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Who is in charge of compensation,
benefits and rewards schemes?
Most employees don’t just work for the love of their job. Most people also
want a decent salary and other incentives that will reward them for their
hard work.

These remuneration packages need to be created, managed and

distributed efficiently. This is where HR professionals that specialise in
compensation and benefits get involved.

Without these guys nobody would get that ‘just been paid’ feeling at the end
of the month and Christmas bonuses would certainly be a thing of the past.
For many people, compensation and benefits professionals are the most
important guys in the HR department. Why? Well, because they control the
money of course!

What are the responsibilities of

someone in compensation,
benefits and rewards?
Basically, people who work in compensation and benefits are responsible
for devising policies for an organisation’s salary, bonus and incentive
schemes. These might include:
 Salaries
 Bonuses
 Commission
 Company cars
 Pensions
 Life assurance
 Profit sharing
 Dental plans
 Medical insurance
 Vouchers
 Capital bonds reward schemes.

They are then in charge of administering, managing and evaluating the

payroll, salary structures, and incentive schemes. Basically, they make sure
that the right people get the right amount of money, at the right time.

Why is a good compensation,

benefits and rewards scheme
The right compensation and benefits schemes ensure that hard-working
employees are rewarded fairly and in the most cost-effective way for the
company. This in turn then motivates employees to sustain their

The compensation, benefits and reward schemes that these HR

professionals manage are not only important for retaining and motivating
employees, but also for attracting new people to the company. Salary and
incentive packages are one of the main reasons why people apply for
specific jobs. The more attractive compensation and benefit schemes tend
to generate more interest in new positions.

What skills do HR employers in this

sector look for?
Compensation, benefits and reward careers are all about money.
Consequently, HR professionals who work in this area need to be
numerate, commercially aware and have a detailed knowledge of financial
laws and regulations.

As well as monitoring their own company’s salary structures and benefits,

these people may be required to research and analyse the salary rates of
their competitors.

However, it’s not all about numbers, paycheques and payrolls. These guys
need excellent communication skills to make recommendations to
employees on pension and insurance schemes, and to liaise with
government departments and trade unions with regards to compensation
and benefits issues.

Indeed, these roles have a strategic element too, as the needs of the
company and employees need to be balanced effectively. Furthermore,
compensation and benefits are directly linked to market changes.
Consequently, difficult decisions regarding salary and benefits alterations
may need to be made within this department.

Would I be in charge of all

compensation, benefits and reward
The size of the organisation determines what kind of work you might be
doing in your compensation and benefits career. In smaller organisations,
some people might deal with the whole range of responsibilities, whereas
larger companies may offer careers which focus on one specific aspect of
the compensation and benefits remit, such as payroll management.

If you’re interested in an HR career that specialises in compensation,

benefits and rewards, check out the occupational profile of a Compensation
and Benefits Manager. If a career in HR sounds perfect for you, take a look
at the various HR jobs listed on our jobs board!
Compensation & Benefits
Defining Compensation
Compensation (also known as Total Rewards) can be defined as all of the rewards earned by employees in return for
their labour. This includes:

 Direct financial compensation consisting of pay received in the form of wages, salaries, bonuses and
commissions provided at regular and consistent intervals
 Indirect financial compensation including all financial rewards that are not included in direct
compensation and understood to form part of the social contract between the employer and employee such as
benefits, leaves, retirement plans, education, and employee services
 Non-financial compensation referring to topics such as career development and advancement
opportunities, opportunities for recognition, as well as work environment and conditions
While employees tend to focus on direct financial compensation when contemplating their rewards, according to the
McKinsey Journal, for individuals who are relatively satisfied with their salary, it is the non-financial rewards that
tend to be more effective in contributing to long-term employee engagement.

Examples of Financial vs Non-Financial Compensation

Compensation & Benefits
Legal Compliance
When compensating employees an organization must adhere to the existing legislation in the areas of Labour
Standards, pay equity, Human Rights, Employment Insurance, pension or retirement benefits, labour relations and
Occupational Health and Safety. Regularly reviewing the HR Toolkit, key government websites, and connecting with
an HR and/or legal professional can help you ensure that your organization’s compensation practices are in
compliance with current legislation in your jurisdiction.

Issues may include, but are not limited to, wages, leave options, bonuses, advancement opportunities, termination
pay and more. Auditing your compliance with legislation annually is time consuming yet critical to the sustainability
of your organization.

When compensating employees the following are areas that you need to ensure comply with relevant legislation:

 Statutory Obligations
 Minimum Wage
 Statutory Benefits
 Employment Insurance
 Canada/Quebec Pension Plans
Statutory Obligations
A statutory obligation is a requirement that employers are required to provide their employees as determined by the
law of the province or territory where the employer operates.

Employment Standards Legislation sets out the minimum terms and conditions of employment for those who operate
federally and for each province or territory. Both employers and employees must follow these minimum obligations
unless they offer terms or conditions more generous that the ones mandated by legislation.

Therefore, employment standards legislation sets out minimum standards relating to employment terms and
conditions. The legislation also includes exceptions for certain types of employees, such as managers and
professionals. Some key areas covered by legislation are:

 Minimum Wage
 Hours of Work
 Public Holiday Entitlement
 Overtime
 Vacations Leave
 Maternity and Paternity Leaves
 Adoption and PArental Leaves
 Emergency/Sick Leave/Compassionate Leave
 Bereavement Leave
 Leave Entitlement
 Grievance procedures
 Termintation of Employment
Minimum Wage
The minimum wage is designed to impose a broad and enforceable standard on employers that would guarantee a
minimum level of income for unskilled, non-unionized workers. Minimum wage standards are also designed to stop
these workers from trying to undercut each other by agreeing to work for less than someone else. Some exceptions
exist for those who are student employees, self-employed, independent contracts and commissioned sales people.
Each province or territory has its own minimum wage guidelines and exceptions.

Learn more about the minimum wage in your province or territory »

Statutory Benefits
Statutory is defined as something “fixed, authorized, or established by statute”, therefore the benefit packages that
Canadian employers offer, are designed to enhance the well-being of their employees, and will contain both statutory
and discretionary benefits. Statutory benefits are some of the benefits also referred to as “employer paid” benefits.

Employment Insurance
Employment Insurance is a statutory benefit that provides temporary financial assistance for unemployed Canadians
while they look for work or upgrade their skills. People who are sick, pregnant or caring for a newborn or adopted
child, as well as those who must care for a family member who is seriously ill with a significant risk of death, may also
be assisted by Employment Insurance.

Employment Insurance (EI) premiums are calculated on, and deducted from, an employee's maximum insurable
earnings (MIE), which are insurable salary, wages, cash allowances and other remuneration paid to an employee. The
Canada Revenue Agency is responsible for determining what is considered insurable employment and which earnings
are insurable.

Most employees in Canada are considered to be in “insurable employment” and covered by EI. As of January 1, 1997,
every hour of work is insurable up to a yearly maximum earnings limit, replacing the previously required weekly
minimum earnings or hours worked.

All employees in insurable employment must have EI premiums deducted from their earnings. Premiums are set
annually as a rate per $100 of Insurable Earnings up to the level of Maximum Insurable Earnings. Their employers
are also required to make payments at 1.4 times the employee rate, unless Human Resources and Skills Development
Canada has granted the employer a reduced rate.

Procedures for premium deductions and remittances are outlined in “Canada Revenue Agency Instructions to

Types of Employment Insurance benefits

There are several types of benefits available to Canadians, depending on their situation.

Regular Benefits
These benefits are available to individuals who lose their jobs through no fault of their own (for example, due to
shortage of work, seasonal layoffs, or mass layoffs) and who are available for and able to work, but can’t find a job.
Related website: Service Canada - Employment Insurance Information for Employers
Maternity and Parental Benefits
These benefits provide support to individuals who are pregnant, have recently given birth, are adopting a child, or are
caring for a newborn.
Sickness Benefits
These benefits are for individuals who are unable to work because of sickness, injury, or quarantine.
Related website: Service Canada - Employment Insurance Sickness Benefits
Compassionate Care Benefits
These benefits are available to people who have to be away from work temporarily to provide care or support to a
family member who is gravely ill with a significant risk of death.
When dealing with maternity, parental, sickness, and compassionate care leaves, there are two aspects to be
considered. One is the period of leave specified by employment/labour standards legislation. Although the standards
vary from jurisdiction to jurisdiction, employment/labour standards laws entitle eligible employees to specified leaves
for a specified period of time. They also require employers to ensure that the employee's same, or a similar, job with at
least the same wages, benefits and seniority will be available when the leave is over. The second aspect of the leaves to
consider is the payment the employee may be eligible to receive from Employment Insurance (EI) or the Quebec
Parental Insurance Plan (QPIP). Under the EI legislation, eligible individuals are entitled to government-paid benefits
for maternity, parental, sickness, and compassionate care leaves. The QPIP provides benefits for maternity, paternity,
parental, and adoption leaves for employees residing in the province of Quebec, regardless of the province of
Related website: Service Canada - Career Transition Assistance
Canada/Quebec Pension Plans
Organizations are required to submit CPP/QPP payments to the government for all eligible employees on their
maximum insurable earnings, based on a rate table revised annually. A percentage is deducted from the employee’s
pay and a portion is remitted by the employer.

Related Websites:

Canada Pension Plan

Service Canada
Quebec Pension Plan
Régie des rentes Québec
Next Section: Developing a compensation rewards program

Indirect Benefits
Indirect benefits will look different in every organization. Ultimately it is the way in which you choose to define the
culture of your organization and your total compensation rewards program that will differentiate it. Of course, it is
important to ensure it aligns with organizational strategic objectives. Recent studies all indicate that in today’s
changing work environment it is the flexibility and creativity that draws and keeps the highly skilled employee and
much of this is impacted by the organizations choice of indirect benefits

Professional Development
For many people, especially the younger generations, the ability to develop both personally and professionally is
highly valued and a key consideration in deciding where to work.

 Access to training and development on the job and through courses or conferences were listed in a study
done by the Conference Board of Canada as important
 Another variation of this was receiving reimbursement for courses taken on the employee’s own time - most
commonly reimbursed were courses that aligned with a professional designation in the employees current role
Career Opportunities
In addition to supporting employee’s pursuit of training and development opportunities, an organization should also
consider how it will support its employees’career development. Supporting an employee’s pursuit of their career goals
and possible advancement into more responsible positions in the organization not only benefits the employee but also
the organization as the employee can move into roles that enable them to deliver their greatest value to the

Having regular career discussions with employees, possibly as part of a performance management process, will help
to stay up to date on their progress and any changes to the direction they are hoping to take.
Employees who were surveyed and asked what kept them in their current role, indicated that having a culture that
recognized the importance of connecting performance to rewards were key to their satisfaction.

Performance management was one component that influenced the culture. Having clearly defined expectations, being
able to identify goals to work towards and having their evaluation align with those agreed-to goals, contributed to
higher satisfaction levels.

Receiving effective and realistic feedback, both positive and constructive, increased a continuous learning
environment and increases commitment to the organization because performance, both good and bad, is recognized.

Succession planning when operating within an organization brings a sense of purpose and sustainability to
employees. Confidence in the future and their role it in, was reported consistently by those who had been identified
for a succession plan. Consider ways to develop younger staff with great potential by having them be identified as a
potential successor to a long-term employee. The employee wins by learning new and critical skills while feeling
rewarded for their hard work to date, the more senior person feels rewarded for years of service and identified as a
key contributor. The organization wins by ensuring that intellectual capital is not lost, but transitioned from one
employee to another.

Trust demonstrated as part of the culture of an organization is highly valued by all generations of employees. In
Steven Covey’s book: “Moving at the Speed of Trust” leaders are challenged to evaluate if their organization’s culture
is one of trust or mistrust. Employees who feel trusted and respected will strive harder to maintain that trust and are
less likely to do something that will result in a loss of trust.

Workplace Flexibility
Alternative work arrangements are effective ways to negotiate an arrangement that meets the needs of the
organization while also providing employees will what they need to balance their home and work environments.
Listed below are just some of the ideas that could be explored. Finding out what your organization would value can
start this process. The key is to ensure that any alternative arrangements considered do not hinder the organization’s
ability to ensure that core work is being completed in the time and manner required to maintain sustainability.

Having clear expectations on both the organization and the employee’s part as to the terms and conditions of the
alternative work arrangement can prevent ineffective or damaging results.

 Flexible time
 This can be establishing core hours, then allowing employees to work earlier in the day or later in
the day
 Example: Core hours are 9 to 2. Person A starts at 7 and works till 3, Person B works from
9 to 5.
 Seasonal hours can be established in a variety of terms, just as flexible hours/schedule of part-time
employees. Example: hiring a part-time person to work 4 days a week or a .8. but they actually work full-time for
10 months a year, and then take a combination of their time vacation and .2 hours and take a month in the
summer and a month in the winter off work. They would continue to receive the .8 salary for 12 months a year.
 Compressed work week
 Allowing an employee to work their full number of hours in less days
 Example: Core hours are 40 hours per week, the employee works 4 – 10 hours days
instead of 5 – 8 hour days
 Job sharing
 Having 2 qualified employees share the duties and tasks of one position
 Both could work 2.5 days or alternative between 3 days one week and 2 the next.
 The advantage of job sharing is having 2 people who both know the role; the downside can be
having a communication gap between individuals doing the role
 Consider having an employee who is contemplating retirement job share with a more
junior employee with high potential…transition knowledge, skills and commitment.
 Job sharing
 Having 2 qualified employees share the duties and tasks of one position
 Both could work 2.5 days or alternative between 3 days one week and 2 the next.
 The advantage of job sharing is having 2 people who both know the role; the downside can be
having a communication gap between individuals doing the role
 Consider having an employee who is contemplating retirement job share with a more
junior employee with high potential…transition knowledge, skills and commitment.
 Telecommuting
 This is the practice of allowing an employee work from their home location instead of on your
 There are guidelines governing the considerations for this type of employment
 In the past ten years the number of people telecommuting has tripled with results indicating that
increased productivity and effectiveness were seen from this type of working arrangement.
 Regular part-time work
 Many people today are looking for meaningful work but on a part-time basis. A desire to balance
work and life priorities has increased exponentially over the past decade and employers who recognize the
contribution part-time employees can make, are leading their organizations forward
 Educational partnership
 Many employees are looking for opportunities to balance academic pursuits with employment
 Considering how you could structure a role for a person in the final stages of their education, could
result in an increased pool of potential employees, and employees who will be loyal to an organization that
provided with them practical experience and the ability to create a flexible schedule.
Regardless of whether you are developing an alternative work arrangement or increasing the flexibility of your benefit
program, it is important to understand what motivates employees and what culture you are building in your
organization. The better able you are to align the two together, the increased success you will have.

Next Section: Job evaluation (Internal equity)