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Explain the components of compensation of employees for the calculation of National Income by Income method.

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Compensation of Employees (COE): COE refers to the amount paid to employees by the employer for rendering productive services. 

It includes three elements:

(i) Wages and salaries in cash: It includes all monetary benefits, like wages, salaries, bonus, dearness allowances, commission, etc. 

(ii) Wages and salaries in kind: It includes all non-monetary benefits like free residence, free car, free medical and educational facilities, etc. The imputed value of these benefits should be included in national income. 

(iii) Employer’s contribution to social security schemes: It includes contributions made by the employer for the social security of employees. 

For example: contribution to provident fund, gratuity, labour welfare funds, retirement pension, etc. The aim of such contributions is to ensure the safety and security of life of the employees.

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