Compensation

Companies are expected to pay their employees the minimum wage for normal working hours and a premium rate for overtime, according to local laws and regulations.

What is compensation?

Compensation (i.e. in the form of wages and salaries) is the remuneration in cash and in kind paid to employees, as a rule at regular intervals, for the time worked or work done, together with remuneration for the time not worked, such as annual vacation and other types of paid leaves and holidays. [1]

Why this matters?

Companies are expected to pay their employees the minimum wage for normal working hours and a premium rate for overtime, according to local laws and regulations.

The minimum wage is defined by laws and regulations in many countries. For example:

  • the India Minimum Wages Act 1948 [2]
  • the New Jersey State Wage and Hour Law [3]

How – procedures to ensure fair compensation

  • Policy. Establish a company policy that ensures compliance with local laws and regulations (and collective agreements if applicable) on compensation.
  • Training. All employees should be made aware of the company’s compensation policy and provided with basic training to understand their salary. In addition, management and employees involved in the payroll function should be regularly trained in the latest laws and regulations for compensation (both global and local).

Example of a compensation policy

“[Company name] observes the statutory minimum wage set by the government of the country in which it has a local operation. Where this is not sufficient to meet basic needs, [Company name] strives to compensate employees with remuneration that ensures an adequate standard of living. [Company name] maintains a remuneration policy that emphasises the internal equity and external comparability within a defined job market. The key elements within [Company name]’s pay and reward policy are: pay for responsibility and pay for performance.”

Maersk Policy

Click here to read the A.P. Moller - Maersk Global Labour Principles (Chapter 7- Compensation). 

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