One of the biggest mistakes an employer can make is to invest large amounts of time or money to initiate compensation elements that your employees do not need or want, says Sarah L. Fogleman, extension agricultural economist with Kansas State University.

She adds that successful compensation packages are really total rewards systems, containing non-monetary, direct and indirect elements all based on the objectives of the employer and the needs of the employees.

  • Non-Monetary Compensationincludes any benefit an employee receives from an employer or job that does not involve tangible value. This includes career and social rewards such as job security, flexible hours and opportunity for growth and recognition, task enjoyment and friendships.
  • Direct Compensation is an employee’s base wage. It can be an annual salary, hourly wage or any performance-based pay  received, such as profit-sharing bonuses.
  • Indirect Compensation is far more varied, including everything from legally required public protection programs such as Social Security to health insurance, retirement programs, paid leave, childcare or housing.

“Employers have a wide variety of compensation elements from which to choose. By combining these elements, progressive managers can create compensation packages that are as individual as the employees who receive them,” she says.

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