Most Important Types Of Monetary Compensation

The most common forms of monetary compensation are salary and commission-based pay. Some types of monetary compensation are also known as Stock options, and they may be awarded to employees for exceptional performance or on special occasions. This type of compensation is necessary by law and provides benefits to both employees and employers.

Many recent graduates are looking for a stable job with a good salary and housing affordability, but they are often unable to afford the higher salaries offered by traditional companies.

The two most common types of monetary compensation are salaries and bonuses. Salaries are paid based on the experience and skills of the employee. Bonuses are often paid annually and in a lump sum.

Profit-sharing plans tie employee pay to the success of the company. And non-monetary compensation includes social rewards, flexible hours, and opportunities to grow in the organization.

Non-monetary compensation can also include praise, recognition, and task enjoyment.

Besides the well-known salary, let’s take a look at other common monetary compensations.


Bonuses are often given for exceeding performance targets or for achieving certain milestones. Bonuses are also classified as variable compensation, whereas commission is paid without a specific achievement. In addition to salary, some other types of monetary compensation are deferred, such as savings plans or annuities.

Bonuses also come with other advantages. Employees may receive them after meeting certain targets, which makes them more motivated.

However, commission-based pay can also be detrimental. Some employees get employee retention bonus overly focused on the commissions they earn, failing to fully explain their products and discouraging people from buying.

Commission-based pay

Commission-based pay is money paid to employees in exchange for their efforts. These kinds of compensations vary from job to job, but generally, commissions are paid on a percentage basis. Salespeople may receive commissions based on how many products or services they sell, while stockbrokers may receive commissions if they make a transaction with a client. Such compensations are beneficial for employees because they encourage them to sell more or less.

Commission-based pay can also negatively affect the dynamics of a team since aggressive sales techniques can turn off new customers.

Overtime pay

Overtime pay is a monetary compensation provided under title 5, United States Code. It is paid for hours worked beyond regular business hours. In some instances, an employer may require overtime hours when determining the length of a shift. However, it is usually not required for the employee to request this pay. As such, employers should be sure that they are following all procedures properly. If not, the employee may not be able to receive the money they are owed.

The Fair Labor Standards Act (FLSA) first created overtime protections. The act established a general standard of time and a half for hours worked beyond forty hours per week. The FLSA applies to hourly and salaried employees. Salaried employees are presumed eligible for overtime. However, they must meet a salary threshold set by the Department of Labor, as well as pass a test demonstrating that their job duties are primarily responsible for paying the overtime.

Stock options

For many years, stock options were the most popular form of monetary compensation, but they’ve recently become a controversial topic. The debate began over whether stock options were truly beneficial and how much they should cost employees. This new research may shed some light on the debate. While stock options are not the best form of monetary compensation, they’re still an excellent choice for attracting top talent. They also provide many tax benefits, as they are not taxed at the time of grant or exercise. Additionally, stock options are a good way to start a long-term savings plan.

Another important distinction between stock options and other forms of monetary compensation is the expiration date. If the stock option expires after a certain period, it has no real value until it’s exercised. The price of an employee’s stock options will be fixed by the contract, often called a grant price, strike price, or exercise date. Regardless of how well the company does, this price will not change.

What About Non-Monetary Compensation?

When choosing between offers, employers should consider both monetary and non-monetary compensation. The former is a key consideration as it goes beyond cash compensation to include the quality of life and career opportunities.

The latter will help companies win the talent war by playing to their strengths and offering a variety of benefits to attract top talent. Whether you are looking to offer a competitive salary or not, non-monetary compensation will go a long way in sealing the deal.


Non-monetary compensation can be in the form of benefits such as gym memberships or wellness programs. Such benefits can promote a better work-life balance and help you attract talented people. Other types of non-monetary compensation include time spent one-on-one with management.

Compliments, for example, can be a powerful motivational tool. It can encourage employees to perform at their highest potential by sparking their passions. Google’s 20% Time program is a great example of a passion-based incentive.

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