, bonuses, allowances, etc. The plan allows for all employees to be compensated in a fair manner, consistently, and based on the performance of the individual. Additionally, the Compensation Plan is associated with the organisational goals and provides market-rate compensation.
Why Compensation Plan Matters?
- Guarantee clarity and transparency regarding employee compensation.
- Support in attracting and retaining skilled workers.
- Align compensation with performance and business objectives.
- Assist in budgeting and monitoring salary expense controls.
- Encourage internal pay equity and consistency.
Policy & Compliance Guidelines
The laws concerning compensation plans in India are not summarised in one law. While there are various compensation plans, those plans must comply with other laws, which may include the Minimum Wages Act, the Payment of Wages Act, the Equal Remuneration Act, the Income Tax Act and any other labour law which has statutory benefits (PF, ESI, Gratuity).
