What is Direct Compensation? | Meaning & Definition | Akrivia HCM

Direct compensation is the money a company gives to employees in return for their work. Financial benefits like house rent, basic salary, conveyance, medical reimbursements, leave travel allowance, special allowances, gratuity, and bonuses. The purpose of communicating a total compensation package to employees is to help them understand the full value of the job you’re offering. Direct and indirect compensation, when combined, help workers stay motivated and satisfied. This ensures improved performance and retention.

Types of direct compensation

1. Salary: It includes salaries paid directly to employees for the service they provide to the company.
2. Travel Allowances: Many companies provide vehicle and fuel allowances to their employees.
3. House allowances: Companies will sometimes pay their employees a housing allowance if the employee must relocate for work.
4. Medical reimbursement: Organizations also offer medical reimbursement for the employees as well as their family members.