What Are Compensation Packages? (Definition and Example)
Updated November 21, 2022
Compensation packages allow people to compare job opportunities or keep a record of their employee benefits. These packages can help employees and job candidates organize information about what an employer offers into a readable format. Understanding what's in a compensation package can help you make decisions about your future. In this article, we explain what compensation packages are, list what they include, and provide a template and example you can reference to help you better understand this concept.
What are compensation packages?
Compensation packages are summaries of the methods employers use to pay their employees and the amounts they provide. Sometimes called total compensation statements, they tell the employee or candidate about their wages, benefits, and other ways the employer contributes to their income. Some of these packages may apply to many members of a team, while others include individualized offers based on an employee's request, experience, or position.
For example, a company may offer the same compensation package to every entry-level accounting team member, but a candidate for the accounting manager position may have the freedom to negotiate terms such as salary and bonuses.
What does a compensation package include?
A compensation package may include all forms of payment you receive from an employer, whether they affect your income directly or indirectly. For example, your salary has a direct effect on your income, while certain benefits like retirement plans benefit you financially after a certain number of years. Here are some elements included in a compensation package:
Your pay rate refers to the money you earn according to your hourly wage or salary. Employees who earn a salary make a specific amount of money per year, so unless they take unpaid time off work or contribute to optional benefits, their pay rate stays the same. However, hourly employees typically earn additional wages for every hour they work in a week past eight hours in a day or 40 hours in a week in the form of overtime compensation.
Bonuses are additional compensation you may receive outside of your regular salary or hourly wage. Employers have the option of whether they provide bonuses for their employees. They may offer bonuses to employees in certain positions or those who perform well, or they may give all their employees bonuses during certain times of the year. The types of bonuses compensation packages may include are:
Holiday bonuses: These bonuses give employees a set amount of extra payment to account for holiday spending and show appreciation.
Referral bonuses: When employees refer strong applicants to open positions or attract clients, employers may reward them for supporting the company with a referral bonus.
Spot bonuses: Managers give out spot bonuses on a discretionary basis to employees who exhibit exceptional behaviour.
Annual bonuses: Sometimes given in conjunction with holiday bonuses, annual bonuses are lump sums employers give out at the end of the year that reflect an employee's performance over the entire year.
Retention bonuses: A retention bonus is a lump sum or payment instalments employers provide to employees to give them extra motivation to stay with the company during a challenging or important period.
Signing bonuses: When a new employee agrees to accept a new job, they can get a signing bonus, which encourages employees to make a quick decision and commit to a new employer instead of entertaining other job offers.
Performance bonuses: Employees who meet performance metrics or achieve specific objectives at work may get performance bonuses.
Longevity bonuses: Employees who have been at a company a long time may get cash, a raise, or a significant gift when they meet certain milestones like 10 or 20 years of service with a company.
Retirement and savings
Employers may offer retirement and financial savings plans, which employees have the option to use. Many companies make contributions to their employees' retirement and pension plans, and some even match or exceed the amounts their employees contribute. They may also offer stock options, which allow you to purchase a specific number of company shares at a pre-determined price, or profit-sharing plans, in which employees receive a portion of the company's profit as part of their retirement benefits.
In addition to making social insurance contributions based on your pay, employers may also provide their employees with optional insurance coverage. These options may include private supplemental health care policies, dental insurance, and life insurance. Some employers pay the premiums for these plans if employees choose to use them, while others pay a portion of the premium and require the employee to cover the rest. All employers provide their staff with workers' compensation for illnesses and injuries that occur at work and employment insurance for employees who require time off because of medical concerns.
Many elements of a compensation package involve an employee's work schedule, including paid time off, unpaid time off, and leaves of absence. Employers typically provide paid time off for certain holidays, employee vacation time, medical or parental leave, and sick days. However, they may also offer employees additional unpaid time off as needed.
Employee support services
Employers may offer employee support services, such as discounted wellness programs or crisis assistance. They may include benefits such as free or affordable health club memberships, childcare services, or counselling sessions. Some companies also provide their employees with extended breaks during working hours that include planned events like paid lunches or social hours.
Compensation package format
Employers may use various formats in a compensation package, but here is a common layout to help you understand what to expect when reviewing your compensation:
Hourly rate or salary:
Registered retirement savings plan (RRSP):
Pooled registered pension plan (PRPP)
Defined benefit pension plan (DBPP):
Defined contribution pension plan (DCPP):
Employee profit-sharing plan (EPSP):
Supplemental private health insurance:
Cost of supplemental private health insurance:
Employment Insurance (EI):
Paid time off:
Personal time off:
Professional development stipend:
Employee assistance programs:
Compensation package example
Here's one example of a compensation package that uses the above template:
Name: Nichole Thet
Position: sales associate
Hourly rate: $15/hour
Hours: 40 hours per week
Overtime: $22.50/hour (hourly non-exempt)
Signing bonus: $2,000
Performance bonus: up to 10% at end of fiscal year
Other bonuses: monthly $500 bonus for the top salesperson
Relocation compensation: will cover 100% of relocation fees, including travel, packing services, and home sale assistance
Raises: yearly cost-of-living raise of 1.3% plus up to 5% pay increase based on performance reviews
Registered retirement savings plan (RRSP): 100% of employee contributions matched
Pooled registered pension plan (PRPP): no
Defined benefit pension plan (DBPP): no
Defined contribution pension plan (DCPP): no
Stock options: 500 shares at $6 per share within 10 years of hiring date
Employee profit-sharing plan (EPSP): no
Supplemental private health insurance: Better Way Insured
Cost of supplemental private health insurance: $150/month
Dental insurance: no
Life insurance: no
Hazard pay: no
Workers' compensation: 85% of wages during recovery
Employment Insurance (EI): up to 15 weeks of benefits due to sickness, injury, or quarantine
Medical leave: five days medical leave per year, including three paid days after three months, up to 12 weeks of unpaid leave
Parental leave: Up to 15 weeks paid during pregnancy or after birth or adoption; up to 20 additional weeks unpaid
Paid time off: 10 paid vacation days after the first year of employment, 15 vacation days each following year, and 20 vacation days after five years of employment
Sick time: three paid sick days and two additional unpaid sick days per year
Holidays: all general holidays are paid time off
Personal time off: flexible unpaid time off for personal days
Professional development stipend: $500 yearly for professional development materials
Tuition reimbursement: $1,500 per year for courses or degree programs related to business and marketing
Memberships: free standard gym membership, discounted special classes
Transportation vouchers: 50% off monthly train ticket or petrol reimbursement based on commute**
Employee assistance programs: access to 24/7 EAP with financial planning, counselling, and addiction support services
Flexible scheduling: option of working with flexible lunch and break times
Meal plans: one free lunch per day from the company cafeteria
Telecommuting options: no
Now that you have reviewed what compensation packages are, what they include, and an example you can better answer the question "what are compensation packages?"
The model shown is for illustration purposes only, and may require additional formatting to meet accepted standards.
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