Fundamentals of Human Resource Management, 5/e

The Basic Factors in Determining Pay Rates

Learning Objective 1

• List the basic factors determining pay rates.

Employee compensation includes all forms of pay going to employees and ­arising from their employment. It has two main components, direct financial payments (wages, salaries, incentives, commissions, and bonuses) and indirect financial ­payments (financial benefits like employer-paid insurance and vacations).

employee compensation

All forms of pay or rewards going to employees and arising from their employment.

direct financial payments

Pay in the form of wages, salaries, incentives, commissions, and bonuses.

indirect financial payments

Pay in the form of financial benefits such as insurance.

In turn, there are two basic ways ...