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Lesson 2 Types of Compensation

There are two main types of compensation: direct and indirect. Direct compensation includes wages, salaries, bonuses, tips, commissions, and overtime pay. Indirect compensation includes health insurance, life insurance, and employee stipends. Direct compensation is money directly paid to employees, while indirect compensation does not directly involve paying wages but provides additional benefits. Understanding the different types of compensation is important for employers to create fair compensation packages for their employees.

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192 views

Lesson 2 Types of Compensation

There are two main types of compensation: direct and indirect. Direct compensation includes wages, salaries, bonuses, tips, commissions, and overtime pay. Indirect compensation includes health insurance, life insurance, and employee stipends. Direct compensation is money directly paid to employees, while indirect compensation does not directly involve paying wages but provides additional benefits. Understanding the different types of compensation is important for employers to create fair compensation packages for their employees.

Uploaded by

ag clothing
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Types of

Compensatio
n
If organizations want to reward their
employees fairly, they need to understand different
types of compensation and how to create attractive
compensation packages for their employees. Let’s
dive into different types of compensation
employers can offer.
What is
compensation?
Compensation refers to any payment given
by an employer to an employee during their
period of employment. In return, the employee
will provide their time, labor, and skills.
What is
compensation?
Compensation is also sometimes
referred to as remuneration.
Tpyes of
• Compensation
Base Pay.
• Commissions.
• Overtime Pay.
• Bonuses, Profit Sharing, Merit Pay.
• Stock Options.
• Travel/Meal/Housing Allowance.
• Benefits
There are two main types of
compensation:
• Direct compensation (financial)
• Indirect compensation (financial &
non-financial)
There are two main types of
compensation:
Direct compensation is the money directly
paid to employees in exchange for their labor.
Indirect compensation is a type of payment to
an employee that doesn't involve directly paying
a wage or salary.
There are two main types of
compensation:
Direct compensation includes wages,
salaries, bonuses, tips and commissions.
Indirect compensation include offering
your employees health insurance, life insurance,
or employee stipends (also called fringe
benefits).
Direct compensation include:

A wage is payment made by an employer to


an employee for work done in a specific period
of time.
Direct compensation include:

A salary is the money that someone is


paid each month by their employer.
Direct compensation include:

Bonus an amount of money added to


wages on a seasonal basis, especially as a
reward for good performance.
Direct compensation include:
Tips are discretionary (optional or extra)
payments determined by a customer that employees
receive from customers. Tips include: Cash tips
received directly from customers.
Direct compensation include:
Commission refers to the compensation paid to
an employee after completing a task, which is,
often, selling a certain number of products or
services.
Direct compensation include:
Overtime pay is the amount of overtime paid
to each employee in a pay period. Overtime pay
is calculated: Hourly pay rate x 1.5 x overtime
hours worked.
Direct compensation include:
Merit pay refers to a performance-related pay
which provides bonuses or base pay increases for
employees who hit the target or perform their jobs
effectively, according to measurable criteria over a
predetermined period of time.
Direct compensation include:
Incentive pay is financial reward for
performance rather than pay for the number of
hours worked.
Incentive pay is a form of compensation
employers choose to offer employees as a way to
motivate high performance.
Types of Incentive Payment
• Annual bonus: Defined as an annual payment that's
generally based on a worker's annual salary. ...
• Signing bonus: A one-time reward given when a
candidate commits to working for a company.
• Spot bonus: A one-time cash payout that rewards
past work.
Indirect compensation include:

Health insurance is an agreement in which an


insurance company agrees to pay for some or all of
your medical expenses in exchange for a monthly
premium payment.
Indirect compensation include:

Life insurance is a type of insurance that


pays out a sum of money after the death of the
insured or a benefit on a specified date.
Indirect compensation include:

Employee stipend refers to a form of


compensation that is paid to certain individuals
for services rendered, other work, or while they
receive training.
Thank you!

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