Quick Answer: What Are The Three Types Of Compensation?

What are the different types of compensation?

Types of compensation include:Base pay (hourly or salary wages)Sales commission.Overtime wages.Tip income.Bonus pay.Recognition or merit pay.Benefits (insurances, standard vacation policy, retirement)Stock options.More items…•.

What are the four types of compensation?

The Four Major Types of Direct Compensation: Hourly, Salary, Commission, Bonuses. When asking about compensation, most people want to know about direct compensation, particularly base pay and variable pay. The four major types of direct compensation are hourly wages, salary, commission and bonuses.

What is a typical compensation package?

It can include an annual salary or hourly wages combined with bonus payments, benefits, and incentives. These could include group health care coverage, retirement contributions, and short-term disability insurance. A total compensation package usually includes several of these components.

What is considered officer compensation?

When corporate officers perform services for the corporation, and receive or are entitled to receive payments, their compensation is generally considered wages. Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to shareholders.

What is the difference between compensation and reward?

Compensation would include rewards when you offer monetary payment such as incentives, various bonuses and performance bonus. Organisations reward their staff when they attain the goals or targets that they have jointly set with the employees. Rewards can be non-monetary such as a paid vacation for two.

What is the compensation plan?

A compensation plan refers to all the components of a compensation package (wages, salaries, and benefits), the manner in which it will be paid, and for what purpose employees receive bonuses, salary increases, and incentives. Benefits of having a Compensation Plan.

When should compensation be used?

Compensation is a tool used by management for a variety of purposes to further the existance of the company. Compensation may be adjusted according the the business needs, goals, and available resources. Compensation may be used to: recruit and retain qualified employees.

What is another word for compensation?

Synonyms & Antonyms of compensationdamages,indemnification,indemnity,quittance,recompense,recoupment,redress,remuneration,More items…

What is an example of direct compensation?

Direct compensation includes wages, salaries, bonuses, tips and commissions. … Alternatively, she may opt to increase variable pay, which is pay that has to be earned by performing to some standard. For example, she may offer performance pay for each employee that meets his or her quarterly performance goals.

What are the two types of compensation?

Gary Dessler and Biju Varkkey have preferred to keep various forms of compensation into two main categories—direct financial payments such as wages, salaries, incentives, commission and bonuses, and indirect financial payments such as employer-paid insurance and leave travel concessions.

What are the components of compensation?

Components of employee compensationSalary and wages. In a compensation package, these typically make up the single largest component. … Bonuses. … Federal/state pay requirements. … Long-term incentives. … Health insurance. … Life and/or disability insurance. … Retirement plan. … Time off.More items…•

What is the best form of compensation?

Pay for performance is by far one of the most popular forms of compensation that employees can offer their workforce.

What are the types of compensation management?

Types of CompensationsDirect Compensation. It is naturally made up of salary payments and health benefits. … Indirect Compensation. It focuses on the personal encouragements of each individual to work. … Wages and Salary. … Allowances. … Incentives and Performance Based Pay. … Fringe Benefits/Perquisites.

How is compensation determined?

More generally, salary is determined by factors like title, skill set, level, location and more. Companies often approach individual compensation plans based on the candidate, too.