Compensation can either be in financial and non-financial terms. In economic terms it alludes to remittance of funds to employees, i.e. salaries and wages vis-à-vis labor offered. The end goal is employee retention; efforts provided to maintain a business environment focusing on them remaining within the firm to render their services. The goal being enhancing utility regarding employee satisfaction and reduction of substantial costs aimed at profit-making. Compensation and employee retention construe each other. The linkage between them is that a reasonable compensation strategy enhances the retention of employees. Salary is a significant factor that determines employee choice, low pay and lack of incentives for an appraisal can inform a laborer to seek employment elsewhere. Subsequently, compensation also influences a decision, a laborer only stays put in as far as the employer is willing to measure his/her needs. Benefits in a business environment provide an ideal working environment that enhances employee retention. Employees feel appreciated and recognized; consequently, they double their efforts and comfortably stay rooted in the organization.

Total Rewards Philosophy illuminates “an organization’s vision, strategy, and values into a framework that guides the design and decision making of base salary, short and long-term incentives, recognition and benefits.” Compensation and benefits foremost differ in their structure, i.e. the former can be submitted in financial and non-financial aspects whereas the latter can only be construed in kind. In nature, compensation is direct while benefits indirect. Fundamentally, benefits allude to non-monetary earned by employees for services rendered whereas compensation is the remuneration received that is either monetary or non-financial.  Understanding the motivational factor of employers sharpens the development of strategies that enhance employee retention. Organizations provide monetary and non-monetary rewards to their employees in a bid to motivate them in the act of goodwill thereby retain their services.

 
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