A compensation package is a summary of all the ways that a company directly or indirectly pays employees. It is a combination of all the rewards that employees receive for performing the work they are hired for. A compensation package includes both monetary and non-monetary rewards, such as salary, bonuses, health insurance, retirement savings, paid time off, and other perks. Compensation packages are divided into four basic categories: guaranteed pay, variable pay, benefits, and equity. Guaranteed pay includes base salary and any other fixed compensation an employee receives. Variable pay includes bonuses, commissions, and other incentives that are tied to performance. Benefits consist of the non-wage compensation that form the total remuneration package for an employee. Equity includes stock options, profit-sharing, and other forms of ownership in the company.

A compensation package is not just about salary, but also includes other forms of value, both monetary and non-monetary, that an employer provides in exchange for the work an employee does. A compensation package is useful for attracting and retaining talent who will help a business thrive. It is important to evaluate a compensation package and job offer to ensure that it aligns with ones values, goals, and lifestyle. Building a total compensation package starts with understanding what an organization can offer and then organizing this information in an easy-to-read document.