What Is Compensation?
As Figure 10.1 shows, an employee’s total compensation has three components. The relative proportion of each (known as the pay mix) varies extensively by firm.1 In most firms the first and largest element of total compensation is base compensation , the fixed pay an employee receives on a regular basis, either in the form of a salary (for example, a weekly or monthly paycheck) or as an hourly wage. The second component of total compensation is pay incentives , programs designed to reward employees for good performance. These incentives come in many forms (including bonuses and profit sharing) and are the focus of Chapter 11 . The last component of total compensation is benefits, sometimes called indirect compensation.
Get Managing Human Resources, Eight Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
