Describe the three major components of compensation: wages, salaries, and benefits. What will be ...

Employee compensation is made up of wages, salaries, and benefits. Wages are paid to employees based on hours worked. Salaries are paid on an annual or other basis and do not depend on hours worked.

Some benefits are mandated by federal and state laws including social security, workers' compensation, and unemployment. Others are voluntary including healthcare coverage, vacations, educational assistance, and other programs, the costs for which may be shared by the operation and participating employees. Employees may not be aware of the costs incurred to provide benefits.