Compensation: The Five Types You Should Understand

| December 2, 2016 | 0 Comments

Compensation simply refers to the amount of money an employer pays to an employee for a particular reason. It could be related to the work they do, it could be an added benefit, or it could be for a particular reason. These can be broken down into five main categories. And whether you’re an employer or employee, you should understand them all.

1. Salary

For the basic work you do, you should be paid a salary. This is what every worker and employee gets for their work. Of course, there are laws and rights in place to protect pay. This is known as the minimum wage, and you should understand how much you are entitled to. The amount will depend on where you live and how old you are. Sometimes, young people are not entitled to as high a minimum wage as people above a particular age, so be aware of that.

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2. Commission

Sometimes, pay is linked to commission. This might be on top of the basic salary that a company pays its employees. The reason why companies choose to pay people in this way is that it encourages them to work harder. That’s because the quality of their work is directly linked to how much they get paid. This kind of pay structure is more common in certain industries than others. For example, people who do sales jobs are much more likely to be paid in this way.

3. Bonus Pay

On top other forms of pay, most people will also be paid bonuses. This might be a standard end of year bonus that all employees get given. Or it might be more closely linked to an employee’s individual performance throughout the year. By rewarding employees with additional pay, it’s hoped that they will work harder for the business and stay loyal to it. Every business has to keep hold of its best and brightest members of staff.

4. Worker’s Compensation

Worker’s compensation is different from the other forms of compensation in that it is only paid out when something goes wrong. There are many reasons for it being paid out. For example, someone might get hurt while doing their job. Or they might be subject to bullying or discrimination. Getting help from places like Orzoff Law Offices can help you to get this kind of compensation if you think you’re entitled to it. It’s something that you should definitely pursue if something bad has happened to you at work.

5. Stock Options

Some companies choose to make their employees shareholders in the business. This can be a good reason for many different reasons. What it mainly comes down to is making employees more invested in the company. When they hold stocks and shares in the business, they will earn more money when the business does well. Therefore, it will be in their best interests to push the business on and do everything in their power to make sure that it performs well.

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