Facts About Reward and Compensation (The Difference between Reward and Compensation)


Reward and compensation are terms that are often used interchangeably, but they have different meanings and implications. Here are the key differences between the two:

1. Definition – Reward is something that is given in recognition of someone’s efforts or achievements. It is typically non-monetary and can include things like praise, recognition, awards, certificates, or promotional opportunities. While Compensation is a monetary or non-monetary benefits that an individual receives in exchange for their work or services. It includes wages, salaries, bonuses, benefits, commissions, stock options, and other forms of financial or non-financial compensation.

2. Purpose – Rewards are typically given to recognize and motivate individuals for their exceptional performance, achievements, or contributions to an organization or project. Compensation serves as a means to attract, retain, and motivate employees for the work they do. It is an essential component of an employment agreement and is directly tied to job responsibilities and market value.

3. Tangibility – Rewards are often intangible in nature and may not have a specific monetary value. They focus more on recognition and appreciation. While Compensation is tangible and measurable, as it involves a specific amount of money or benefits that hold a monetary value.

4. Frequency – Rewards are often given sporadically or irregularly, such as monthly or quarterly recognitions, annual awards, or special achievements. While Compensation is typically provided on a regular and consistent basis, such as weekly or monthly paychecks or annual salary packages.

5. Relationship to Performance – Rewards are more closely linked to exceptional performance or specific achievements, serving as a form of positive reinforcement to motivate individuals. While Compensation is generally tied to job roles, responsibilities, level of expertise, market demand, and other factors, rather than performance alone.

In summary, rewards are non-monetary forms of recognition given for exceptional performance or achievements, whereas compensation encompasses the monetary and non-monetary benefits received in exchange for work or services provided.


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