What is an example of indirect compensation?

Indirect compensation consists of non-monetary benefits and services provided to employees as part of their overall compensation package. Medical insurance is a prime example of indirect compensation because it represents a benefit that supports the well-being of employees without being directly tied to their base salary or hourly wage. It enhances an employee's overall compensation experience by providing financial assistance for healthcare needs, promoting employee satisfaction and retention.

The other options listed—commission, bonus, and overtime pay—represent direct forms of compensation. They are financial payments made directly to employees for their work performance, productivity, or hours worked. Commission and bonuses are performance-based incentives, while overtime pay rewards employees for hours worked beyond their regular schedule. Therefore, they do not fit the definition of indirect compensation, which focuses on non-monetary benefits.