A compensation package refers to the salary, benefits, and other forms of remuneration an employer offers employees for their work.
A total compensation package encompasses various compensation elements beyond the employee’s basic wage or salary. It is a comprehensive set of rewards and incentives designed to attract new talent, retain employees, and motivate employees for the time and skills they provide.
What is in a compensation package?
Compensation packages vary based on local regulations, industry, and company policy, but they typically include a combination of statutory benefits, supplemental benefits, and fringe benefits.
Employers often tailor compensation packages based on the employee’s specific job role, experience level, and geographic location. They may also design compensation packages to align with their business strategies, goals, and market realities.
A typical compensation package may include the following components:
- Base salary. Base salary refers to the fixed amount of money an employee receives on the payroll.
- Benefits. Benefits examples include health insurance, dental insurance, retirement plans, life insurance, disability insurance, and other employee perks such as wellness programs, paid time off, and flexible work arrangements.
- Performance incentives. Additional payments depend on the employee’s performance, team successes, and company profitability, such as bonuses and commissions.
- Stock options or equity awards. Employers may offer employees the opportunity to purchase or receive shares of company stock for future financial gain if the company's value increases.
- Allowances. Employers may provide allowances for specific expenses, such as travel, housing, tuition reimbursement, or professional development.
- Perks. Employees may receive non-monetary benefits such as gym memberships, health and wellness opportunities, company cars, or other special privileges.
What is a fair compensation package?
A fair compensation package is aligned with the value of the work, considers the employee’s skills and experience, and is equitable across the entire organization. An appropriate compensation package should support both the company’s and employee’s needs and values, be sustainable, and match or surpass industry standards.
In addition to the above components of a typical compensation package, some universal characteristics of a fair compensation package may include the following:
- Competitive salary. A base salary that aligns with or exceeds the market rate and considers the cost of living where the employee or job is located.
- Work-life balance. Perks that enhance employee satisfaction and productivity include paid time off, flexible working hours, remote work, and wellness programs.
- Career growth opportunities. Opportunities for professional development, upskilling, and career advancement.
- Performance incentives. Additional bonuses, meals, or awards that provide motivation and recognition for the employee’s hard work.
- Positive work environment. While not necessarily a physical component of a compensation package, a respectful, inclusive, and supportive workplace culture enhances the overall employment experience.
Example of a compensation package
Compensation packages vary widely worldwide, so the elements may differ depending on the jurisdiction.
For example, an employer may offer some of the following U.S. employee benefits in a compensation package for their U.S. workforce:
- Statutory benefits. Base salary, Social Security and Medicare tax contributions, unemployment insurance, workers' compensation, and 12 weeks of job-protected, unpaid annual leave.
- Supplemental benefits. Health insurance, vision and dental insurance, a 401(k) retirement plan, paid time off, paid parental leave, and equity awards.
- Fringe benefits. Gym membership, a remote work policy, free access to coworking spaces, a travel stipend, and education reimbursement.
Meanwhile, an employer may offer some of the following German employee benefits in a compensation package for their German workforce:
- Statutory benefits. Base salary, health insurance, pension plan, long-term care insurance, unemployment insurance, occupational accident insurance, and mandatory annual, parental, and sick leave.
- Supplemental benefits. Life insurance, option for private healthcare, long-term disability, and total permanent disability benefits.
- Fringe benefits. Housing and child subsidies, equity compensation, travel allowance, wellness funds, and 13-month pay.
What is the importance of a compensation package?
A comprehensive compensation package is critical for attracting and retaining talent. A fair compensation package that exceeds the statutory benefits requirements enhances the work environment, company culture, and employee engagement and satisfaction.
While compensation packages look different worldwide, every country mandates that employers offer unique statutory benefits to their employees. Offering a global compensation package that encompasses many benefits talent expects across borders ultimately helps attract high-quality talent worldwide.
Talent is also willing to seek new jobs for the right perks that address their individual needs, support work-life balance, and give them a reason to stay with an organization. Employers offering the right employee benefits in their compensation packages gain a competitive hiring edge in the market.
How to create compensation packages for a distributed workforce
A comprehensive and competitive benefits package is critical for employers seeking global talent. However, tailoring your compensation package to fit different foreign statutory benefits and varying talent expectations is a daunting, complex, and time-consuming task.
Instead, work with a global benefits partner like Velocity Global to ease the process. We help companies in more than 185 countries easily manage benefits for their global talent.
Our Global Benefits solution makes it easy for companies to offer competitive compensation packages to their employees—no matter their location. We remove the burden of benefits administration and compliance, so you can focus on delivering the support to your distributed team needs and maintain a competitive edge in the hiring market.
Contact Velocity Global to learn how our Global Benefits solution helps you compliantly offer your distributed workforce the benefits they deserve.
