After all, for employees, compensation is the equivalent not to how they are paid but, ultimately, to how they are valued. It s easy to think dollars per hour when thinking about compensation. Successful compensation packages, however, are more like a total rewards system, containing non-monetary, direct and indirect elements. Non-Monetary Compensation can include any benefit an employee receives from an employer or job that does not involve tangible value. This includes career and social rewards such as job security, flexible hours and opportunity for growth, praise and recognition, task enjoyment and friendships.
Direct compensation is an employee s base wage.
It can be an annual salary, hourly wage or any performance based pay that an employee receives, such as profit sharing bonuses. Indirect Compensation is far more varied, including everything from legally required public protection programs such as Social Security to health insurance, retirement programs, paid leave, child care or housing. Employers have a wide variety of compensation elements from which to choose. By combining many of these compensation alternatives, progressive managers can create compensation packages that are as individual as the employees who receive them. The general consensus of recent studies is that pay should be tied to performance to be effective.