Published on September 6th, 2013 | by jp


Compensation For Employees Or Worker’s Compensation? Which Is Which?

There are times when confusion really hits us—such as when we encounter the terms, compensation for employees and worker’s compensation. Which is which between these two? It is significant for us to know the difference because as simple as it may seem, this knowledge will definitely come handy. What if someone asks us,”I got injured at work, what am I entitled for: Worker’s compensation or compensation for employees?” The similarity between the two is definitely uncanny. But of course, there is at least something that differentiates one from the other.

Compensation for employees is actually a statistical term used in national accounts, balance of payments statistics and sometimes in corporate accounts as well. It basically refers to the total gross or pre-tax wages which are paid by employers to employees for work done in a certain period, such as a quarter or a year.

The accounting for compensation for employees through an accrual basis; because it is measured by the value of the remuneration in cash or in kind which an employee becomes unrestricted to receive from an employer in respect of work done, during the relevant accounting period – irrelevant of whether paid in advance, concurrently, or in arrears of the work itself.

The inclusion in compensation for employees varies in different countries. The reason for this is the way in which workers are compensated for their labor may somewhat be different in different types of economies. Likewise, systems of social insurance also differ between countries. There are some countries that have little social insurance and one has to keep this in mind when comparing CE magnitudes for different countries.

It is also important to know that a compensation system has to be aligned to the mission, vision, business strategy and organizational structure of a company. This way, the compensation plan can be included in the company’s budget in an efficient way without compromising the achievement of the company goals. On the other hand, businesses within the same organization also tend to have different competitive conditions, acquire different business strategies, and design compensation strategies.

Compensation Package

A basic compensation package includes three components:

  1. Base compensation- the amount which is the basis for all the benefits of the employee
  2. Rewarding incentives- which are given when an employee is able to reach a specific target, or has closed an important deal
  3. Indirect compensation- in the form of benefits such as allowances 

Worker’s Compensation

On the other hand, worker’s compensation is the compensation given to employees who suffered injuries while in the course of their work. It is somehow a form of insurance, rather than remuneration as such because it pays for the medical bills like a health insurance and it also assists in the funeral expenses such as that of a life insurance. It also aims to provide for the damages and loss of the employees who were hurt during the course of their work.

So, to answer the question, worker’s compensation is what should be filed for when claiming for an injury while at work.

Author Bio 

Jenifer is a Law Graduate working as a consultant offering professional services like Consultation on Labor Law, fair HR practises to big organization. She is quite inspired by Mitchell Sexner, leading workers compensation Attorney. Find out More here

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