Rewards and compensation are different things

The terms ‘total rewards’ and ‘compensation’ are often used interchangeably – and incorrectly! While they sound like similar things, the two are different in some significant ways, though there is some overlap.

So, what is the difference between total rewards and compensation? Let’s take a look.


First, what is compensation, anyway? For most of us, compensation is synonymous with our paycheck – the salary we earn for work. But employee compensation packages aren’t just about the salary. They include several other things as well.

Everything an employee gets in return for their work at an organization is usually called compensation and will usually include the money, benefits, and perks they are eligible for. Compensation is the term used to define all the resources available to an employee to motivate them to work at an organization.

Compensation will usually consist of a few things:

  • Base salary, which you earn every month. This part is communicated to you in your contract and is not dependent on your performance.
  • Bonuses or commissions. These are usually performance-based.
  • Stocks and equity
  • Health and life insurance
  • Pension plans/retirement fund contributions
  • Any additional benefits (internet services, company discounts, car services, phone services, etc.)


women standing beside a corkboard

Of course, every company’s compensation package may be different. This usually depends on the type of company you are in, the size of the company, and even the employee’s seniority level.

While compensation gives employees a basic idea of what their job is worth, it isn’t comprehensive. An employee will be paid for their work, but there are a whole bunch of other things they may get from an organization by being affiliated with it.

But compensation is what most employees will look at before deciding which organization to work with, because if nothing else, it provides a basic overview of what they will get in return for their work.

This is why compensation is so widely used as a reference, but total rewards take that further.

Total Rewards

Total rewards consist of everything compensation does – base pay, bonuses, equity, benefits, etc. – and then some.

In fact, you could say that compensation is just one component of total rewards, an umbrella term for everything you get from working at an organization. The rewards could be tangible – such as those offered by compensation – and even intangible.

Total rewards programs will typically include five key things.


We’ve already discussed what compensation is, and all of that is part of total rewards. In general, compensation is used as a baseline for employees to determine whether a role is suitable for an employee or not. They may have certain expectations based on their work, and compensation will usually be comparable with other organizations’ packages.

women in a meeting room


Benefits are sometimes included in compensation and other times considered part of the wider total rewards program. These include insurance packages and other value-added benefits such as discounts, assistance, and health-incentive programs.

Work-Life Benefits

This is an example of one of the intangible benefits that a total rewards program includes. Work-life imbalance is one of the biggest reasons for employee turnover, and employers who recognize this ensure solutions are included in their total rewards programs.

One example of this is providing opportunities for employees to enjoy their personal time off, paid time off (organizations with unlimited PTO show high productivity), and flexible work hours. As a result, burnout is less likely, and employees are given autonomy over their own time and work, which leads to greater satisfaction.

Some organizations also incorporate social activities daily to encourage employees to relax.

 professionals gathered for a meeting

Performance Recognition

Performance recognition is a major contributor to employee motivation, which is why there is so much emphasis on ensuring achievements and efforts are acknowledged. But most people don’t realize this is also part of the total rewards programs.

Again, rewards programs are a means for employees to feel motivated to work and stay with an organization rather than find employment elsewhere. Since recognition contributes to motivation, it becomes a reward that they get for their work, and thus become encouraged to stay and work better.

It’s also important to note that while recognition seems like an obvious benefit, it is not as commonly found as it should be. 44% of employees who intend to leave their job say they feel their efforts are unrecognized. That’s almost half!

Career Development

Career development is another part of an organization’s total rewards program. Most people, when entering a role, will ask: what is the opportunity for growth?

Nobody wants to be stuck in the same position, doing the same thing all their life, but there are plenty of organizations where that are doing precisely that. Career development then becomes part of the rewards system.

Individuals feel that they are learning skills that will help propel them to new stages in their careers, where they will be able to do more and better and thus get more and better rewards. After all, we are no longer in the era where seniority refers to the length of time an employee has been with an organization.

Most people think of their job’s worth in terms of their employee compensation package. However, the total rewards system truly determines whether one is satisfied with what they get at their workplace.

Developing a compensation package is relatively simple, but figuring out the total rewards program and how to make sure employees understand their total rewards is trickier.

If you’re looking for C-level Recruiting Companies In NY who can help you review your total rewards program, CCY is your best option. With skilled and experienced professionals, CCY can help you ensure your compensation and rewards programs are up to the mark. Contact us now for Executive recruiter NY.