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Direct and Indirect Compensation,

Unit 1 - Discussion Board 2

Organizations must make strategic and tactical decisions regarding a complete compensation and benefit package to ensure recruitment and retention of employees who perform well in their positions.

Primary Task Response: Within the Discussion Board area, write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas:

  • Discuss the purpose of compensation and benefits from the organization's viewpoint.

  • Provide examples of strategic and tactical recommendations that an HR specialist might make to senior leaders with regard to direct and indirect compensation.

Compensation and benefits are two big key factors people take into consideration when looking for a job. However, the two are very different and it is important to understand their differences. Compensation is how employers can attract potential employees, it is normally a monetary payment that attracts the employees. Benefits are in place to help motivate employees to work harder and to stay with the company. A company’s budget usually makes plenty of room for their employees and this includes their compensation and benefits. The main purpose of compensation for the company is to attract employees. If a company has compensation and benefits that are comparable to or better than other companies around them, they are sure to get the most applications and the first pick at employees. When a company compensates their employees well, it has been proven that the employees are more likely to perform better. This will also improve and ensure employee loyalty. If an employer is good to their employees, pays them a livable wage, gives bonuses and has great benefits, it is very unlikely they will leave the company. Attracting great employees is important, but retaining them is just as important if not more important.

There are different forms of compensation that companies can offer to their employees. There are direct and indirect forms of compensation. Direct forms would be the salary that the company offers the employee, or even bonuses that the company gives the employee based off of their performance. Indirect compensation would be intangible forms of money. This would be more of a benefit the company has in place for their employees. A human resource specialist would play a big role in the company’s compensation and benefit package. It would be their job to recommend direct and indirect forms of compensation to the company. For direct compensation they may recommend to raise the starting pay at the company, or to even give out monthly or quarterly bonuses based on performance. They could even base the bonuses off of how the company is doing and give a percentage every quarter or month. For indirect compensation, the human resources specialist could recommend paying for insurance or a percentage of the employees’ insurance package. They could also recommend a child care allowance. It is no secret many parents do not work because child care is so costly, but this is keeping employers from getting some great employees who would be assets to the company. Also, many companies offer a 401(k) so the human resource specialist may recommend matching a competitive percentage or having no maximum number for matching. Giving your employees great direct and indirect compensation will create loyal, happy employees.


Lindblad, M. (2017, November 21). Does HR planning improve business performance? Small Business - Retrieved March 1, 2022, from

Types of compensation. Types of Compensation - Compensation - Departments - UTHealth. (2022). Retrieved March 1, 2022, from,rewards%20such%20as....

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