5 Types of Compensation Beyond Salary

Date: April 30, 2020
Types of compensation plans
When an employee begins their contract with an organization, they may find that there are several types of compensation that will become available to them during the course of their employment. Although many companies offer their employees a base salary when their contracts begin, there are other types of compensation plans that exist within smaller business infrastructures. In order to boost employee morale and ensure retention, it’s important to offer attractive compensation to employees - especially to new hires. Overall, the main types of compensation for your employees include:
  • Salary
  • Salary & commission
  • Hourly compensation
  • Bonuses
  • Total compensation
As a business owner, it’s important to offer a compensation plan that is reasonable and enticing to your employees. This will motivate your employees to work hard for your company - all while maintaining the values, goals, and growth that you desire to see in your organization.

5 types of employee compensation

When an employee decides to become a part of your team, they need to know that they are being fairly compensated based on their experience, workload, and educational background. Let these things be your guide as you decide upon the best model of the following types of employee compensation.

1. Salary compensation

This form of compensation is typically offered to employees as a base pay, straight annual sum, without the stipulation of overtime. There is a general agreement that employees work a typical 40 hour work week while receiving more compensation than they would with an hourly rate.  Salary compensation is also typically most attractive to employees who want to have the potential benefit of working either in-house or remotely, depending upon the agreement detailed in their employment contract.

2. Salary & commission compensation

If an employee enjoys the challenge of having their individual contributions reflect upon their compensation package, they may benefit from a salary plus commission model. This means that the employee would receive an additional commission on top of their already allocated annual salary. This type of compensation is particularly motivating for sales employees.

3. Hourly compensation

Although some employees prefer a salary or base compensation, hourly compensation can be advantageous for employees who work overtime (i.e. over 40 hours in one week, or more than eight hours in one day). This form of employee compensation is typically for entry-level employees or lower paying positions within your company, and may begin at minimum wage.

4. Bonuses

Many businesses like to offer indirect compensation and incentives to employees in order to facilitate a happier, more productive work environment. These incentives can include holiday bonuses, hiring bonuses, and profit sharing plans, among others. In addition to these bonuses, some businesses may offer fringe benefits to their valued employees, such as health insurance, meal discounts, or even a company car.

5. Total compensation

Often the most attractive to new hires, total compensation offers a base salary, plus benefits and bonuses. A benefits package that covers a percentage of employees’ medical and dental bills, as well as any additional health benefits, such as physiotherapy, is typically offered as total compensation. Additional bonuses may include paid vacation, sick days, and access to EAP services.

Discovering the best forms of compensation for your employees

Of course, some forms of compensation may not be viable for all businesses. For example, if you’re a smaller business, you may not be able to afford total compensation packages for all of your employees. Likewise, your business may not have the financial means to support an entire team on base salary: in this case, starting some new hires on an hourly rate may be the best possible way to support your bottom line. Although offering some type of employee compensation is integral to ensuring employee satisfaction, it’s equally important to only offer what your organization can financially support long term. Finding out what your employees want in terms of compensation, and being open to negotiating as needed, is a crucial aspect of letting your employees know that they are valued.


Compensating your employees for the time and effort they put into your organization’s growth is essential to ensuring employee retention. According to Employee Benefits News, the average employee exit can cost your organization approximately 33% of their annual salary - however, offering a type of compensation plan that will assure employee satisfaction will allow you to take crucial steps towards securing the right people and increasing your employee retention rate. However, financially compensating your employees for their hard work is only the beginning. In order to offer the best business incentives to your employees, it’s important to invest in innovative tools and software that can give your employees the rewards they want. If you’re looking to integrate these tools with your employee compensation program, contact BucketList today.
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