Glossary definition

What is compensation management?

Compensation management means the specialist HR discipline of planning and administering everything of financial value that an employer gives an employee in exchange for their work.

It includes their salary but also benefits, bonuses and rewards.

The compensation package is a key factor in employees’ decisions to join or remain with an employer, so compensation strategy and planning is an important role in organisations that are focused on attracting and retaining the best talent.

Traditionally, a senior level compensation package might have included salary, pension, bonus, share options, company car, private healthcare and life insurance.

Today, leading employers are even more creative about offering tailored compensation packages that meet their target employees’ needs.

Employees may be able to pick and mix a package that meets their needs, including extra holiday days, discounted computer equipment or wellbeing benefits.

Administering, managing and monitoring compensation schemes can be a complex and time-consuming HR activity.

Today’s advanced HR software can help to automate this process in the most efficient way for both employees and employers.