What is total compensation?

Total Compensation is the collective compensation earned by employees from their employer, in exchange for their work. This includes both direct and indirect compensation. Total Compensation is a critical consideration for employers because it will influence their ability to attract, retain, and motivate their employees.

Direct Compensation vs. Indirect Compensation

Direct compensation is wages paid to the employee in exchange for their work as well as through incentive programs. This includes base salary as well as variable pay like bonuses, cash recognition award, commissions, and profit sharing.

Indirect compensation is the benefits side of “compensation and benefits.” This includes paid time off (vacation, sick time, and personal days), health/dental benefits, life insurance, employee assistance programs, wellness programs, long-term disability benefits, retirement contributions (RRSP or pension plans), tuition reimbursement, training and development options, as well as career advancement opportunities.

To develop an effective, equitable and compliant compensation program, employers should ensure they are aware of the legal frameworks and best practices surrounding compensation. Read further to learn more!

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