LESSON: 1 BUSINESS ETHICS - Is a type of payment to an employee

that doesn’t involve directly paying a

wage or salary.
TYPES OF COMPENSATION - Indirect Compensation include
offering your employees health
If organization want to reward their
insurance, life insurance, or
employees fairly, they need to understand
employee stipends (also called fringe
different types of compensation and how to
benefits).
create attractive compensation packages for
their employees. Let’s dive into different Direct compensation include:
types of compensation employers can offer.
a. A wage is a payment made by an
WHAT IS COMPENSATION? employer to an employee for work
done in a specific period of time.
- Compensation refers to any payment
b. A salary is the money that someone
given by an employer to an
is paid each month by their
employee during their period of
employer.
employment. In return, the employee
c. Bonus an amount of money added to
will provide their time, labor, and
wages on a seasonal basis, especially
skills.
as a reward for good performance.
- Compensation is also referred to as
d. Tips are discretionary (option or
remuneration.
extra) payments determined by a
TYPES OF COMPENSATION customers. Tips include: Cash tips
received directly from customers.
 Base Pay.
e. Commissions refers to the
 Commissions.
compensation paid to an employee
 Overtime Pay.
after completing a task, which is
 Bonuses, Profit Sharing, Merit Pay.
often selling a certain number of
 Stock Options.
products or services.
 Travel/Meal/Housing Allowance.
f. Overtime pay is the amount of
 Benefits.
overtime paid to each employee in a
TWO MAIN TYPES OF COMPENSATION pay period. Overtime pay is
calculated, Hourly pay rate x 1.5 x
1. Direct Compensation (financial)
overtime hours worked.
- Is the money directly paid to
g. Merit pay refers to a performance-
employees in exchange of their
related pay which provides bonuses
labor.
or base pay increases for employees
- Direct compensation includes wages,
who hit the target or perform their
salaries, bonuses, tips, and
jobs effectively, according to
commissions.
measurable criteria over a
2. Indirect Compensation (financial &
predetermined period of time.
non-financial)
 h. Incentive pay is a financial reward
for performance rather than pay for
the number of hours worked.
- Incentive pay is a form of
compensation employers choose to
offer employees as a way to motivate
high performance.
Types of Incentive Payment
 ANNUAL BONUS: Defined as an
annual payment that’s generally
based on a worker’s annual salary.
 SIGNING BONUS: A one-time
reward given when a candidate
commits to working for a company.
 SPOT BONUS: A one-time cash
payout that rewards past work.
INDIRECT COMPENSATION
INCLUDE:
Health Insurance is an agreement in which
insurance company agrees to pay for some
or all of your medical expenses in exchange
for a monthly premium payment.
Life Insurance is a type of insurance that
pays out a sum of money after the death of
the insured or a benefit on a specified date.
Employee Stipend refers to a form of
compensation that is paid to certain
individuals for services rendered, other
work, or while they receive training.