10 Significant Compensable Factors in a Job

compensable factors

Whenever you apply for a job, you’ll be looking at several things. The two major factors that we all look at: the pay and the position. Obviously, both go hand-in-hand meaning, the pay is always commensurate with the position at your workplace.

However, there’re different factors that go into calculation of our pay. These are known as compensable factors. 

If you’re applying for a new job, it’s important to understand about these 10 significant compensable factors.

That can help you get a proper position and superb pay so that you don’t actually need to invest your time in negotiating your salary.

Therefore, I will start by explaining what exactly does the term compensable factors imply and later discuss how it impacts your pay and position.

Compensable Factors Definition

There’re quite a lot of definitions of the term compensable factor. 

However, this is exactly what the Economic Research Institute says: “Any factor used to provide a basis for judging job value in a job evaluation scheme.

Typically, compensable factors include effort, skill needed in order to perform a job, and responsibility. These factors are used to establish job worth when creating a job hierarchy in order to set a wage structure.”

In simpler terms, it means the various factors that a company or employer takes into consideration while making you a job offer.

There’re 10 such compensable factors. An employer might consider all or at least some of these factors while hiring someone to any particular position at that organization.

Also, if you’re a Human Resources Manager, you could use these 10 significant compensable factors in a job to fix salaries and positions of prospective hires.

10 Significant Compensable Factors

examples of compensable factors

Generally, these are the 10 significant compensable factors that would go into deciding the pay and position of an employee.

These compensable factors are applicable to both- new hires as well as existing staff members.

All these terms used for examples of compensable factors are self-explanatory. 

1. Experience

Experience is one major factor that goes as a compensable factor. This means the overall work experience and the skills an employee acquires through such experience.

Now experience and skills are actually two different things. While experience is the overall number of years a person does a job at a specific role, skills is the capability to do work at that position.

2. Education

Education as a compensable factor means the educational degree, certificates from any additional courses and skills learned at the job, if an employee was previously employed or is currently working at some job.

Basically, it considers whether the jobseeker is qualified academically and through work and other courses, for a specific job.

3. Responsibilities

An employer also takes responsibilities that a position or role at the organization would involve. Normally, greater the responsibilities, higher the position and greater the pay.

However, the employer can adapt the work responsibilities to suit a particular role and assign some part of these functions to another employee, if necessary.

4. Work Complexity

Work complexity means the nature of your work and ease of performing your tasks. If there’re several complex tasks that any role entails, the pay and position would differ accordingly.

HR managers take this into account while formulating pay scales for any position. That’s the reason managers and senior staff get paid more: because their work is more complex.

5. Requirement of Supervision

compensable factor

Requirement of supervision means do you need to work or report to someone that would give directions and check the quality of tasks you complete. If so, the pay would dip accordingly.

That’s because the HR department also has to consider the time a senior staff gives you during the course of the work and the cost of such supervision.

6. Supervising Position

If you’re hiring or joining at a supervisory position, you’ll require certain skills. And supervisory positions involve complex tasks too.

This means, your pay goes up or the HR manager has to fix a salary that’s commensurate with the level of supervision that an employee needs to exert on juniors in the team.

7. Impact of Error

It’s obvious that an error by any staff can cost the employer dearly. However, the impact of an error depends according to your role.

Therefore, the HR manager has to calculate how much would an error by an employee cost the organization in terms of real money and damage if any, that it would do to an organization. 

8. Working Conditions

Some companies pay “offshore allowance,” or “hardship allowance” or similar such perks if an employee is working abroad or at a location where the work conditions could be unfavorable.

And also, HR managers consider favorable work conditions that’re given to an employee. This decides the pay and position too. Generally, those opting to work away from their home cities or company headquarters would get such allowances.

9. Physical, Mental and Visual Impact

compensable factors examples

This compensable factor takes into consideration the physical effort, mental stress and impact on eyesight if any, while calculating the pay for any position.

For example, prolonged use of a computer screen or radar screen also has an impact on the eyesight. And lots of such jobs are indeed mentally stressful, though there might be lower physical activity.

10. Confidentiality

Confidentiality as a compensable factor means whether an employee would have access to any confidential data or information about the organization. Generally, this compensable factor comes into play when any organization is hiring a person at a very senior position.

In such cases, the person would have access to a lot of confidential data. And companies pay to ensure that such information isn’t leaked out to any rivals.

In Conclusion

The above 10 compensable factors are utilized either fully or partly by Human Resources and Admin manager while deciding the position and pay scales of an existing or prospective employee.

This ensures that the employee is well cared for and would perform to the best of their abilities. Compensable factors are also part of the Cost to Company (CTC) calculations while fixing pay and other perks for an employee or prospective hire.

Therefore, it’s important for both employees and HR managers to know these compensable factors.

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