The total compensation offered to an employee may be broken down into direct, indirect and intangible compensation. Direct compensation involves monetary payments to employees for time worked or results obtained. Indirect compensation involves expenditures made by an employer on behalf of all employees and are typically called "fringe benefits". Intangible compensation involves non-monetary rewards.
Direct Compensation Components
- Base salary
- Premium payments (overtime, shift differentials, longevity pay.)
- Contingent programs (incentive plans or achievement award, merit pay)
Indirect Compensation Components
- Protection programs (Social Security, Worker's Compensation, Unemployment Compensation, pension plans, health, dental, vision, life, accidental death and long term disability insurance.)
- Paid Leave (vacations, holidays, jury duty, sick leave, military leave.)