Indirect compensation

Meaning & Definition

Indirect compensation means those non-monetary rewards and benefits that are offered to the employees along with their salary. These may be in the form of medical coverages, vacation time, retirement plans, bonuses, work flexibilities, or even fitness programs. The concept of indirect compensation enhances the satisfaction level of employees.

Important Features of Indirect Compensation

• Increases employee happiness and motivation.
• Supports in recruiting and retaining competent personnel.
• Promotes health and financial stability among employees.
• Strengthens compensation and benefit policies for organizations.
• Enhances commitment to the organization among employees.

Applicable Policies & Regulations 

Indirect compensation benefits may be governed by:

• The Employees’ Provident Fund Act, 1952
• The Employees’ State Insurance Act, 1948
• The Payment of Bonus Act, 1965

It is important for an organization to be clear about its employees’ benefits and compensation programs.