Compensation of employees is mainly divided into the following two components:
(a) Wages and salaries, and
(b) Social security contributions.
Wages and salaries are the reward for the services rendered by the workers. These may be in kind or in cash. These include:
(a) Salary; (b) commission; (c) bonus; (d) dearness allowance; (e) housing allowance; (f ) rent free accommodation; (g) free medical facilities; (h) car allowance etc.
Compensation of employees also includes social security contributions made by the employers to their employees. These are provident fund, pensions, casuality or life insurance etc.