What Different Forms of Compensation Do Firms Use to Attract and Keep Workers?

Firms combine base pay, incentives, and benefits into a total compensation package to attract and retain productive workers. Base pay includes wages or salary, while incentives tie pay to performance, and benefits add health coverage, retirement contributions, and paid time. Some firms also use indirect compensation such as flexible schedules and learning opportunities. How a package is designed varies by occupation, industry, and labor market conditions. The following explains each form, how it is measured, and how organizations use it in practice.