Compensation is to compensate (financially or otherwise) the employees, workers, or contractors for their use of services by an employer or organization. It includes an employee's standard salary or per hour wage and other earnings like overtime hours pay, bonus pay, pension, health insurance, stock options, and other non monetary perks. Several kinds of compensation are used by businesses to hire, motivate and retain employees. Also, compensation is set based on rules and regulations of the state(s), for instance, minimum wage, equal employment opportunity, overtime wages, and taxes.
Types of Compensation include:
Direct Compensation includes financial befits in the form of hourly payments, monthly pays, bonuses; commissions.
Indirect Compensation involves both financial and non financial benefits. Why it is called indirect while it is monetary is the reason that the monetary benefits are not in the form of cash or checks directly, rather they are equity arrangements, stock holding, and the benefits like additional covers of insurances. The indirect non monetary compensation includes certificates of appreciation, employee of the month badges, leaves, training and development opportunities, meals; and company vehicles, etc.