A company with a high staff turnover is never attractive. It leaves prospective employees questioning whether they will be supported, valued, and respected in the workplace. This is why retention is incredibly important for businesses. 

High retention rates ultimately result in less money spent on recruitment. But, more importantly, it also means loyal employees who are invested in the success of your company.  

But how can you ensure your employees are going to be satisfied? And how can you make your vacancies appealing in the recruitment process? 

Recently, indirect compensation has taken the main stage. We’re going to explore what it means, offer examples to inspire you, and explain how it can benefit your team. 

What is Indirect Compensation?

You may be more familiar with terms like ‘job perks’ or ‘employee benefits.’ These refer to indirect compensation. It means any type of pay that is non-monetary. Where direct compensation would see bonuses and commissions being offered to employees, indirect compensation focuses on incentives like health insurance and childcare. 

You’ll often see a list of these benefits in job advertisements. Most companies include the following examples of indirect compensation:

  1. Company car

  2. Company cell phone

  3. Memberships to gyms

  4. Life insurance

  5. Healthcare benefits

  6. Overtime pay

  7. Retirement benefits

Understanding the different terms is important if you’re putting together a compensation plan or benefits package for your employees, or if you’re seeking a job yourself. Check out the table below for clarity.

Direct monetary compensation

Non-financial compensation

Indirect financial compensation

This compensation is money paid to the employee by the company. 

E.g.: hourly wages, base salary, bonuses, and commission. 

This compensation is indirect in the form of ‘perks’ or ‘benefits’ that aren’t monetary. 

E.g.: Time off, gift cards, paid parking, and tuition reimbursement.

This compensation is indirect, and the company is usually under a contractual obligation to provide it.

E.g.: Retirement plans, and profit sharing.

The Importance of Indirect Compensation

It’s probably becoming clear why compensation packages are important for your employees. It’s no coincidence that the majority of companies now publicly advertize their employee perks. So, let’s take a look at how it can help your business. 

Improve Employee Engagement

With the recent phenomenon of ‘quiet quitting,’ ensuring your employees are engaged is more important than ever. By simple gestures, your team will feel valued and appreciated for the work they do. In turn, they will respect the business and the leadership more, improving employee sentiment

This leads to an investment in the team’s success. If employees don’t feel as if they are an important cog in the machine, then they will disengage. By offering them indirect benefits as incentives, you’ll see an increase in their passion and productivity. 


Improve Employee Morale

Have you ever walked into an office after a job interview and decided there and then you wouldn’t take the job? It happens often, and usually, this is down to poor morale. Non-monetary benefits can encourage a better work-life balance and work environment. This is extremely important if you want your team to show up with energy and enthusiasm. 

We’ve all experienced a workplace where, no matter how hard you try, you can’t get recognized for your work. Let’s be honest. It’s soul-destroying, and it leads to people giving up. 

By offering time off or compensation for outside of work, you’re recognizing that it’s important to maintain a strong work-life balance.  Rested and happy team members make efficient and productive workers. 


Streamline the Hiring Process

It’s a competitive world out there, and trying to find the top talent for your next job opening can be difficult. But attracting new employees should be a piece of cake if your employee retention rates are high, morale is booming, and you’ve got plenty of initiatives and rewards to offer. 

Job seekers will apply for more than one job and will often receive more than one offer. If you want to set your company apart from the competition, utilize indirect compensation. The more types you can offer, the more attractive you will be. It will also appeal to the type of employee who will appreciate the company going above and beyond the base rate of pay for them. 

Best Examples of Indirect Employee Compensation

We’ve listed a few of the most popular and common forms of compensation, but let’s take a look at some of the companies going the extra mile to really stand out from the crowd. We’ll examine  a few certified Most Loved Workplaces® and see what they have to offer their employees. 


Conduent are a huge corporation that specialize in delivering business process outsourcing (BPO) solutions. This includes commercial, government, and transportation solutions. Despite the size of the business, they always put their employees first, with an emphasis on flexibility.

Some of their benefits include:

  1. On-site medical staff

  2. Performance-based incentive plans

  3. Full healthcare and insurance packages

  4. Flexible working (remote/hybrid)

  5. Flexible vacation plans

To this day, this competitive benefits package incentivizes employees and attracts new hires, making Conduent a successful case study for indirect compensation. 

A summary of all the benefits that Conduent can offer


By working at Hasbro, the entertainment company, you’ll receive all the standard benefits like paid parental leave, medical and dental benefits, and life insurance. But they’ve also introduced something a little different. It’s a simple solution: Half-day Fridays all year-round. 

It may not sound like a lot, but, over 52 weeks of the year, cutting an 8 hour work day in half leaves employees with over 200 additional hours to make their own. We all know that Friday feeling. The guilt of not being productive and not being able to focus is no way to kickstart your weekend. Clocking off at midday sounds like a luxury, but it’s only a small change with a big knock-on effect.