© Creative Compensation Solutions, Inc. Direct Compensation Direct Compensation is typically referred to as "cash compensation" and includes: Base Salary Incentive Pay Stock Based Incentives Bonuses Commissions These dollars are discretionary income to the comployee/associate.  A weel designed compensation plan will have an appropriate "mix" of these components. Indirect Compensation Indirect Compensation includes things that have a monetary value but are provided as a benefit. This includes: Health Insurance Life Insurance Retirement Plans: Pension and 401 (k) Vacations/Holidays Child Care Facility/Subsidy Group Legal Plans Other Benefits and Perquisites With a plethora of available benefit programs, it is important to provide those programs which meet the needs of your employees/associates. Psychic Income Psychic Income includes the psychological satisfactions that an employee/associate derives from: the type of work he/she performs their work environment constructive feedback they receive (performance management system) recognition other factors that may influence an individual´s motivation to perform While psychic income is the least expensive form of compensation, it is often overlooked or taken for granted.  This compensation component is often measured by conducting an employee opinion survey. What is Total Compensation ? Total Compensation includes: Direct Compensation Indirect Compensation Psychic Income In analyzing the total compensation package, CCS creates a value for each component of direct and indirect compensation. That value is then compared to a competitive market to determine competitiveness and the appropriateness of the current compensation "mix." An organization's business strategy will provide direction to determine the appropriate compensation "mix."