Non-Monetary Compensation, Explained

The cash compensation that an employee receives, including their base salary and variable pay, is typically considered the largest reward for their work. But in many cases, the non-monetary compensation benefits your organization offers can be equally important to attracting and retaining top talent.

Just because these non-monetary compensation elements won’t fit in your employees’ wallets doesn’t mean they’re not a valuable part of the total compensation package your organization offers – and you need to make sure you employees are aware of the additional investments you’re making to ensure their wellbeing.

In the article, the follow questions will be answered:

What is non-monetary compensation?
What kinds of non-monetary rewards can I give to my employees?
Why are non-monetary rewards important?
How do you motivate employees non-financially?

What is Non-Monetary Compensation?

Non-monetary compensation is defined as any compensation rewarded to an employee in a non-cash form. On a simple level, that could mean a trip awarded to “Salesperson of the Month,” where the award has a value but is not paid out as additional cash their paycheck. However, the modern workplace provides many other types of non-monetary rewards, whose total value may be less evident to employees at first glance.

Many employees in your organization may not even be aware of all the non-monetary rewards they receive, so it’s important to ensure that you’re communicating the value of these reward types effectively. If you organization offers any of the non-monetary rewards below, make sure to emphasize them across all stages of the employee lifecycle – from pre-hire to retire.

Employee Benefits

Health and wellness benefits, including medical, dental, and vision insurance, are the most common types of benefits provided by employers.

Retirement plans, like 401(k) plans, are the second major type of benefit. Retirement plans are even more valuable when employers match the employee contribution, whether in part or in full.

Income replacement plans include short-term disability plans (which typically offer a 3 to 6 month benefit period) and long-term disability plans (which can offer 50 to 60 percent of your salary after your short-term disability plan runs out).

Many companies choose to provide additional benefits, such as sick days, life insurance, commuter reimbursements, or free parking. Other benefits and perks that can be considered non-monetary compensation include:

Pension plans
Tuition reimbursements
Child care reimbursements
Pet insurance
Free or discounted food and drinks
Gym memberships
In-office massage benefits
Company parties and off-site events

Your organization may also offer unique benefits that don’t exist anywhere else. If you’re like one of the organization’s below, consider dedicated messaging about your unique offering.

Google offers on-site haircuts.
Harper Collins India offers pawternity leave after adopting a new pet.
Evernote provides free house cleaning while you’re at the office.
REI provides ‘Yay Days’ where employees are encouraged to get outdoors.

Time Off From Work

Time off from work includes Paid Time Off (PTO), such as vacation and sick time. It also includes time off without pay, such as unpaid sabbaticals and leave mandated by the Family and Medical Leave Act (FMLA). FMLA-mandated leave includes traditional maternity and paternity leave, as well as leave associated with adoptions, the foster care placement of a child, personal or family illness, and/or family military leave.

Career Development Opportunities

Career growth and development opportunities help your employees enhance their job-related skills, often setting them up to take on new, expanded projects or roles in the future. These can include stretch projects, opportunities to attend or present at an industry conference, temporary assignments to teams that are designing an exciting new product, as well as on- and off-site classes and training sessions.

Development opportunities at your organization make take the form of tuition reimbursement, job rotations, mentoring sessions, and similar programs. These types of offerings are a critical part of your total rewards strategy, as they help you grow your current workforce and ensure succession planning is in place for critical roles. And as employees become more and more invested in their own career pathing and planning, enabling talent mobility in your organization can become a strategic retention plan.

Employee Recognition Awards

Employee recognition awards are typically given to publicly acknowledge major performance milestones and other positive employee behaviors that goes above and beyond the typical call of duty. While these rewards can include something of nominal monetary value (e.g., celebratory lunches, dinners, or gift certificates), they are considered forms of non-monetary compensation.

Examples of employee recognition awards include peer-to-peer awards, above-and-beyond performance awards, and employee of the month or team of the month awards.

Work/Life Benefits

Work/life benefits include the policies and services your organization has put in place to help employees better balance obligations at the office and at home. These benefits can include workplace flexibility programs like flex time, telework or work-from-home (WFH) opportunities, compressed workweeks, and employer-provided services like on-site child care centers.

Are Stock Options Non-Monetary Rewards?

Although many employees think of stocks as non-monetary forms of compensation, stock options and awards are typically categorized as long-term incentives and not as non-monetary awards. This is because they are usually performance-based, and can be converted to cash (although this may happen at a later date). Stock options are often deferred, are vested over time, and sometimes treated differently than ordinary income for tax purposes.

Bundling Your Benefits

Offering even just a few of these benefits can help you greatly enhance the overall employee value proposition at your organization and improve employee performance as a result. Understanding what other employers in your pay markets are offering for benefits can be a critical first step in determining which benefits your organization should invest in.

Emphasizing Your Investments in Non-Monetary Compensation

Many employees think of their compensation in terms of base pay and bonus pay. But the types of non-monetary compensation outlined here can represent a significant investment on the part of your organization. Therefore, establishing a competitive total compensation package is only the first step towards attracting and retaining top talent.

Communicating about pay with employees is a critical part of ensuring compensation program success, and can ultimately help you with your recruiting and retention efforts.

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