Forms of Pay

Base Pay

is compensation based on time worked, such as annual salary or an hourly wage and it does not include pay benefits, overtime or incentive pay.

Compensation

may be in the form of financial returns, tangible services, and benefits received by employees as part of their employment. It does not include other forms of rewards such as recognition and interpersonal relationships etc.

Compensation Mix

may include a part of base pay and/or performance pay and/or indirect pay or a relative proportion of each.

Indirect Pay

is part of an employee’s total compensation package, non-cash items or services provided to employees in return for their contribution to the organization (i.e., health benefits, paid time off). Sometimes the costs for the items are shared by the employees.

Merit Pay

is a monetary reward given in recognition of outstanding performance which increases base pay. It may be paid in a lump-sum or added incrementally to base pay.

Performance Pay

is a monetary onetime payment made to an employee, team or the whole organization for achieving results established at the beginning of a performance cycle. 

Salary

is direct compensation/pay calculated at an annual or monthly rate rather than by hour.

Wages

are direct compensation/pay calculated by the hour.