Total Compensation and How it is Used in an Organization's Human Resources Strategy

It's not surprising that when most employees hear the term "compensation" they typically think of the money that they receive in their paycheck. Total compensation, however, extends beyond salary. Total compensation may be defined as "the package of quantifiable rewards that an employee receives for his or her labors." (Gomez-Mejia et. al, 2012, pg. 312) It is the resources that employers offer to attract, motivate and retain employees. An employee's total compensation includes base compensation, pay incentives and benefits or indirect compensation (see figure below). In the following we will discuss these three components and identify how they are used in an organization's human resources strategy.