What is Compensation?

The general term, "compensation", applies to remuneration paid in exchange for work.

Normally, it means wages, salaries, bonus and other incentives, commissions, overtime, shift differentials, premium pay and other cash components that appear on W-2 taxable income statements. Good surveys are careful to clarify what they report. Base salary is the regular sort-of "guaranteed" pay, whether stated as a hourly wage or as a periodic paycheck. Total Cash Compensation is all the cash that is paid by the employer.

Some variable pay elements like overtime, shift differentials and premium pay are rarely reported in pay surveys because they change so often. Surveys of pay practices are more likely to cover those details, which vary mostly by industry and location.

Executives often receive extras that (when paid by a publicly traded corporation) the US Federal Securities Exchange Commission (SEC) require be valued in terms of equivalent cash; in those cases, an executive compensation survey may show Total Compensation that includes base and bonus (all cash beyond the base) plus non-cash elements like Stock Appreciation Rights, Long-Term Incentive awards, Long-Term Compensation and Other things like special taxable benefits like moving expenses and such. "Long-term" elements generally involve periodic annual payouts of pre-established bonus/incentive plans that involve performance measures and payout values computed and paid over multiple years.

In some economies like in the UK, Total Remuneration is the operative phrase to cover cash pay, stock awards, pension and benefits (because Britain requires those executive compensation elements to be published in corporate annual reports). Likewise, in the United States, top executives of tax-exempt entities have to openly publish the same kind of direct cash, non-cash pension, benefit and allowances information on tax forms that are technically available to anyone who wants to pay for a copy from the Internal Revenue Service.

The more basic the information, the easier it is to collect and analyze and the less expensive it is to get.

Learn more at: SalaryExpert.com