Direct and indirect compensation are two distinct components of an employee's overall compensation package. Direct compensation refers to the monetary rewards directly received by an employee, including their base salary, bonuses, and any performance-based incentives. On the other hand, indirect compensation, often referred to as benefits, encompasses non-monetary perks provided to employees, such as health insurance, retirement plans, vacation days, and other fringe benefits. While direct compensation is tangible and directly contributes to an employee's take-home pay, indirect compensation focuses on enhancing the overall well-being and work-life balance of the employee.