Consists of all forms of payment or rewards given to employees. Direct Financial Payments are wages, salaries, incentives, commissions, and bonuses.
Indirect Payments are financial benefits such as employer-paid insurance and vacations.
There are two basis for making Direct Financial Payments. They are time and performance. Most employers today pay on the basis of time whether it is on an hourly, weekly, monthly or yearly basis. Some manufacturing companies on the other hand may pay on the basis of performance, for instance if an employee produces ten items he may get paid based on the ten items he produced. There are many forms of compensation.