Other compensation may include educational assistance, non-production cash bonuses, and medical reimbursement accounts.
Small- and medium-sized businesses may find that offering other types of compensation can offset an inability to provide big pay increases, making the prospect of joining a company or continuing employment more attractive.
The Fair Labor Standards Act does not address other compensation; these benefits are often decided between the employer and the employee while hiring, and may be altered during the course of employment.
A non-production cash bonus is a popular example of other compensation. These bonuses can be offered to employees when they meet certain fixed thresholds. Such benefits not only make the prospect of joining or staying with a firm more attractive for employees, but also motivate them to give their best. This benefits the company by boosting revenue and ensuring high retention rates.
Educational assistance is also included under the category of other compensation. Employers can encourage their employee’s potential by offering educational assistance. Here the employers are betting that the productivity of their employees will grow with higher education. Offering other compensation can be an effective method of retaining talented professionals, as they are likely to recognize the benefits of educational assistance and stay with the company at least for the duration of the contract.
For more information on other compensation, refer to the W-2 instructions for Box 1.