Components of Compensation – What Makes Up Total Compensation
Compensation components are the individual monetary and non-monetary elements of what a person receives for their work. In addition to base pay, they may include performance-based pay, bonuses, commissions, allowances, or benefits. Breaking down compensation into its components helps identify where disparities in pay arise.
What to Include
Determine in advance which components and which time periods should be included in the summary. For benefits, note the valuation method so that the same benefit has the same value when compared.
What to Examine Separately
For variable compensation, distinguish between the possibility of receiving a bonus, the rules for calculating it, and the amount actually paid. Each of these factors may differ between two people.
Same Base, Different Commissions
Two salespeople have the same quarterly base of 120,000 CZK. One receives a commission of 30,000 CZK and the other 12,000 CZK. The entire difference of 18,000 Kč stems from commissions. When analyzing this, it’s therefore worth comparing commission rates, assigned portfolios, and executed trades.
How should missing data be handled?
Enter a zero where you know for certain that the person received nothing. An undetermined bonus amount should remain marked as missing data; otherwise, it may lower the average for the entire group.
The section on compensation standardization explains how to convert selected components into a common hourly rate. You can also use the amounts prepared in this way to calculate the gender pay gap.
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In which component does the difference arise?
Take a look at the SmartFP example to see how bonuses are broken down by category. Together, we’ll go over what you can glean from the overview and what questions to ask the payroll department.
