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The Right Way to Use Compensation

The Right Way to Use Compensation

Recruitment and compensation are the lifeblood of any organization and they must be managed to maintain organizational goals. For many working professionals, compensation is a touchy subject that leaves them feeling unappreciated, under compensated, or even exploited.

It can be challenging to strike a balance between what an employee needs and what the company can afford to offer, but this post will explain how to use compensation the right way according to educator Jonathan Osler.

In order to use compensation the right way, it’s important to know what it is in the first place. It’s a measure of all the money a business gives in total for its workers’ labor that they have provided. This includes wages, bonuses, and benefits.

Types of Compensations

But that’s not all. There are different types of compensation: Fixed, variable and discretionary.

Fixed compensation is just that: fixed. This means it’s consistent, stable, and secure. It doesn’t change. It’s a kind of compensation received as a salary.

Variable is anything that varies. For example, a commission is variable because it can increase or decrease based on something else, like how much is sold or how many people are recruited to the company from the team of salespeople.

Discretionary compensation is anything that can be increased or decreased. This may seem like a great deal, but it’s not always the best choice. The reason for this is that it can’t be controlled when the compensation will increase or decrease. That’s because it will depend on the performance, sales goals, or the team’s performance.

Compensation is basically wages and benefits put together. Employees start getting it right away, and they’ll continue to get it after they leave the job if they’re salaried employees. Salaried employees get their salary every two weeks, on a payday, or once a month.

Investing Compensation

It’s wise to invest some of this money through overtime so that it earns more per hour than someone who works regular hours but gets the same salary because he or she works more hours than usual. It can also be invested in training. It can be used for training to learn new skills or applied to enhance existing skills.

The manager may have implemented something called a training budget. This is money set aside so that workers can get training on anything that will help them do their job better.

According to Jonathan Osler, the best way to use compensation is to invest it so it can get the best return. For hourly workers, this is easy. Some companies offer 401(k) plans, which are works like Individual Retirement Accounts. These types of plans usually come with a matching amount that employers contribute to an employee’s account if the employee makes more than $5,000 a year.

If these aren’t feasible opportunities, Osler suggests using the money and turning it into a business investment. It can be used to create value and generate income in the future.

Ways to Invest Compensation

There are a variety of ways to do this. For example, it can be used to buy real estate, stocks, or even a franchise business. It can be invested to enhance skills set by going back to school and getting a degree, or getting on-the-job training or certification.

In addition to investing compensation, make sure it is spent wisely, too. This money is for future expenses like rent, health insurance, and even groceries.