What Is a Compensable Factor?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 24 October 2019
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A compensable factor is any job element that is considered essential to properly evaluating the amount of pay that should be rendered as part of employment. The range of factors that may be used to set wage and pay rates will vary, with some being unique to the task of evaluating hourly wages, others to setting salaries, and still others for work that is compensated on a task by task basis. Along with the actual units produced by the work effort, a compensable factor can also be a job element such as the skill set of the employee, the efficiency of the employee, and even the conditions under which the employee must labor in order to produce the desired results.


With the setting of an hourly wage, a compensable factor that usually has some impact on the rate of compensation is the complexity of the tasks that the employee performs as part of his or her employment duties. Tasks that are classed as calling for unskilled labor, or that are highly repetitious in nature may come with a lower rate of pay. To some degree, the efficiency of the employee in carrying out those tasks may result in some increase in compensation, such as a merit raise or a raise based on the longevity of the person’s employment with the company. While these considerations will have some influence on the wages earned, the type of work involved will usually provide the crucial compensable factor for assembly line work and similar types of jobs.

When it comes to salaried positions, a compensable factor of great importance is usually the skill set that the employee brings to the workplace. A combination of formal education and experience will often result in receiving a higher salary as well as additional benefits in the overall compensation package. This is particularly true if the past experience of the employee includes a number of successes in the business world, since this creates a perception that those successes can be replicated to the advantage of the new employer.

Even employment that is based on piece work will require the consideration of a compensable factor or two. With this application, the focus is often on how quickly the employee can turn out finished units that are of acceptable quality. For example, an employee who is able to produce ten units per production hour versus one who can produce seven will likely be considered more valuable to the operation, since more finished units means more opportunity to make sales and generate profit. Typically, companies offering piece work will consider speed to be a compensable factor that influences the pay offered per finished unit, setting that rate of pay at a point that is considered equitable by the employee while still allowing the employer to realize a decent level of profit from each unit sold.


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Post 1

A good number of those factors are going straight out the window these days. What is more common in this down economy is to combine jobs -- give an employee a modest raise to handle his or her duties and take on another job. Through that method, a lot of organizations are cutting people while dumping more work on the employees remaining.

The threat is obvious -- "put up with this or you, too, will be unemployed."

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