Some workers receive a bonus for vacations or simply to celebrate a year of good service.
The main focus for understanding the different types of compensation systems is the fact that the basic principle underlying all forms of compensation for work performed involves some form of financial compensation in exchange for services rendered. Compensation is the keyword for understanding compensation systems and can be presented in a variety of formats. It can be in the form of base salary, deferred pay, benefits, commissions or incentives.
A sales team can receive a base salary and a commission.
The salary or base salary is the most common type of remuneration system, since it is the most immediate payment for services rendered. This type of compensation system is classified as a fee-based scheme, as the exact amount of compensation in this compensation system is based on the exact terms of the contract between the employer and the employee. That way, the employee knows exactly how long to expect and what time to expect payment. For example, if the contract states that the employee will be paid on the first day of each month, the employee may be entitled to claim when the first day of the month passes and the expected payment has not been received.
Base salary, or salary, is the most common type of pay system.
Another aspect of payment systems that is less immediate than salary or wages is the deferred payment system that is cumulative in nature. This is still linked to salary, as it is still part of the remuneration earned by the employee in the course of work. Deferred compensation can include pensions and other types of retirement packages that employees can receive if they meet certain terms or conditions of their employment contract. In this sense, this type of remuneration system can be classified as an incentive or labor benefit.
Insurance is another type of compensation system that can be classified as a benefit. To a large extent, benefits do not have to be monetary, as they can come in many other beneficial and compensatory forms that do not necessarily involve money but still benefit employees financially. An example of such a benefit is the provision of housing for an employee as part of the employment package. This type of employment benefit generally does not involve sending cash to the employee, as the employer is usually responsible for any accommodation-related payments. Still, the agreement offers the employee a financial benefit by relieving him of the burden related to housing expenses.