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.

Related: What Are Compensation Strategies and Why Are They Important?

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.

Related: Importance and Common Types of Compensation

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:

Pay rate

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.

Related: How Much of a Raise Should I Ask For?


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.

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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.

Related: How Employer-Sponsored Pension Plans Work

Insurance options

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.

Work schedule

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.

Related: How To Write a Leave of Absence Letter (With Example)

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.

Related: What Is Total Compensation Compared to Your Actual Salary?

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:

Contact information

  • Name:

  • Position:

Financial compensation

  • Hourly rate or salary:

  • Hours:

  • Overtime:

  • Commission:

  • Signing bonus:

  • Performance bonus:

  • Other bonuses:

  • Relocation compensation:

  • Raises:

Retirement planning:

  • Registered retirement savings plan (RRSP):

  • Pooled registered pension plan (PRPP)

  • Defined benefit pension plan (DBPP):

  • Defined contribution pension plan (DCPP):

  • Stock options:

  • Employee profit-sharing plan (EPSP):


  • Supplemental private health insurance:

  • Cost of supplemental private health insurance:

  • Dental insurance:

  • Life insurance:

  • Hazard pay:

  • Workers' compensation:

  • Employment Insurance (EI):

  • Medical leave:

  • Parental leave:

Time off:

  • Paid time off:

  • Sick time:

  • Holidays:

  • Personal time off:


  • Professional development stipend:

  • Tuition reimbursement:

  • Memberships:

  • Transportation vouchers:

  • Employee assistance programs:

  • Flexible scheduling:

  • Childcare:

  • Meal plans:

  • Telecommuting options:

Related: How To Write a Sick Day Email (With Tips and Examples)

Compensation package example

Here's one example of a compensation package that uses the above template:

Contact information:

  • Name: Nichole Thet

  • Position: sales associate

Financial compensation:

  • Hourly rate: $15/hour

  • Hours: 40 hours per week

  • Overtime: $22.50/hour (hourly non-exempt)

  • Commission: 10%

  • 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

Retirement planning:

  • 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

Time off:

  • 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

  • Childcare: no

  • 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?"


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The model shown is for illustration purposes only, and may require additional formatting to meet accepted standards.

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