What are the Best Forms of Compensation for Your Employees?

Oct 31, 2022 6 Min Read

Photo by Brooke Cagle @ unsplash

The right types of employee compensation can open many favourable doors!

Today, most organisations are moving away from the old-school benefits and perks systems. Instead, they’re focused on providing the right types of employee compensation that drive performance, happiness, and loyalty. 

Employee compensation can mean a variety of things. It can refer to salaries, bonuses, stock grants, or even free snacks in the employee break room. But no matter what kind of employee compensation you provide to your team members, it’s important to understand what types are best for your organisation. 

Read more: Assessing A Job Offer And Your Compensation And Benefits Package

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It’s all about finding the right balance between your employees’ needs and yours. You want to make sure that you are able to provide them with everything they need while ensuring that your company can continue growing and thriving. If you can figure out how to do this well enough, then chances are good that your employees will be happy at work too!

It’s important to factor in market compensation ranges to establish a salary range for each specific job position. Benchmarking against competitors in a similar market will enable you to offer competitive pay and keep your company favourable to new applicants as well as company employees.

In this article, we’ll dive into the main types of employee compensation and why they’re beneficial for your organisation. Each strategy has its own pros and cons but can be useful depending on your company's culture and business goals.

1. Base pay package

Base pay package refers to the standard compensation an employee receives for working a previously set number of hours. This can either be a monthly income or an hourly wage. The decision between the two might depend on their role. For instance, an employee who is working on well-defined tasks or a specific task will have a base salary package. 

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Hourly-type packages, on the other hand, are usually for low-paying or entry-level jobs. Hourly packages are mostly reserved for unskilled, semi-skilled, part-time, temporary, and contract workers. It is the compensation given to them in exchange for their labour and hour. Industries that usually offer hourly wages are hospitality, retail, and construction. It also gives the employees opportunity to work overtime and get paid more. However, while deciding on hourly wages, you must remain compliant with the minimum wage legislation of your area.

2. Equity package

This form of compensation has become quite popular in the past few years. It is a way to compensate the employees in the form of company shares. Many law firms, IT companies, and even retail organisations have opted for this form of compensation. By giving shares or equity to an employee, you are tying their package directly to the growth of the company. It not only increases the financial benefit for the employee but their loyalty as well.

This may interest you: How We Can Relook At Employee Compensation And Benefits In Talent Management

3. Bonuses

Bonuses are given to the employees based on their performance. Although it can be offered to an employee of any level, it is usually given to employees in management positions. For instance, the company’s VP and C-suite employees have a higher bonus percentage available. This bonus reflects the performance of their team or the financials of the company.

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When deciding on bonuses for employees, it is imperative to consider the projections, financials, and goals of the company. Use automated tracking and measuring platforms like Plentive to ensure the accuracy and efficiency of your incentive programs.

4. Commission

Another type of employee compensation is commission. Commission is often used in sales positions where a team member receives a percentage of the revenue they generate. Commission is a great way to incentivise a sales team or boost revenue in a certain division. It can also help you hire a more diversified team by removing salary expectations as a factor in the hiring process. If you’re thinking about implementing a commission structure, it’s important to note that it isn’t all sunshine and rainbows. One major drawback to commission compensation is that it can create an environment of competition. When employees are trying to boost their commission percentage, it can create tension between team members.

5. Benefits and Perks

Similar to pay for performance, benefits and perks are other forms of compensation that are provided to employees with no expectation of return. This type of employee compensation can include things like health insurance, paid vacation days, retirement plan contributions, and company culture. This strategy is great for organisations focused on employee happiness and retention. This can be especially true in industries with high turnover rates, such as the hospitality and healthcare industries. Employee benefits and perks are a great way to show your team members that you care about their overall happiness and well-being. They can also help you stand out against competitors that may be paying a lower salary.

Explore more: How Leaders Handle Workers’ Compensation Claims

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6. Non-Financial Compensation

Another common type of employee compensation is non-financial compensation. While this type of compensation isn’t tied to dollars and cents, it can still be incredibly valuable to your team members. You may have heard of the term “work-life balance.” Work-life balance is the idea that employees should have time for work and other aspects of life like family, education, and hobbies. For example, when you offer flextime or allow remote work, you’re providing non-financial compensation that helps your team members balance their work and personal life. Other examples include generous vacation policies, paid training, and education reimbursement.

Even with everything going on in the world, you can still find ways to show your gratitude for your employee's hard work.

  • Recognise good work. If a job is done well and efficiently, give them a raise or bonus for doing so.
  • Give more vacation days. It's important that employees get time off from work when they need it most—but what if there was no such thing as "time off"? You can make up for this by giving them more vacation days! (This will help keep morale high.)
  • Give new responsibilities. More responsibilities must be given to those who have excelled at their jobs so far. This will encourage them even further and motivate others within an organisation as well!

Supplementary reading: Should Employees Be Allowed to Choose What They Want to Do?


In the end, there is no one-size-fits-all solution to employee compensation. There are many types of employee compensation, each with its own benefits and drawbacks. It’s important to consider the culture at your company and the types of employees you’re trying to attract when determining which compensation types to use. When you provide the right types of employee compensation, you can drive engagement, boost productivity and hire a more diverse team. Your employees will thank you for it.

If you're seeking information about calculating workers' compensation settlements for employees, a workers' comp settlement calculator can be a valuable tool.

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Jonathan is a technocrat and an avid outdoor enthusiast. He is a community manager and a committed team member. When he isn’t working to make the internet a better place, Jonathan can be found exploring the great outdoors and beautiful coastlines with his sidekick, Zen, a very energetic Weimaraner.


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