Indirect Compensation

HR Glossary for HR Professionals

Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

Indirect Compensation

What is Indirect Compensation?

Indirect compensation is a form of payment offered by employers to workers that are typically characterized as non-monetary benefits.

A strong indirect compensation package can be part of an effective recruitment strategy.

What is Considered Indirect Compensation?

Indirect compensation can include health insurance, tuition reimbursement, maternity and paternity leave, retirement plans, life insurance, and more.

Why Should Employers Offer Indirect Compensation?

Much like other employee benefits, this form of non-wage compensation can play a significant role in boosting an organization’s retention rates, lowering its turnover, and fostering a thriving company culture.

What’s the Difference Between Direct and Indirect Compensation?

Direct compensation is money paid by the company to employees for labor and services. This kind of compensation includes an employee’s base bay (hourly or salary), commission, and bonuses.

Meanwhile, indirect compensation does not include monetary payout or impact an employee’s wages, but does offer quality-of-life improvements that make an employee’s total compensation more appealing.

Related Terms: Compensation

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