Definition:

Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an
employer in return for work performed as required.
Compensation is based on:
market research about the worth of similar jobs in the marketplace,

employee contributions and accomplishments,

the availability of employees with like skills in the marketplace,

the desire of the employer to attract and retain a particular employee for the value they are perceived to
add to the employment relationship, and
the profitability of the company or the funds available in a non-profit or public sector setting, and thus, the
ability of an employer to pay market-rate
Compensation also includes payments such as bonuses, profit sharing, overtime pay, recognition rewards and
checks, and sales commission. Compensation can also include non-monetary perks such as a company-paid
car, stock options in certain instances, company-paid housing, and other non-monetary, but taxable, income
items.
Perks are employee benefits , usually in addition tosalary and standard employee benefits. The word, perk or
perks, is a short form of the word perquisite which means incentives, bonuses, extras, or sweeteners. In use in
business, the term perks has come to mean benefits or extras above and beyond the normal comprehensive
benefits package.
Employers of choice provide a comprehensive employee benefits package to attract and retain employees. In
addition to a competitive salary, an employee benefits package is a standard and expected - part of an
employee total compensation package.
Smaller employers tend to offer fewer components in the employee benefits package and sometimes, no
benefits at all. But, the majority of large companies and virtually all public sector government employers
provide an extensive employee benefits package.
Small businesses that are growing and expanding need to plan a careful phase-in of employee benefits so that
as you grow, you continue to attract and retain the talent you need for further growth and expansion.
Employers can expand this employee benefits package, as resources allow.
With an almost endless variety of potential employee benefits that are listed in Are You Getting the Best
Benefits From Your Benefits? and wished for in What Employee Benefits Would You Love to Have or Offer?, an
employer can customize an employee benefits package to the needs and desires of its employees.
These are the components of an attractive employee benefits package. No laws require an employer to offer
these voluntary employee benefits.
Health Insurance Is the Foundation of a Comprehensive Employee Benefits Package
Health insurance is the foundation of a comprehensive employee benefits package. Health insurance is the
preferred employee benefit of the majority of people who work. Health insurance marks an employer as
an employer of choice when desirable candidates select job opportunities. If you can currently afford to offer
only one employee benefit, make that benefit health insurance for employees and their families.

Perks also refers to nonstandard benefits that are unusual or for which only a limited number of employees
are eligible. You will hear employees in the business world use the word perks in reference to any nonstandard
benefit, though this is not the usual reference
In organizations, perks are often viewed as an incentive or a form of gratitude that is offered to executive level
employees or employees with seniority or longevity something that sets the employee aside from the
average employee.
Perks also refer to employee benefits that are discretionary and optional on the part of an employer. Perks do
not necessarily involve a monetary cost to the employer. Perks may consist of privileges, rewards, or options.
Examples of Perks
The following are examples of perks of both the monetary type and perks that are available as a privilege.
Company supplied cars
Free lunches or beverages
Company logoed shirts, hats, and other merchandise supplied at low cost or no-cost

First choice of vacation schedule

First chance to work overtime
Professional association membership
Conference attendance
First chance for lateral moves or promotions
Job openings posted and filled internally before externally
Flexible schedules
Telecommuting opportunities
Office, larger office with window
Tuition reimbursement
Cafeteria benefits plan

Are your employee benefits giving you the payback you deserve in increased employee appreciation and
satisfaction? Chances are, your employee benefits are not. On average, organizations spend 41 cents for
employee benefits for every dollar of payroll. That's 29% of the total employeecompensation package.
Research reported in the journal, Personnel Psychology, suggests that employees only understand and
appreciate between 31 and 68% of the cost or market value of the employee benefits they receive. In fact, the
most recent data indicates that employers are spending 43% of total pay on types of employee benefits.
Employees undervalue their comprehensive set of employee benefits for many reasons including:
employers communicate the value of employee benefits poorly, the employees have little or no choice in
employee benefits packages or options, and the employees misunderstand the market value of their employee
benefits.
Maximize the Value of Employee Benefits Expenditures
Employers can overcome these factors by allowing employees to make choices about the types of
employee benefits and by providing lots of information. You can jump start the education process by
providingpaycheck inserts that detail your cost for each employee benefit. Other ways to get employees to
think about the value of their employee benefits include interactive computer quizzes, employee benefits fairs,
telephone hot lines, workplace posters and video tapes or television discussing employee benefits. Firms that
wish to maximize the value of their employee benefits expenditures need to survey their employees to ask
them the types of employee benefits that they value and how much they value each type. Employee benefits
surveys or focus groups are important first steps in understanding employee preferences for types of benefits.
Relevant questions about the desired types of employee benefits might include the following.
What types of employee benefits are most important to you?
If you could choose one new type of employee benefit, what would it be?
If you were given X dollars for employee benefits, how would you spend them?
Follow-up research about the cost of employee benefits that employees desire can help you determine
which programs will provide the most bang for the buck. On the basis of the data developed, you can
adapt your employee benefits offerings or provide choices about types of employee benefits that are
consistent with organizational objectives such as employee retention or performance.
Consider Types of Employee Benefits
The variety of employee benefits offered today is immense. Some employee benefits, such as health
insurance and retirement benefits, are almost institutionalized or expected in the United States.
However, other employee benefits are not - and these are the types of employee benefits that set
companies apart. Organizational values are often manifest in the types of employee benefits organizations
offer. Thus, the employee benefits help to establish an organization's positive reputation as an employer of
choice in the marketplace.
So, isn't it about time to reconsider the employee benefits package that your company offers? Following is
a long list of the types of employee benefits that are offered across hundreds of U.S. firms. The cost of these
employee benefits varies, as do employee and employer perceptions about the value the employee benefits
deliver.
The key for organizations looking for a competitive edge, through the types of employee benefits, they
offer, is to determine what employee benefits you can provide that are most valued and useful to your
employees. Hopefully, these employee benefits will approach a 1:1 cost to perceived benefit ratio.
Want to see a list of the types of employee benefits that your employees want and need? Here are the
employee benefits that employers need to offer to attract and retain superior employees.
Types of Employee Benefits
Following are samples of the employee benefits that are offered across many organizations. Use this list of
employee benefits to think creatively about your current employee benefits package. Are your employee
benefits giving you the competitive edge in attracting and keeping the best employees? Are your employee
benefits helping you to create a workplace in which employees are motivated, happy and productive?
If not, use this list to determine the types of employee benefits that you may want to consider providing.
You're in competition with the best employers for the best employees. These types of benefits will attract and
retain your best talent.

Bonus Options for Employee Benefits

Performance bonus
Attendance bonus
Longevity bonus or service award
Profit sharing
Discount stock purchase plans
Medical and Health Employee Benefits
On-site medical clinic
Medical care programs (HMO, health insurance)
Dental care programs (insurance)
Vision care programs (insurance)
Flexible spending accounts for healthcare costs
Employee assistance programs (EAPs)
Wellness programs
On-site fitness facilities
Fitness facility membership
$50 to take annual physical; $200 reward if vital signs are positive
Paid Time Off Employee Benefits
Sick leave
Well pay
Mental health days
Paid Personal Days
Holidays
Vacation
Bereavement leave
Ten paid hours a month for volunteer work
35 extra vacation days in 10th year and every 5th year thereafter
Personal or emergency business days or floating holidays
Paid sabbaticals
Professional association participation
Insurance Benefits for Employees
Short-term disability insurance
Long-term disability insurance
Life insurance
Mental health insurance
Travel accident insurance (when traveling on company business)
Insurances mentioned under "Medical and health"Retirement Benefits for Employees
Defined benefit pension
Defined contribution
Financial planning assistance
401(k)
Profit sharing
Discount stock purchase plans
Children and Family Employee Benefits
Free child care
On-site child care
Free elder care
Vouchers to help pay for child care
Information about cost and quality of day care
Discounts on day care
Flexible spending account for child care
Sick child care center (to cover when providers won't accept children)
Financial support for infertility treatments and/or adoption aid
Employee Benefits Related to Pets
On-site kennel service
Dog and cat grooming
Animal sitting for business travelers
Pet walking services
Bereavement period for the loss of pets
Pet insurance
Bring a pet to work day
Allowed to keep pets at work (an office cat)

Education and Development Employee Benefits

Tuition reimbursement or payment for seminars and classes
Educational assistance (interest-free loans for own or children's education)
Career planning and development
Scholarships for children of employees
Professional association meeting, conference or seminar expense
Concierge Services as an Employee Benefit
Car wash and oil change
Dry cleaning service
Maid service to clean home
Errands run
Food as Employee Benefits

ice cream, fruit, or other snacks

-home meals
-bar snacks at hotel (while on travel)
meals included in company-provided refreshments at company events
Clothes as Employee Benefits
Free uniforms or uniform cleaning
Free clothes for personal use (such as shirts, sweaters, jackets, hats)
Shoe repair
Safety shoes
Safety eyeglasses
Personal Care Employee Benefits
Beautician on site
$5 haircuts
Free on-site massages
Nap time during the workday
Discounts for Employees as Benefits
Leased automobiles
Life insurance
Discounts (up to 50%) of closing costs in the purchase of a new home
Clothing
Transit Employee Benefits
Van-pool programs
Company car
Free or subsidized mass-transit passes
Free parking (car or bicycle)
Free taxi rides home
First-class travel
Free ride in jump seat of company planes
Free airline passes
Keep frequent flyer miles for personal use
Other Types of Employee Benefits
Relocation expenses
Subsidized or free housing
Employee referral bonus
Boomerang bonus (employee rehire bonus)
Prepaid legal services (telephone advice, wills, purchase of a home)
Award or gift certificates (redeemable at the employer's or another local store) as bonuses for attendance,
productivity, and punctuality
Game rooms (pool, foosball, video games, etc.)
Free movies
Free cigarettes
Company sponsored/subsidized events such as trips to athletic events, concerts and hikes
Theme days such as Halloween costume days and holiday cookie exchange days
Condominium, hotel, camping or other recreational area for employee use
Annual family trips back to the "home country" of H1 B visa employees

Relocation back to the "home country" if the job doesn't work out
Relocation back to any United States location in case of "no fault" layoff or termination
Birthday card or note from executive
Assistance in obtaining a visa to visit the United States
In-plant bank branches for employee banking services
Life Cycle account of $10,000 to help employees cross major thresholds such as buying a first house or
financing college education
Employers who consider and offer many types of employee benefits will experience positive employee
morale and retain employees better than organizations that do not. Employers who educate their
employees about the value of the employee benefits they receive, can maximize the value to employees of
the employee benefits that the employer provides.
Employment is an agreement between an employer and anemployee that the employee will provide certain
services on the job, and in the employer's designated workplace, to facilitate the accomplishment of the
employer organizations goals and mission, in return for compensation. The agreement can be verbal, implied,
or an official employment contract.
In employment, the employer determines the where, when, how, why, and what of the work that is performed
by the employee. The degree of input, autonomy and self-directedness that an employee experiences on the
job is a by-product of an employers philosophy of management and employment.
In the United States, much of an employment relationship between an employer and employee is governed by
the needs, profitability, and management philosophy of an employer as well as the availability of employees.
Increasingly, however, Federal and state laws are enacted which direct the employment relationship and
decrease the autonomy of employers.
Employment ends at the prerogative of the employer or the employee.
In exchange for the employees work or services, the employer pays compensation that may include a salary,
an hourly wage, and benefits that is above the Federally mandated minimum wage in the US.
Most employers offer employees a comprehensive employee benefits package, as they can afford to offer
benefits, including health insurance and paid time off, holidays, and vacation. Other employers pay just the
salary or hourly wage and do not provide employee benefits.
Employers hire employees either as exempt employees who receive a salary for completing a whole job, such
as $40,000 a year for supervising the quality department. Or, employers hire employees as nonexempt or
hourly workers who are paid an hourly wage, such as $14.00 an hour, for each hour worked, and whose pay is
subject to the terms of the Fair Labor Standards Act (FLSA) for overtime.
Work is performed by an employee for the employer under a verbal or an implied or written contractual
agreement or contract. Some employers use job offer letters to confirm the details of an employment
relationship. In union-represented workplaces, the employer is obligated to pay in accordance with the unionnegotiated contract.
An employer has certain responsibilities that are required by law about paying employees, withholding taxes,
and filing government
An employee is an individual who was hired by an employer to do a specific job. The employee is hired by the
employer after an application and interview process results in his or her selection as an employee.
The terms of an individuals employment are specified by an offer letter, an employment contract, or verbally.
In workplaces represented by a union, the collective bargaining agreement covers most aspects of an
employees relationship with the workplace.
An employee works part-time, full time or is temporary.
An employee barters his or her skills, knowledge, experience, and contribution in exchange for compensation
from an employer. An employee is either exempt from overtime or not exempt from overtime; the rules about
paying an employee are governed by the Fair Labor Standards Act (FLSA).
Each employee has a specific job to accomplish that is often defined by a job description. In responsible
organizations, a performance development planning process defines the work of the employee and the
organizations expectations for the employees performance.
An employee works within a functional area or department such as marketing or Human Resources. An
employee has a boss, the person he or she reports to and takes direction from, usually a manager or
supervisor. The employee has a work station or office in which he or she accomplishes the job. The employer
supplies the employee with the tools and equipment necessary to perform work such as a computer,
telephone, and supplies.