What Is the Meaning of 'Compensation & Benefits'?

by Roslyn Frenz; Updated September 26, 2017
Skilled workers usually receive higher compensation.

"Compensation" refers to money received for work, such as wages, salaries and tips, while the word "benefits" describes job extras provided by the employer. Benefits might include health, dental and life insurance and paid vacation time. Competitive compensation and appealing benefits attract employees to companies and positions. Some types of compensation depend on the employee's work performance while other compensation is a flat rate. Some workplace benefits are required by law and others are offered as a job perk.


Compensation is linked to the requirements of the job. Jobs that require an advanced skill set or a college degree often have higher compensation than jobs that require little or no skills and education. Compensation programs need to seem fair to employees. Workers in the same position should receive similar pay. The formula for salaries and wages should be uncomplicated. Most employees are paid by the hour, by the piece of work or on a weekly, biweekly or monthly schedule.


Benefit plans focus on employees' needs and the organization's overall objectives. Goals of benefit plans include improving employee satisfaction, keeping employees healthy, attracting new employees and motivating existing employees. Many different kinds of benefits exist, and employers choose which benefits to include in the package that they offer to employees.

Types of Benefits

Some benefits such as unemployment compensation, workers' compensation and family medical leave are required by law. Other benefits offer payment for time not worked. Although many employers offer unpaid time off, paid time off is an extra benefit. Paid time off can include holidays, sick leave and vacation.

Many benefits center on health. Medical benefits include medical and dental insurance, vision care and life insurance. Retirement benefits include pension plans, 401(k)s, stocks and retirement bonuses. Other benefits include severance pay, employee discounts, child care and payment for educational expenses.


A commission is compensation often used in sales that is based on a salesperson's volume of sales in a given time period. Some businesses offer their salespeople only commission as compensation while others offer a mix of commission and flat salary. Opponents of paying commissions argue that it makes salespeople too pushy, minimizes follow-up customer service and puts the emphasis on quantity over quality. Commission supporters argue that commissions are a good incentive that encourages salespeople to give their best to every sale.

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About the Author

Roslyn Frenz started writing professionally in 2005, covering music, business ethics and philosophy. Her work has appeared in "Designing Wealth," "The Other Side," "Upstate Live" and many other publications. Frenz has a bachelor's degree in business marketing from the University of Phoenix. She is pursuing an M.F.A. in creative writing.

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