What is compensation and how is it determined?
- Compensation is defined as the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required. Essentially, it's a combination of the value of your pay, vacation, bonuses, health insurance, and any other perk you may receive, such as free lunches, free events, and parking.
What are the three types of compensation?
- Straight Salary Compensation. Straight salary refers to the basic salaries and wage given to the worker. ...
- Salary plus Commission. This is one of the most reliable types of compensation plans. ...
- Commission Only. ...
- Territory Volume Compensation Plans. ...
- Profit Margin/Revenue Based Compensation Plans. ...
- Residual Commission. ...
How is compensation determined for an employee?
- New hires. In a small to medium-sized business,new hire compensation is usually determined on a case-by-case basis.
- Market data. Once you’ve evaluated your position,you can start reviewing market data. ...
- Compensation history. ...
- Compensation strategy. ...
- Equal pay for equal work. ...
What is considered compensation?
- Compensation packages refer to the combination of the salary and various benefits an employer offers you in exchange for employment. Compensation packages tend to vary by employer. Therefore, though they include a basic salary, the fringe benefits they include often depend on the company and the specific position.
Typically, compensation refers to monetary payment given to an individual in exchange for their services. In the workplace, compensation is what is earned by employees. It includes salary or wages in addition to commission and any incentives or perks that come with the given employee's position.