Employer compensation in the United States refers to the cash compensation and benefits that an employee receives in exchange for the service they perform for their employer. Approximately 93% of the working population in the United States are employees earning a salary or wage.
Typically, cash compensation consists of a wage or salary, and may include commissions or bonuses. Benefits consist of retirement plans, health insurance, life insurance, disability insurance, vacation, employee stock ownership plans, etc.
Compensation can be fixed and/or variable and is often both. Variable pay is based on the performance of the employee. Commissions, incentives, and bonuses are forms of variable pay.
Benefits can also be divided into as company-paid and employee-paid. Some, such as holiday pay, vacation pay, etc., are usually paid for by the firm. Others, are often paid, at least in part, by employees—a notable example is medical insurance.
Compensation in the US (as in all countries) is shaped by law, tax policy, and history. Health insurance is a common employee benefit because there is no government sponsored national health insurance in the United States, and premiums are deductible on personal income tax. 401(k) accounts are a common employer organized program for retirement savings because of their tax benefits.
Workers' compensation statutes are intended to eliminate the need for litigation and the limitations of common law remedies by having employees give up the potential for pain- and suffering-related awards, in exchange for not being required to prove tort (legal fault) on the part of their employer. Designed to ensure employees who are injured or disabled on the job are not required to cover medical bills related to their on-the-job injury, the laws provide employees with monetary awards to cover loss of wages directly related to the accident as well as to compensate for permanent physical impairments
The laws also provide benefits for dependents of those workers who are killed in work-related accidents or illnesses. Some laws also protect employers and fellow workers by limiting the amount an injured employee can recover from an employer and by eliminating the liability of co-workers in most accidents. US state statutes establish this framework for most employment. US federal statutes are limited to federal employees or to workers employed in some significant aspect of interstate commerce.