FORMS OF

COMPENSATION
COMPENSATION
 Compensation is the total of all rewards
provided to employees in return for their work.
FORMS OF PAY
CASH COMPENSATION/DIRECT FINANCIAL COMPENSATION

 Base wages
 Foundation of pay packet
 Pay for work performs.
 Determined by value of work, skill or
experience
 Stay stable over a long period of time means
don’t change frequently
CONT.…
 Merit pay / cost of living adjustment
 Both are periodic adjustments to base wages
 Adjustments are made based on changes in
competitors pay for same work/ changes in
cost of living / changes in experiences or
skills.
 Merit Pay
 Pay increases by recognizing past work
performances of employees.
 The amount increases might vary person to
person.
 Cost of living Adjustment
 Adjustments are found on changes in prices as
recorded by the consumer price index (CPI).
 Give the same increase to everyone regardless of
performance
 Incentives
 Pay increases based on work performance.
 Do not increases base pay, must re- earned
 Size of potential payments will be known
beforehand.
 Incentives influence future behaviour
 Long Term Incentives
Example: Stock ownership
 Short Term Incentives
Example: Sales commission
 Indirect financial compensation/ Benefits
 Income Protection
 Medical insurance, life insurance, retirement
money, saving plans etc…
 Help to protect from financial risk inherent in
daily life.
 Work/life Balance
 Important to better integrate their professional
and personal responsibilities
 Vacations, flexible work arrangements,
financial planning, referrals for child care.
 Allowances
 Is given for anything that is short in supply
 Housing, transportation allowance etc…
 Relational Returns from Work
• Recognition and status
• Challenging work
• Employment Security