COMPENSATION AND BENEFIT
The term “compensation” refers to the combination of wages, salaries and benefits an employee receives in exchange for work. Compensation may include hourly wages or an annual salary, plus bonus payments, incentives and benefits, such as group health care coverage, short-term disability insurance and contributions to a retirement savings account. A total compensation package can have several components. An “employee compensation plan” collectively refers to all the components in addition to the manner in which the compensation is paid and for what purpose employees receive case bonuses, salary increases and incentives.
Employees classified as non-exempt receive what employers usually call wages, which are calculated on an hourly basis and require overtime payment for work in excess of 40 hours per week. Overtime is one and a half times the hourly rate. Employees who have a collective bargaining agreement with management -- often called a labor union contract -- have wages set by contract terms for a certain period. For example, a sample labor union contract may require employers to pay master plumbers, licensed plumbers and apprentice plumbers hourly wages of $19.75, $17.95 and $15.50, respectively, pursuant to the terms of a collective bargaining agreement.
Although there are salaried employees who are classified as non-exempt and, therefore, entitled to overtime pay, the term “salary” generally refers to an annual salary the employee receives or a method of employee compensation that does not require overtime pay. For instance, the reference to a “salaried employee” is generally used to describe a worker who does not receive overtime pay. An example of an employee compensation plan for salary levels is one based on a salary scale that considers education, years of professional experience, credentials and qualifications such as job competency and functional expertise. Salary levels such as the wage...