COMPENSATION
DEFINITION: Amount of money and/or benefits a company pays to its employees
TYPES OF COMPENSATION
HOURLY WAGES Used for many part-time workers Minimum wage is the lowest hourly wage an employer can pay an employee Overtime can be paid for working more than regular hours or on holidays
SALARY A fixed amount of money that employees receive on a regular schedule such as weekly, monthly, or bi-weekly This is often stated as a yearly amount It does not specify how many hours employees have to work Employees are expected to complete assigned tasks No overtime is paid
SALARY PLUS COMMISSION Often found in retail jobs, such as sales Employers often pay a percentage of the employee’s sales This is in addition to the employee’s base salary This works as an incentive to make the employee work harder
COMMISSION The employee is paid straight on commission This is often used for people who sell high priced items such as cars, houses, or insurance
INCENTIVE BONUS Many businesses offer employees a bonus or reward for excellent performance This is sometimes called variable pay Companies that set goals often reward employees with cash, trips, cars, or something else of value
PERFORMANCE-BASED PAY Performance-based pay is calculated on the amount of a particular product an employee can make This is often called piecework. This form of compensation is often used in the clothing industry. It rewards speed and skill However, it often leads to abuses such as sweatshops It also allows people to work at home
FEE FOR SERVICE Often used in the construction, catering, and cleaning businesses The business estimates how much the job will cost and then builds in the profit A written contract is signed to prevent misunderstandings
ROYALTY AND LICENSING FEES This type of compensation is used when you write a book, record a song, or have an idea you can sell
STOCK OPTIONS Used to attract outstanding employees The employee has the opportunity to purchase company shares at lower than the market price The employees benefit because they can purchase the company’s stock at a lower price for a given period of time, even if the stock price increases over that time