Compensation systems are those systems in which employees of organizations are given rewards by the organization for their efforts on its behalf. There can be financial and nonfinancial types of compensation. By contrast, noncompensation systems or rewards are those that are not actually given in return for work done.
We are typically much more familiar with the idea of compensation. Compensation consists of such things as wages, benefits, and bonuses. In some parts of the corporate world, they may include such things as stock options. We are less familiar with noncompensation even though that is important as well. This consists more of “quality of life” factors. For example, the feeling that one has done a job that is important for society is a noncompensation reward. The feeling that one is a valued member or an organization is another such reward. These are not handed out by the firm but are more inherent in the job itself.
Both of these types of rewards are very important to employees. Wages are clearly necessary for all workers. However, other rewards such as health insurance and paid holidays are also very important. It can be hard to attract good workers without providing both of these. Noncompensation rewards can help to make up for lesser compensation. Teachers are an example of people who get noncompensation rewards. They work in jobs that can be quite rewarding. They get to have summers off. These are noncompensation rewards that can help to make up for the relatively low levels of compensation.