Compensation as a concept according to (Bernadin, 2007) refers to all forms of
financial returns and tangible benefits that employee receives as part of
employment relationship. Compensation as it were is divided into two parts and
these are cash compensation which is the direct pay provided by employer for
work performed by the employee and fringe compensation which refers to
employee benefit programs. Cash compensation has two elements which include
base pay and pay contingent. Base pay has to do with hourly or weekly wages
plus overtime pay, shift differential and uniform allowance while pay contingent is
concerned with performance allowances such as merit increases, incentive pay
bonuses and gain sharing. Fringe compensation on the other hand refers to
employee benefits programs. Fringe compensation also has two parts to it which
are legally required benefit programs and discretional benefits.